Where Your Car Insurance Money Goes

We all need to have adequate motor insurance cover before we can get behind the wheel of a car. Apart from the essential security that it provides for the car drivers, the passengers and everyone else, it’s against the law to drive without it.

Although it’s reassuring to know the protection is there - our insurer is someone that, thankfully, most of us rarely have to call upon. From time to time most car owners must wonder just exactly where all the money goes. Particularly when you might never make a car insurance claim, and yet your insurance costs still creep up year after year, rather than dropping (unless you use a car insurance comparison site like thecomparisons.com).

So, if you sometimes wonder where your insurance premium goes, here’s a rough breakdown of how your insurer divides up the money paid by you and all their other policyholders.

All companies are different, of course, and the exact amounts will vary from insurer to insurer, but this is more or less the average of where your money goes:

Claims Costs

Around 50% of the fund will be used to pay claims. Picking up the bills for collision damage will account for roughly half of your insurance company’s expenditure.

Administration and Legal Costs

25% of all that your insurance provider lays out will be spent on administrative and legal costs (and the cost of a qualified solicitor or legal executive is likely to be in excess of £100 an hour).

The Company

Every business costs money to operate, and the last quarter of your insurer’s expenditure is the 25% ploughed back into actually running the company. This includes staff salaries and any commissions that are paid – such as to brokers, the cost of the business’s everyday overheads and the insurer’s advertising and marketing.

With regard to the car insurance company’s overheads, you’ll often find that cover available online is low priced. This is because the insurer’s overheads are reduced when you buy on the internet. See for yourself by comparing car insurance in the UK with The Comparisons.