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I have recently found that my fully comprehensive car insurance quotes have been cheaper than third-party only policies. I had assumed it was just random differences between policies rather than any systematic phenomena. However the Guardian is reporting that "fully comprehensive insurance... is now typically cheaper than taking out a third-party policy".

What is the cause of this effect?

Comparison to other question: What Is The Logic Behind Cheaper 'Fully-Comp' Insurance?

This question covers from an individual point, how an individual could put themselves in a different risk bracket by choosing lower levels of cover if they are at a higher risk. These do not obviously apply to the market where as a whole Fully-Comp is cheaper, where someone who "do[es] not care much about [their] own car" or "younger motorists or those with driving convictions have opted ... to keep the cost of motoring down" would be motivated to go with fully comp not third party.

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    Does this answer your question? What Is The Logic Behind Cheaper 'Fully-Comp' Insurance?
    – AakashM
    Jan 29 at 9:50
  • @AakashM I have edited the question to illustrate why that does not answer the question.
    – User65535
    Jan 29 at 10:03
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    But 'the market' is made up of all the thousands of individuals, and insurers' responses to them... I don't see how an answer to this q is going to be any different from the answers to the linked q, but let's see what the community thinks.
    – AakashM
    Jan 29 at 10:14
  • Are the comparatives truly equal, wrt 3rd party coverage? eg. does 3rd party-only coverage typically start at a $1M limit, but the amount of 3rd party present in a comp policy starts at $100k? I see some reasoning in the linked answer but it feels like only half the truth, if there is truth in the comparison at all. Jan 29 at 14:32
  • I'd want to compare the specific policies; this does feel incomplete.
    – keshlam
    Jan 30 at 6:37

2 Answers 2

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Note that the statement in the Guardian means

"For the cheapest 3rd party insurance offered to an individual, is there a cheaper comprehensive insurance offered by any (other) insurance?"

which is not the same as

"For the same insurer, is the 3rd party insurance cheaper than their own comprehensive insurance?"

For that latter question, the answer is actually generally "No" (maybe unless they try to force their customers out of a contract), while for the first, it is "usually yes". Mixing the questions up might lead to illogical conclusions though.

Why do other insurer might offer cheaper comprehensive insurance?

This is probably a market effect. There are a lot more insurer that offer comprehensive insurance (with prices based on their own internal risk statistics and marketing strategy), so one of those is likely to have a cheaper option. If that insurer would also provide a 3rd party insurance, it would probably be even cheaper, but they apparently don't offer it.

Why don't they offer it? Almost certainly because their statistics say that they would earn less money with that. Insurance is a number's game, and we can be certain they did those calculations.

The thread you linked made the assumption that this might be because 3rd party insurance attracts riskier clients, which sounds reasonable: prefering 3rd party insurance is probably correlated to cheaper and/or used cars, which are problably at least slightly correlated to driving experience (in addition to age, which has their own effect on the price), as well as to caring a bit less about their own vehicle (while the damage inflicted to others is usually uncorrelated to the value of your own car). So if you are more likely to cause 3rd party damage, you at least are forced to pay the higher comprehensive premiums (or pick a different insurer, which is even better).

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A possible explanation:

Insurance doesn't have a fixed price. It depends on the risk, due to you personally, your history, the car that you bought. Some people will always pay more than others.

It may be that people going for fully comprehensive insurance act differently and are a lower risk. They usually drive an expensive car and take care and try not to damage it, while someone with a cheap old car doesn't car. It could be that those who care for their expensive cars will on average drive more carefully than others and cause less damage not only to themselves but also to others. It could be that bad drivers who keep causing damage have premiums so high, they cannot afford fully comprehensive cover.

So for many reasons, it is possible that people paying third-party liability only will on average be involved in more accidents, and even cost more money than those who pay for fully comprehensive insurance.

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