What Makes a Car Impossible to Insure?

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Have you ever heard of a car that is uninsurable? While rare, there are instances where a vehicle is not worth the risk for the insurance companies involved. There are dozens of different reasons why this may happen. 

Sometimes, a vehicle may ironically be considered too high value to insure. Other times, the car has a problem that keeps it from being insured. Please read below to better understand what it takes to create (intentionally or not) an uninsurable vehicle.

Why Insurance Companies Refuse Certain Cars

To run at peak efficiency, insurance companies must constantly run risk assessments. In other words, when they come across a car that is considered high risk to insure, they will be less likely to approve any application for coverage.

So, what makes a car risky in the eyes of an insurance company? There are a few primary reasons why insurance companies may deem the risk too high. For example, the value of the car (and thus potential replacement cost) is too high, or the vehicle could be considered a danger on the road. 

Reasons Cars Become Uninsurable

While the two examples above are the most common, there are actually a variety of reasons why insurance companies may not opt to cover a vehicle. Other potential causes include:

  • Altered/modified vehicles
  • Antiques/rare finds
  • Exhibition cars
  • Exotic or high-value cars
  • Grey market cars (cars imported into the US)
  • High-weight cars

This is by no means an exhaustive list of reasons why a car may be deemed uninsurable. The simple truth is that humanity is quite creative when it comes to developing new vehicles, and it does take time for an insurance company to establish policies to match.

Technology and the Uninsurable

There is one final reason why an insurance company may opt to avoid insuring a car. These days, self-driving tech is becoming more readily available. However, it has not yet been perfected. Until such a time when self-driving vehicles are deemed safer than human-driven cars, it is unlikely that any vehicle based on this tech will be considered insurable. Keep that in mind before splurging on a shiny piece of new technology.

What Is Usage-based Insurance (UBI)?

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The traditional model of vehicle insurance has always been geared towards rewarding good drivers. Often, discounts are applied after a length of time without any claims or tickets filed. Specific demographics are at an automatic advantage because of the law of averages surrounding age and location. These conventional stereotypes are somewhat outdated and fail to take into account how much society has changed. A male in his 20’s will pay a much higher premium than a woman in her 50’s, regardless of both having a clean driving record. It will take the male driver much longer to prove that they are competent and trustworthy enough to have a lower premium.

 

Usage-based insurance (UBI) was introduced about ten years ago. Since then, over eight million UBI insurance policies were created. The appeal of UBI is that it looks at insurance in a completely different way. Additional factors are taken into account beyond demographics, such as how many miles you drive and whether you tend to stick to speed limits. Your driving habits will impact how much you pay, in addition to your vehicle type and location. This concept can be very favorable for both insurance companies and drivers. The incentive to drive carefully means fewer claims being filed, and drivers benefit from lower rates. 

 

Depending on whether you chose the pay-as-you-drive (PAYD) or pay-how-you-drive (PHYD) package, different metrics are measured by UBI’s telematics. These telecommunication devices monitor vehicles via cellular, GPS, and onboard diagnostics and then display those movements on a computerized map. Data is also transmitted to the insurance company for review, and it is broken down into specific details, depending on whether you have a PAYD or PHYD policy. PAYD programs will usually charge a monthly fee on top of a per-mile charge. PHYD is more invasive, monitoring how you brake, accelerate, slow down, and turn corners. People who opt-in for UBI policies benefit from multiple discount opportunities. Some agencies reduce rates as a signing-up bonus. 

 

While telematics is a helpful tool for measuring real-time vehicle data, it doesn’t provide driver data. Newer iterations are software-based, saving everyone money by not having to pay for telematics devices. Mobile telematics is also more accurate because of its ability to measure distracted driving moments and offer rates based on an individual’s driving habits.

The Future of Car Insurance Beyond 2021

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The last year forcibly changed industries worldwide. No industry escaped, including the car insurance industry. While much of the world is gearing up for a bounce-back, all evidence indicates that the automotive industry will be one of the last to recover. 

According to a TransUnion survey, the impacts of the pandemic will linger well past 2021 for insurance agencies worldwide. Experts are even coming to believe that these changes may be permanent on some levels.

Digital Transition

Every industry has been working hard to adapt along with the discovery of technology. The pandemic forced this transition along faster, as general populations sought digital resources for their daily needs.

Bain & Company looked into how this might impact car insurance, and they found that the digital insurance sector had grown by around 20%. While that number may balance out after pandemic measures are reduced, it is just as likely that this has become the new norm.

Furthermore, people are seeking new avenues of finding, comparing, and choosing car insurance opportunities. The call to obtain quotes through websites has been steadily increasing. The insurance companies that meet those needs are doing better than those without.

Advancing Technology

Thanks to developments such as artificial intelligence, loT, and even self-driving cars, the automobile industry has been facing many technological advancements. As these technologies become more commonplace, insurance quotes and companies will have to adjust alongside them.

Theoretically, many of the advancements being made are helping to make the driving experience a safer one. 3D-LiDAR can detect potential collisions while assisting in smaller processes, such as parking. Removing the human element helps to reduce mistakes, and thus, accidents.

However, there are certain risks involved as well. This will require any insurance agency to seek the appropriate data to keep up with risk assessment modules. 

Generational Shifts

The generation dominating the insurance world will soon be shifting. For years it had been the Boomers and Gen X providing most clients in the insurance market. Naturally, with those generations came certain expectations, experiences, and regulations.

However, the number of Millennials in the insurance market has been steadily growing. Soon, their numbers will surpass those of their elders, meaning that the market will soon shift to cater to their demands and expectations instead. 

Millennials are part of the force behind the demand for better technology and online opportunities. Insurance companies will have to make an active effort to keep up with these demands or risk falling out of practice.