Who are these insurers?
All motor insurers in the UK have to be licensed by the Financial Services Agency. Many are part of large groups which deal with all types of policies such as home and contents, airplanes, ships and also life insurance and pensions. A smaller number of insurers are administered by Lloyds of London; these tend towards commercial and special risks. Very few insurers only sell motor insurance.
Insurance is a simple business. Insurers sell policies to policyholders. If the policyholder has an accident, the claims department deals with the other side (the third party) to settle the claim. The difference between the money the insurer receives from the policies it sells and the cost of the claims it pays out is their underwriting profit. They also make money by investing the cash you pay for their policies, although not so much now as in the past.
Self insured policyholders
Some policy holders have so many vehicles that they operate almost as insurers themselves. Examples are companies like British Telecom, Royal Mail, Tesco.
Vehicles from outside the UK
There are now lots of foreign vehicles on our roads. These are insured by local or European insurers, most of whom delegate management of claims to a UK based partner.
If you have an accident with a foreign vehicle. See below.
Are insurers charging a fair price?
Motor insurers received over £12 billion last year in insurance premiums, yet they made a loss of over £1 billion. In fact car insurers have not made a profit for at least the last 15 years. There are one or two exceptions. Admiral Group for example is an extremely successful and fast growing car insurer, even though it only started business comparatively recently. For more details about how car insurers make money and lose money click here.
What if an insurer goes bust
Policy holders of all UK based insurers are covered by the Financial Services Compensation Scheme. Even if an insurer goes bust, third parties can still receive 100% compensation, and policy holders are also covered although a small excess may apply. The FSCS is funded by levies on the various sectors of the financial services sector. The levy for general insurance, which includes motor insurance, is capped at just under £1 billion. So if an insurer goes bust, ultimately the bale out is paid for by other policy holders.