A survey of 2,000 UK drivers revealed 51% did not know how premium is calculated and two fifths were unclear why prices may fluctuate year to year. 

Commissioned by Co-op Insurance, the research found more than a third (36%) did not understand how their policy is priced in relation to the choice of their vehicle.

It added many people were not aware what their premiums covered. For instance, 42% of respondents did not realise their insurance provides protection if another driver claims for personal injury, as a result of an accident that is their fault. 

James Hillon, products and pricing director at Co-op Insurance, said: “Motor insurance can be complex and the research has found that drivers are often confused by it.”

For two fifths (43%) of drivers, motor insurance is a “grudge purchase”, with 15% of them saying they would not buy the product if it was not a legal requirement.

In response to this, the firm released today a video to explain how pricing works in order to improve transparency for its customers. This is the first in a series of three animated videos.

Hillon believes it will help drivers understand the value they get and reduce the chances of them deciding against cover.

“Uninsured drivers have an impact on the cost of insurance generally, and can also lead to really unfair situations on honest road users if they are involved in an incident,” he added.

Percentage of drivers confused on different aspects of car insurance:

1. How premium is calculated – 51%

2. Why prices can change annually – 43%

3. What isn’t covered – 39%

4. The policy price in relation to vehicle value – 36%

5. What different add ons are – 36%

6. What is covered – 28%

7. Why it isn’t easy to compare policies – 23%

8. Insurance premium tax – 23%

9. When I need to update my insurer on changes – 18%

Fonte: TheActuary