How on earth have the car insurance companies managed to get themselves into such a mess?

Premiums are rising at a rate which is hugely ahead of inflation. Cheap car insurance sites, such as, are swamped with customers. Yet despite this, insurers are posting losses, not enormous profits. So what can have gone wrong?

As usual, the culprit is the Internet. Going back to those pre-web days a cosy cartel used to sell us our car insurance; a small number of insurance companies put their business through a network of brokers who relied upon the insurers to pay them very generous commissions on business they introduced; the result was that the buying public was completely at the mercy of the system, and had to rely upon the honesty and goodwill of the brokers to work hard and find them the best policy to suit their own individual circumstances. Human nature being what it is, this confidence was occasionally misplaced and brokers occasionally; I will say no more than that; pushed the product that they felt was more advantageous to themselves than to the client. Times have now changed, and the large plush offices that the insurance buying public wants paid for through their premiums now lie empty, or converted into charity shops; the Internet has transformed our buying habits.

Insurance companies reacted with some shock to this new medium, and it was not long before price wars broke out. The result, believe it or not, is the insurance policies now cost far less than they would otherwise do so, have the Internet never been invented. Why is it then, that so many people have temporary car insurance policies?

The temporary policy itself is a product of the Internet; unless a product with such low prices could be automated, it probably wouldn't exist since it would not be worth the while of insurance brokers to go through all the steps necessary to get a quotation from a client and to set up a policy, when for the same amount of time expended they could create and sell a full 12 month policy. The growth in popularity of temporary cover has been little short of phenomenal, with a figure somewhere in excess of half a million sales claimed by leading figures in the industry.

The huge benefit of temporary cover is that buyers can insure themselves to drive as and when they wish to. It is proved extremely popular with retired people, who own a car for the convenience of being able to go away for the odd weekend or short holiday, but who for health or mobility reasons prefer to stay close to home the rest of the time. With the growth of an elderly population, thanks to better health care, nutrition and housing, it is likely that this particular segment will continue to increase. At the other end of the spectrum, temporary insurance is very popular with people under the age of 25, but above the age of 21 (those under 21 are excluded from all temporary schemes at present) making up the majority of the rest of the market, no doubt due to the very high insurance premiums paid by those in this age range.