It's Not My Fault: Car Insurance Premium Policy in Case of An Accident

Introduction

Insuring a car today is as essential as a basic need. Everybody who owns a car needs to have car insurance which is one of the most important aspects today. People insure different properties they own and insuring a car seems to be one of them. Car insurance is essential because it helps in offsetting huge losses. When one has protected his or her vehicle, the benefits that come with the protection include getting benefits to the survivors if there has been an accident. The insurance company will always help in paying the survivors something that allows the car owner (Zavadil 2015). The car insurance also helps in covering the lawsuits, and this includes paying the legal fees that are against the car owner as a result of the accident involving the car. The legal fees might be high, but with car insurance, there is a sure way to pay the taxes. Car insurance also takes care of the car involved in the accident. It means that in case of an accident the insurance company will always cover the costs of repairing the car damages that have been caused by accident.

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What is still a puzzle, however, the fact is the insurance premium usually in the case there is an accident. According to Yang, Qian, & Zou, the reason why this happens is not always clear, but the insurance companies have their explanations (2018). Car insurance will rise in case of an accident even if it is not your fault. Today, many drivers face hikes in their car insurance premiums when they claim in the event of a crash. Most of the insurance companies say that this happens so that the motorists can always preserve their no claims discount and will always add a complaint about their claim to the premium. When involved in an accident insurance companies will put up to a 25% blame on you whether the accident is your fault or not and that is the reason that once you make a claim, the premiums will rise Szymanska & Kijek (2017). The rise sometimes sees that many drivers fear to lodge a claim whenever they get into an accident. The drivers will always find ways to avoid putting a request something that is even more dangerous. It is because when they find out that a driver never put a claim when he or she got an accident they will charge the drive more and it may be difficult to get paid in the event of another crash.

Bauman, Brandle, Coenen and Zimmer-Merkle 2018 believe that because insurance companies are always risk-averse, when the driver gets into an accident they will raise the premiums and this comes regardless of whose fault it is. The company still views the driver as a higher risk and to offset this, the company will apply a surcharge, and this always varies depending on the insurance company. It may be wrong as sometimes the other driver might be the one to cover costs the insurance company will raise the premium. This car insurance is not good as it gives a burden to the driver although they help the driver. It is also not fair that the dividend is increased even when the driver is not at fault. The insurance companies need to change the way they do this and instead make sure that when a claim is made they first investigate who was at fault and surcharge them accordingly. Let us move into an insurance age where the insurance companies look at the error in the accident first before raising the premiums.

References

Zavadil, T. (2015). Do the better insured cause more damage? Testing for asymmetric information in car insurance. Journal of Risk and Insurance, 82(4), 865-889.

Yang, Y., Qian, W., & Zou, H. (2018). Insurance premium prediction via gradient tree-boosted Tweedie compound Poisson models. Journal of Business & Economic Statistics, 36(3), 456-470.

Baumann, M. F., Brandle, C., Coenen, C., & Zimmer-Merkle, S. (2018). Taking responsibility: A responsible research and innovation (RRI) perspective on insurance issues of semi-autonomous driving. Transportation Research Part A: Policy and Practice.

Szymanska, A., & Kijek, A. (2017). Discounts and Increases against the Base Premiums Increases in the Motor Third Liability Insurance in Poland. Przedsiebiorczosc I Zarzadzanie, 18(1, CZ. 1 Practical and Theoretical Issues in Contemporary Financial Management), 315-328.