Motor car insurance
At the turn of the century, Otto had developed his internal combustion engine and a handful of noisy motor cars were chugging around what passed for roads in the UK. They were expensive, cumbersome and the horse was actually a more dangerous conveyance. Nobody gave any consideration to the idea of motor car insurance in much the same way as we nowadays wouldn’t consider insuring a bicycle.
Where the motor car is concerned, two things changed all that. Thanks to the First World War, more people learned how to drive them, and shortly afterwards in the 1920s, hire purchase was devised and individuals found ways to afford them.
Still, it wasn’t until the 1930s and the UK’s first Road Traffic Act that motor car insurance became compulsory, and even then it was managed and provided by the composite insurers of the day. Whoever insured your house and other liabilities covered your driving. It wasn’t too sophisticated; a few insurers pooled what limited data they had and made a rough risk assessment, and then operated a price cartel from which all were sworn not to deviate. The ‘cartel’ became enshrined in law and was known as ‘the tariff’ and it is interesting to note that this ‘tariff’ wasn’t dissolved until the late 1960s.
It was of course a relatively simple world back then. Motor car insurance may have been a necessary evil but it wasn’t too expensive. That’s because less than a quarter of the number of cars clogged our roads than is the case today, and there were very few motorways.
And of course the car had yet to become a potential missile. Hence the accidents were in the main less frequent and a lot less serious.
In the 21st century the simple fact is that our roads have become dangerous and overcrowded, the technology we put into our cars has made them immensely powerful (and with that, expensive to repair) and, it has to be said, that the people we put into them have become younger.
So now, motor car insurance has, of necessity become a sophisticated, balanced and highly data intensive financial instrument. It is also a product with a massive and staggeringly diverse market to satisfy.
Insurance companies used to be content to place a limited range of products in the hands of an army of brokers, pay them commission and let the job run itself. If the annual figures stacked up, all well and good, if they didn’t, simply hike the premiums for the following year.
Customers didn’t really like it, but the broker, the insurance company and the law effectively combined to ensure that since quotes, cover and discount were all pretty much part of a homogenous product, then buying your motor car insurance policy was never really going to be any more than a thinly disguised distress purchase.
The computer age has changed all that. The prime marketplace for selling insurance product is now the internet and online car insurance comparison has ensured that the customer is king and that your insurance company, in order to compete, needs to pay attention to its customer, refine and target its product and provide as far as possible cheap and practical cover.
Something Otto could never have foreseen. He just thought that causing four controlled explosions inside a steel chamber was quite a novel idea.
Motor car insurance. It hasn’t always been with us… and it has come a long way.