I decided to research and write about this subject as a friend of mine has recently had an accident on his motorcycle; fortunately nothing major but not nice all the same.

I was surprised to hear a few days ago that he is now in a terrible position as his bike is being written off by Insurers and the suggested settlement figure he has been offered will not clear the outstanding finance he originally took out to purchase the bike.

This got me to thinking that this must happen quite a lot and is there insurance out there somewhere that will protect the shortfall. …It turns out this is called GAP Insurance!

So, let’s break it down like this…

1. What does GAP stand for?
2. When should I consider taking out GAP Insurance?
3. What types of GAP insurance are available?

What does GAP stand for?

GAP stands for Guaranteed Asset Protection.

When should I consider taking out GAP Insurance?

If you have purchased your vehicle using a personal loan, lease the vehicle or purchased it with cash you should seriously consider taking out some additional protection as you will almost certainly be in a negative equity situation until you have paid off a substantial amount of the agreement.

Vehicle values depreciate at an alarming rate, starting from the very moment you drive off of a forecourt.

A new vehicle is likely to be worth only around 40% of its original list price within 3 years of ownership.

Insurance companies are writing off more cars than ever due to the high cost of repairs and modern materials used.

When a write-off occurs you are responsible for any financial shortfall, not your motor insurer.

What types of GAP insurance are available?

There are two main types of protection available:

1. Lease or Finance GAP
In the event of your vehicle being declared a write-off by your motor insurers because of theft or an accident, there may be a shortfall between the vehicle’s current market value and the value required by the lease/finance company to settle the lease/finance agreement.

There could be a significant shortfall depending on the rate at which your vehicle has depreciated and the period that is remaining on the lease or finance agreement.

You will be held responsible for this shortfall by the companies involved.

GAP insurance would cover this shortfall for you as shown in the following example.

A vehicle is purchased for £18,335. 15 months later the vehicle is written off. The motor insurer settles £11,250 but the customer still owes the Lease or Finance company £13,175.

The GAP policy will pay the £1,925 shortfall direct to the Lease or Finance Company so that the agreement can be closed.

2. Protection if you purchase a new vehicle for cash
In the event of a write off Vehicle Replacement Insurance will cover the difference between your motor insurance payout and the cost of replacing your vehicle to the exact specification, even if the price of the new replacement car has increased. This is not available for used cars or any on contract hire or finance lease.

This type of GAP insurance is also known as Return to Invoice.

In this scenario if you purchased a vehicle for £15,000 and paid cash and the vehicle was later written off with a settlement figure of £12,750 from your motor insurers the policy would reimburse the shortfall amount of £2,250 to allow you to replace the vehicle with the same specification as the original.

I imagine our initial thoughts to all of this are that this will not happen to me, but you may want to consider the following alarming facts before dismissing this type of protection:

• Over 200,000 cars are stolen every year and only 60% are recovered.
• Around 500,000 vehicles are involved in serious accidents every year.
• UK vehicle crime is now one third of all crime.
• Your insurers will value your vehicle at the time of a claim, the offer they make will always be less than the price you paid.
• Vehicles depreciate from the moment you purchase them.
• A 3 year old vehicle may have lost as much as 60% of its value.

Do you have Gap Insurance? What are your impressions of this type of cover? Are you a GAP insurer? Let us know, we’d like to hear from you! Add a comment below!

The domain ‘homeinsurance.biz’ is up for grabs on Sedo.

• There are 334,000,000 search results for “Home Insurance” on Yahoo.com
• There are 785,000,000 search results for “Home Insurance” on Google.com
• There are exactly 110,000 global searches per month for “Home Insurance”
• “Home Insurance” is searched for 27,100 times per month through Google in the US.
• The CPC Value is $ 17.00

The epitome of freedom could be seen as owning a motorcycle. We can all conjure up images of legendary motorcycle marques, routes, and motorcyclists across the eras. Such a freewheeling lifestyle could easily become full of bitter regrets however should the right kind of insurance purchase not accompany the procurement of the bike.

Fully comprehensive, third party only, or third party fire and theft choices exist to allow the motorcycle owner to choose which level of investment best suits their needs, lifestyle and aversion to risk.

Motorbike insurance can further add flexibility to your lifestyle as both web-based and telephone take-on of insurance can give you peace of mind from day one. British-based call centres and online providers allow for 24 hour service, advice, updates and claims administration.

Recognising that for some buying a bike represents a more economical way of making their transport budget go further, as well as that for others their motorcycle is not their primary vehicle and is therefore a significant other investment, flexible payment solutions for motorbike insurance exist. For better budgeting, payments can be tailored to your needs, even being spread over twelve months for the annual premium.

Motorcycle insurance can also give you the liberty to use your bike as way to explore and find new horizons. Travel with your bike can bring ultimate freedom if you choose an insurer offering travel and continental cover.

Whether your motorbike is your way to work or your weekend wonder, theft remains an issue. Motorcycle insurance is the obvious choice to avoid any financial shock should your bike unfortunately be stolen and not recovered. Market-value payouts mean that you will be able to replace your motorbike at your own convenience.

It is not just financial stress that may be suffered if you neglect to purchase insurance when your purchase your bike. Loss or damage to your motorcycle is also inconvenient. Motorcycle insurance can give you the ability to cover the cost of repairs as well as replace the bike should it be stolen, damaged or destroyed. Transport to your closest garage for repairs can also be included in your policy to remove some of the inconvenience from your nasty experience.

The freedom of the open road beckons with a bike. That however is no excuse to ride without an appropriate level of motorbike insurance. Indeed, purchase of a policy in tandem with your bike actually frees you up to go wherever you want.

Did you find this article useful?

Yes | No

A couple of months ago I wrote about the latest EU ruling which banned the use of gender in the rating of insurance products.

Here we go again I hear you say and to some extent you are probably right although there does seem to be a bit more of a split in views on this one.

Many experts are now predicting that is not a matter of if, but when, a further ruling will be made banning the use of age to determine insurance premiums.

I had assumed that such discrimination was already illegal under the Equality Act but upon examination I find that although it covers all areas like race, religion, sexuality and age insurance is listed as an exception.

The Equality Act was meant to end age discrimination yet the proposal to allow insurers to continue to operate age limits undermines the very spirit of the legislation.

My initial feelings when hearing about the latest proposals was that typically this would just mean that insurance which was previously not available due to age, such as Travel, would now become available albeit at a price.

However we need to bear in mind that some classes of insurance are actually cheaper if you are older.

Motor and Household premiums are typically cheaper if you are over 50 because statistically you are less likely to have a claim. Premiums for over 65 year olds on Household are generally cheaper because the policyholder is likely to be retired and at home in the house more often.

So, it would seem that this proposal may affect all ages groups in different ways.

It is clearly not right that at 65 it becomes very difficult to obtain Travel Insurance especially given that after retirement this is the very period in your life when you may be able to travel for extended periods.

The problem with Insurers approach is that this is blanket underwriting based on one particular risk factor – individual circumstances and condition of health are just not considered on a policy by policy basis.

For the time being Insurers will continue to price on age simply because it is easy and until the EU steps in this is unlikely to change.

I have also come across one proposal that seems to make total sense and may make insurers think twice before declining risks based on age – this proposal is called ‘Signposting’

At the moment an insurer can refuse to accept a policy because of age and no other consideration and that’s where it ends basically.

Signposting would mean that insurers are obliged to point such declined enquiries in the direction of an appropriate provider.

I think this is a great idea, so if you are old or young, if an insurer will not cover you then they must suggest an alternative.

There seems to a very real chance that this will become the compromise that is struck and may just avoid a further EU ruling being imposed – only time will.

I would be very interested to hear other views on this subject, as always there will be two points of view but again this promises to be very topical in coming months.

Did you find this article useful?

Yes | No

Many owners of classic motorcycles will be affected by CIE.

I am a very keen motorcyclist and like many others I am faced each year with the issue of whether or not to leave my motorcycle registered for the road over the winter months. A number of my friends also have classic motorcycles that are only rarely used in the summer months.

I was shocked when I heard recently about the upcoming changes to the law regarding insurance for off-road motorbikes and other vehicles: I heard it would soon be illegal to own a vehicle – even one you are not using – and not insuring it.

On investigation, I found the real situation was a little more complicated and although there was some hope, the new law will certainly have a major impact on all of us who want to adhere fully.

Update: It seems that an interesting solution has revealed itself on our own doorstep, so if you’ll excuse the shameless plug, it seems I’ve discovered a new type of insurance!

I thought I should share this topic with RiskHeads readers right away and get feedback on what people are thinking and doing about this. Read on for the full story and information on how to stay within the law…

What Does SORN mean ?

Since 31st January 1988, SORN has been an abbreviation for Statutory Off Road Notification.

If you are the registered keeper of a vehicle that’s not being road taxed and is kept off road you must make a Statutory Off Road Notification. This is done online or by phone as long as you are registered as the vehicle keeper. It’s all very straightforward and you receive an acknowledgement letter from the Driver and Vehicle Licensing Agency (DVLA) soon after they are notified.

The SORN ends when the registered keeper changes or road tax is purchased for the vehicle.

What is Continuous Insurance Enforcement (CIE) and what’s all the fuss about?

Put simply, from 1st April 2011 it became illegal to keep a vehicle and not insure or SORN it.

Previously it was only an offence to use a vehicle without insurance but the new law means that if your vehicle is kept in a garage and never used it will still need to be insured or otherwise declared SORN.

Everyone's favourite V890 SORN form.

From the end of June 2011 Insurance Advisory Letters (IAL) will be issued by the Motor Insurers Bureau to the registered keepers of uninsured vehicles. This will be following a check of the Motor Insurance Database (MID).

The IAL will advise the registered keeper that their vehicle appears to have no insurance and what actions to take to avoid receiving a fixed penalty from DVLA.

If the vehicle does not have insurance the registered keeper could:

• Receive a fixed penalty of £100
• Have their vehicle wheel-clamped, impounded or destroyed
• Face a court prosecution, with a possible maximum fine of £1,000

And moreover, payment of a penalty does not replace the need for insurance.

If I have a vehicle laid up what should I do ?

If you have no intention of using the vehicle on the road an extended period then it must be SORN’d right away!

If on the other hand the vehicle is only off the road for a short period then you could just retain your insurance during this period.

How can I insure a vehicle that is currently SORN ?

The normal approach is to ask your Insurers if they would restrict your normal cover to Fire and Theft only as you will not need the Third Party cover that is required under the Road Traffic Act.

Unfortunately I found that many insurers will not consider this reduced cover so you have to pay for full cover that you do not actually need.

Update: The shameless plug

Well, a funny thing happened after I wrote this article. You might not believe it, I probably wouldn’t – which is just A-OK with me – but I was contacted by a client of our sister company, who are offering a new product designed for, yes you’ve guessed it, off-road motorcycle insurance.

It seems therefore that there is a solution to this dilemma – for motorcycles at least – in the form of a new website, www.sorninsurance.co.uk So I did a little review.

It seems the website offers motorcycle owners genuine ‘laid up’ cover for all bikes, not just classics. I’m told it’s a new scheme aimed at bikers to reduce the cost of their premiums by providing cover for the bike whilst its kept off the road.

So clearly it covers your bike whilst stored in your garage or shed – something the average household insurance policy does not cover – providing fire and theft insurance whilst your bike is off the public highway.

The policy looks good for bikers who don’t ride some of their bikes or for people who just want some cover during the winter months, or those who have a collection of machines or their bike is too ‘modern’ for a classic laid up policy.

I got in touch with SORN Insurance ‘s Head of Products Paul Wheeler who was happy to give me a quote for RiskHeads (no surprises there!)…

“We know motorbike owners suffer sleepless nights knowing their pride and joy may be at risk as they can’t get a Fire and Theft only policy. The ones who get some have a standard Third Party Fire & Theft policy which means they end up paying through the nose for cover they don’t really want or need. Our ‘laid-up’ policy is available on all motorcycles with no age restrictions. To get an instant quote and buy online visit www.sorninsurance.co.uk or call and speak to an advisor on 0844 3188 398.”

Well there you have it! This may not be right for everyone, but it’s the best solution I’ve seen.

Did you find this article useful?

Yes | No

Simples

I am sure that our UK readers are all familiar with the TV campaigns run by motor insurance comparison websites. From CompareTheMarket & MoneySupermarket to Confused.com we’re all bombarded.

Just the mention of a Meerkat or an Opera Singer will get most people reeling off slogans for these brands, so we might naturally assume the ads have been a colossal success – but have they?

At RiskHeads we like to dig a little deeper. Research we uncovered from one of the major players in this area found that 19% of policyholders automatically renew their motor insurance with their existing insurers rather than shopping around for a better deal.

11% of these motor insurance customers don’t even think they can find a better deal and 8% (which is a staggering 2.7 million motorists) will accordingly automatically renew because “they can’t be bothered” to see if they can save money.

All this means that on average policyholders stay loyal to their insurers for 2.6 years with the older motorists (over 55) staying for around 3.3 years.

And yet the saving these sites can offer can be huge: even on average it’s in the region of £270.

So why don’t policyholders look around for a better deal?

The Go Compare Opera Singer

The consensus answer to this would seem to be Apathy. Most people lead increasingly busy lives and the thought of entering yet more personal details into a website with no certain return on their time investment is distinctly unappealing.

The insurance relies very heavily on this: even though there are savings to be made many people will just not take the time to shop around. If this were not the case, premiums would have to rise all round in order to make insurance profitable again.

Motor insurance premiums are likely to rise by something in the region of 30-40% this year following very bad losses due to two consecutive bad winters. It will be interesting to see whether this encourages more shoppers to reach for the mouse.

But today, despite the blanket advertising it would seem that for the most part the message is still not getting out there.

For our consumer readers it only takes a few minutes to make sure you really have the best value policy to suit your needs, so our advice would be to get searching!

Let us know what you think! Are you an aggregator or a confused policyholder? Should insurance brokers be jumping on the comparison website bandwagon somehow?

Did you find this article useful?

Yes | No

Notice the position of the apostrophe there.

I am sure you have all seen the outcome of the European Court of Justice case 1st March to establish whether insurers are allowed to take into account sex as one of the many risk factors they use in calculating premiums.

From 2013 it will be an illegal act if insurers use sex as a risk factor.

This is not great news for specialist insurers like Sheilas’ Wheels who have taken the initative in offering preferential rates to women drivers.

Whilst this may be another good step on the way to creating true equality it does raise some interesting issues for the whole concept of insurance rating, an art grounded squarely in the statistics of risk-avoidance.

Traditionally insurance premiums are calculated to reflect the risk that is being taken by the insurer. To calculate this risk many factors will be taken into account such as claims costs and expenses already paid out, trends in certain areas and age groups, type of vehicle, security fitted and of course a profit margin for the insurer.

In assessing the level of risk insurers will look at the breakdown of claims paid into different groups – and of course sex has always been one of these.

There is no denying what the statistics show: male drivers, especially the younger ones do have more accidents per capita in comparison to their female risk equivalents; i.e same car, same area, length of driving experience.

• Men are 3 times more likely to be involved in a fatal car accident than women;
• Men account for 80% of speeding fines in the UK;
• 44% of men have used a mobile phone whilst driving compared to 30% of women;
• 20% of men have fallen asleep at the wheel compared to just 6% of women;
• In 2003 93% of convicted drink drivers were men.

These statistics would seem to suggest that the sex of a driver is a reasonable way for an insurer to assess the risk they are accepting and should not be looked at any differently to any other underwriting consideration.

What on earth next?

This is not NG1.

Am I missing something?  Is it the maths here that’s being sexist or the mathematician?  Perhaps we could help the statistics to be less narrow minded by dropping in a few extra numbers?

The EU ruling rather makes one think this madness might spread to other classes of insurance as well.

Is it fair for example to charge a 50 year old man more for life insurance than a 45 year old?  Whichever way you look at it this is age based discrimination, for good or for bad.  What about charging higher premium’s against theft in Nottingham’s infamous NG1 postcode area?  Is this discrimination against the people of Nottingham?  Yes.

But whilst it’s discrimination it’s restricted to a very narrow band.  If NG1 residents go looking for non-theft insurance for instance they won’t be subject to the same maths.

And maths is exactly what it is.  As far as I’m aware the actuaries who come up with these algorithms don’t actually have anything against men, old people or the unwashed students delightful people living in NG1.

Insurance Theory and Discrimination are the same thing.

In researching this article, I amused myself (somewhat) by checking the Wikipedia definitions for both “discrimination” and “actuarial science”.  It seems that:

“Discrimination” is the cognitive and sensory capacity or ability to see fine distinctions and perceive differences between objects, subjects, concepts and patterns.

“Actuarial science” is the discipline that applies mathematical and statistical methods to assess risk in the insurance and finance industries.

There’s certainly some common ground there.  Can either exist without the other?  You might forgive me for thinking “No” and asking “Where will this end?” !

The nasty conclusion

Having been given a situation where they cannot charge a woman less – which ought to mean they should charge a man less as the risk is the same – insurers will predictably increase women’s premiums rather than reduce the men’s.

There is no logic to this approach outside of plain old fashioned (albeit mercenary and unfair) commercial practice;   if insurers were happy to accept a premium for a woman driver and now have the same details for a man, beyond any doubt the man’s insurance should reduce.

There has been no increase in risk for the woman driver so what is the justification for increasing their premium?  Unfortunately the reason for the increase is that the premium for men cannot be decreased in line, because they are the ones making all the claims

Perhaps it’s been a bit of a sour victory for equality if men are still being proven to be more dangerous drivers and women are paying the price.

And once again insurers have done nothing to improve their image.  It was a great marketing opportunity missed but perhaps one that not even they could afford given the risk involved and the overwhelming maths.

I leave you with a quote from Lord Davies of Stamford speaking in the House of Commons 1st March:

“it is a pretty remarkable day when an insurance market is instructed to operate contrary to actuarial principles”.

Perhaps we will be seeing more remarkable days in the years to come.

—

As always, I’d love to know whether you agree.  Has the ruling affected your business or your premiums?  Let me know!

It's not this bad... well not yet anyway.

It’s not long since we had the latest round of flooding in the UK and I remember when it hit.

As I watched the news that night I couldn’t help thinking “Here we go again.” and “This is just getting worse and worse, we should have seen this coming”. I doubt I was alone!

For many years property developers (in conjunction with local authority agreement) have been encouraged to build in areas that have previously been known as flood plains. So it should hardly be a surprise that they are now flooding again.

Add to this some consideration for climate change and you might begin to wonder how we find ourselves in this position.

Working closely with insurers and insurance brokers every day I am very familiar with insurers’ views on covering things which are rapidly becoming a certainty rather than a risk – so I thought I would dig a little deeper.

Some of the figures are pretty worrying in terms of what has already been paid out over the last 10 years. Here are some statistics that might make you ask yourself just how long can this go on…

• Flood claims since 2000 have increased by over 200%.
• One in six homes are currently at risk of flooding.
• Nearly 500,000 homes face a significant flood risk and this is expected to rise beyond 840,000 by 2035.
• The amount paid by Insurers since 2000 now exceeds £4.5 billion.

These are worrying figures indeed and one has to draw the conclusion that this cannot and probably will not be allowed continue.

When you then look at this in conjunction with the government’s recent announcement to cut spending on flood defences we appear to have a disaster just waiting to happen.

I hope you can swim.

Many people will of course think that none of this really matters as I have flood insurance – indeed you probably have – but for how much longer ?

An agreement was reached between the Insurance Industry and the Government a few years ago to ensure that flood cover remains available to all existing customers.  Note the word ‘existing’; this insurance won’t be much use when you want to insure a property in a known flood area for the first time!

What has also largely escaped the news is that this agreement expires at the end of June 2013 and at present insurers are under no obligation to extend this.  And they are not very likely to do so when claims continue to rise and the government is not investing in flood defences.

If something becomes a virtual certainty it is not the sort of thing that insurers will cover and that certainly appears to be what is happening.

Not being able to obtain flood insurance will make some properties unfit for sale, as potential purchasers will not be able to secure a mortgage or advance against a property that is not fully insured.

The outlook is bleak: a vicious circle of house sales down, no upturn in the economy, no extra government money to spend on flood defences, more flooding, yet more claims and finally no more flood insurance for anyone who needs it.

Did you like this article? Do you have an opinion on it?

Yes | No

My life runs smoothly owing at least in part to the regular currency of International flights.

So I have recently come to realise.

You may have noticed I’ve not posted for over a month now, which must certainly represent the longest gap in RiskHeads coverage ever.

You see, I *was* stuck in Paris, but now I’m stuck in England.

Owing to an Act of God I had hitherto thought only affected ancient Romans and ski chalets, pretty much the whole of European airspace was closed for a week after my recent holiday should have finished, leaving me with no way to return to the Italian office. But of course you all know about Iceland’s charming Eugimmyflip volcano.

During my incarceration in that Paris hotel, there were French people in a nearby cell who could not return to their homes in northern France owing entirely to the land-based exodus from Paris flooding every route out: trains, hire cars and taxis had suddenly become a celebrity item.

And most of the US and UK travel pros I found in the lobby each morning were far more dedicated to the ticket search than I: they didn’t seem to sleep, preferring a continual supply of coffee, Skype, VOIP and Google.

What hope did I have of getting out? Or so I asked myself. And thus I extended my stay, having now just returned from the longest Paris trip I expect I shall ever make: 15 days. If you ever need a tour, I’m your man. I must now be one of the few people on the planet who can boast having studied properly more than 50% of the almighty Louvre.

In the end I opted to go to the UK instead of Italy, via Eurostar; it was all I could do. Now finally back at work and after an intense round of research and insurance software development, I’m finally back on top, and I think due to renewed energies after my break this next SchemeServe software release at ADM looks more exciting than ever; I’m really looking forward to it.

And so on this happier note, this morning I prepared to return to the Italian office, leaving home in Cambridge at 4am. And guess what? British Airways are poised to strike AGAIN, and that @&£#%*¥ dust cloud is back.

Only this time, BA’s website told me not to bother turning up for my flight at 8am: the flight information said it was delayed until 11:35, and phonelines were engaged this morning right up until 8. Hmmm, I thought, can I trust this information? I checked the BA iPhone application and it showed the same data, this time with the additional line of information to read “Re-warn 11:35″, whatever that means. So, with no humans about and their phone line telling me to check BA.com for the latest info: what was I supposed to do?

I chose to only half-trust them, and left home in time to arrive at Gatwick about 7:30; hopefully then if the flight really did leave at 11:35 I wouldn’t be waiting around too long, and I would be in with a chance of catchng the original flight if BA were openly lying to me.

Which they were.

On the way, I received a call from a friend to say the website and app were updated to remove the second line of info about the flight, BA effectively erasing history: instead of showing a second flight time change, they removed the first. Very sneaky.

In the end, Gatwick was so traffic ridden that I arrived ten minutes before the original flight time, the flight left without me – despite BA staff at the terminal still insisting until the very last second that the flight would not leave before 11:35 – and I was left with no option but Customer Services.

I’ll spare you the ensuing battle I had but the conclusion is that I might be allowed to sample this jolly fiasco all again for tomorrow’s dawn flight, when BA’s strikes are due to start.

I think I might just walk to Sicily this time. It might be quicker, and would certainly save a few bob.

Dust cloud ‘n strike flight risk insurance anyone?

A

Have you had a similar experience recently? Let me know, leave a comment below!

UK company Hiscox have issued a statement today that their losses from the devastating Chile earthquake could be a whopping £100 million worth.

This follows hard on the heels of a similar joint announcement from Munich Re and Swiss Re that losses for the insurance industry as a whole would likely be $7 billion.

It’s interesting to note that while Munich Re and Swiss Re attested that reinsurance prices would not increase, the Hiscox statement on the other hand notes that reinsurance rates would change.