Gareth Shaw

QUESTION: After my wife passed away, I rang my car insurer to let it know that she would no longer be driving the car – as she had been a named driver. Its reaction was to promptly increase my premium by 22 per cent. I feel very upset that it would do this at a time when I was still very recently bereaved. How can an insurer possibly justify this?

Factors that have very little directly to do with getting into accidents or having your car stolen can influence your price

ANSWER: I’m very sorry to hear of your loss. Dealing with a death is one of the most distressing events you can encounter, and sadly we hear countless stories from grieving people who have had their misery compounded by the way companies handle the administrative side of someone passing away.

To you and me, the price hike you’ve experienced seems calculated and callous. To the insurer, however, the fact that your wife was no longer a named driver on your policy changed its perceived risk of you having an accident, and it needing to pay out for a claim in the future. So, it decided to charge you more, because you appear riskier now that your wife is no longer on the policy.

The practice of setting car insurance pricing is notoriously opaque – insurers guard their pricing practices closely to avoid revealing their commercial secrets, consequentially making it very difficult for a policyholder to understand exactly what has determined the price they have been given.

When you fill in your details to get a car insurance quote, either directly with an insurer or on a price comparison website, these data points are used to determine the level of risk you pose. Computer software will calculate a “score” for you based on a pre-programmed algorithm, which is then translated into your premium. The data you give to an insurer is used to match you as closely as possible with customers already on its books. It uses its experience with those customers to predict how likely you are to claim, renew in future, commit fraud, and so on. For this reason, factors that have very little directly to do with getting into accidents or having your car stolen can influence your price.

But details like your occupation, your age, where you live and the type of car you drive will be matched up to customers with similar profiles and your premium will be priced based on the claims history of those previous customers. There are some real nuances to this. In a study we carried out last year, a scenario where someone called themselves a painter (working in art) was charged more than someone describing themselves as an artist. This will be because the insurer will have data that says painters (decorators) are more likely to claim than painters (artists). Confusing, isn’t it?

And yes, your relationship status can influence the price. In the same study, we found that some insurers would charge single, divorced, or separated people more than those who we married, increasing prices by as much as four per cent depending on your relationship status. Again, the insurers will argue that this pricing will be based on the data it holds drivers and their view of the risk of people in different relationships. That said, we did not find pricing differences for widows and widowers

Certain details are off limits. It’s against the law for insurers to set their prices according to ‘protected characteristics’. These include gender, religion, race, and disability.

In your case, having your wife as a named driver on your car reduced your overall level of risk – not because of her gender, but perhaps that she had a better driving history, was younger than you or had a longer driving experience, all factors that made insuring you more attractive and your policy more keenly priced. The insurer may have considered that you’d spend less time driving, reducing the chance of you having an accident and making a claim.

The good news is that you do not have to accept a hike in your premiums – the car insurance market is hugely competitive, and the power is in your hands to switch away to a new insurer that will offer you a better price. Try gathering quotes from other insurers – both those that are on price comparison sites and those that aren’t – and challenge your existing insurer with these cheaper deals. You may find it is prepared to meet the lower quotes. If not, take your business elsewhere.

Gareth Shaw is the Head of Money at which.co.uk.