Car Insurance Company, Car Insurance Claim

Where Does My Money Go?

As you'll know if you're young and haven't had a license long, car insurance can be an expensive purchase - it's not completely unusual to find your first premium costing more than the car itself - but what happens to the money you spend on your premium?
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How your car insurance company spends your money

The premiums you pay to your insurer are not simply held to one side in the event that you need to claim on them; instead, it all goes into one lump sum which the company uses in several different ways. Approximately 50% the pot is taken up by paying out on claims, and the other half is split equally between administrative and legal costs and the general day-to-day running of the business.

These numbers vary depending on the insurer; some companies keep their overheads lower, or save more money on premiums each month, but that is roughly how the money is split.
What sort of claims cost car insurance companies the most?

Damage to cars involved in collisions make up around half of an insurance company's expenses, and a huge amount of money is also spent on medical expenses and personal injury claims (the costs of which are ever increasing). This is why fully comprehensive cover is so expensive - people who hold these policies can cost insurers a great deal if they have an at-fault accident.

Insurers also spend a great deal of money processing and settling claims - there are legal costs involved in doing so, and disputed claims can take a long time to settle.

Insurers also have other staff to pay, advertising to produce, and physical properties to maintain, but many companies who operate online do not pay many of these, and as such can afford to pass on the savings to those who purchase their cover online. Many companies offer a discount for purchasing online, so it is always worth checking before purchasing.
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