The calculation of a premium is the result of a complex interaction between many rating factors. Even though there does not appear to be any change in individual circumstances from the time of the previous renewal, some of the ratings change merely through the passing of time (e.g., the age of the policyholder and vehicle) and these factors can contribute to an increase in the premium. There may also have been changes in our approach to pricing the various risk factors, or the introduction of a new pricing risk factor, which may then apply to your individual circumstances.
As a concept, insurance works by pooling the funds of many to pay for the claims of a few. Every customer contributes their premium to a larger fund from which we as insurers are able to compensate a customer who has a valid claim, e.g., vehicle damage or an injury to a third party. Therefore, increases in the costs of the total costs of claims and/or the increases in the total number of claims will have a knock on effect on the overall pool and will result in higher premiums.
Please find below a list of the types of factors – both customer-specific and general – which are most likely to be relevant in explaining any increase in your premium. However, if you believe that you require more information in relation to the price of your premium renewal, our customer service team can be contacted at 1890 27 27 27 or firstname.lastname@example.org in order to discuss the matter further.
Also, based on the most recent analysis of claims, pricing models are regularly reviewed and this result in changes in our approach to pricing their various risk factors or the introduction of a new pricing risk factor, which may then apply to your individual circumstances. An example of this is where our view of the vehicle has changed and we have introduced a new rating factor in that respect, like using fuel type or transmission as a rating factor for the first time. So, ratings may change from being based on engine size/cubic capacity (CC) to brake horse power (BHP) as our view of vehicle technology and engines evolve with the car market.
External factors are those costs which affect the cost and number of the claims we have to pay. The cost of paying claims is the single largest factor which contributes to your premium. Given that the cost of claims is the most significant cost associated with insurance, it is vital that insurers set premiums which are sufficient to meet these costs so the business is sustainable and that we are there to pay claims for our customers in the long term.
The main components of the total cost of claims are: