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Online driving records: will it really lower insurance premiums?
Did you hear the latest motoring news? Motorists will benefit from the Government’s initiative to put driving records online. According to the Association of British Insurers, honest drivers will save up to £15 a year once this project goes live.
Insurers pricing in a risk premium
Currently, insurers are having to price in a premium to cover the risk that motorists either deliberately lie or make honest mistakes about their driving records. Understating the number of points lost on a license would lead to a lower insurance quote, therefore giving some motorists the incentive to provide false information.
From an insurer’s perspective, it is too expensive and inefficient to carry out thorough checks on driving records for every insurance application, because the only way to verify this type of information is through lengthy calls to the DVLA call centre. For insurers therefore, there has been no choice but to price in a risk premium on incorrect point score and to spread this to all policy holders.
How online records will work
The My Licence project will be launched by DVLA, and is a part of the Government’s initiative to move more public services to online platforms. It is hoped that the 25 digital reforms to come will in combination save £1.2 billion by the end of 2015.
In terms of how this project will work, once driving records have been migrated to an online system, individuals and companies will be able to search the database using a valid licence number, a national insurance number and a postcode. The record retrieved will indicate the number of points on a particular licence.
Online records will allow more accurate pricing
According to Oliver Morley, the chief executive of DVLA, there is no question that the availability of this facility will reduce the cost of insurance policies for a majority of people.
“Currently, they are effectively spreading the risk of an incorrect points score when you are putting in for your insurance quote; so in future good drivers should be able to get a lower insurance quote – we have spent a lot of time working with insurance companies on this and we are providing this service to the insurance companies as a data stream,” Mr Morley said.
Not only will the insurance industry benefit from the results of this project, car hire companies will also save on administration costs of having to verify driving records by phone.
However, the car rental industry does not believe this service would reduce the cost of hiring a vehicle. A spokesperson for the British Vehicle Rental and Leasing Association said that the process of checking the driver endorsement and qualification information can be done at a low cost, by inspecting the driver licence counterpart.
Paper licences to become obsolete
By 2015, motorists will be issued a plastic photocard licence instead of paper licences. The latter will be abolished, affecting an estimated 10 million motorists.
For the elderly and those unable to access the internet, the Government aims to provide an “assisted digital” service where they can find out about their online records through talking to telephone operators.
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