What has happened to the car insurance industry? On one side we see premiums which are rising inexorably every year, and on the other side we find our insurers complaining bitterly that they cannot make a profit in this industry. Meanwhile the number of people who are having to pay for their car insurance monthly, from sites such as buymonthlycarinsurance.co.uk, continues to soar. Why on earth should this be?

The changes in the car insurance industry over the last 10 years have been profound, and one of the major reasons for that has been the rise and rise of the Internet. The first inklings of what was to come were found in the United States, when the cost of term life insurance suddenly nosedived; the reason was quite simply that potential buyers have been able to get on to the web and search for prices themselves, without having to approach specialised insurance brokers. It has been estimated that around $1 billion per year has been taken out of the industry because of this.

A similar thing has happened to our insurance companies in the UK, who have found that in order to compete online they have had to slash prices to the bone. The many companies the expected increase in sales as a result of price cutting has not materialised, for the simple reason that all their competitors were doing the same thing. Result: tumbling profits, falling liquidity.

This can only happen for so long, before something has to give, and the result has been a slow increase in premiums to cover the losses on the failed marketing initiatives. Premiums have also increased however as a consequence of two more invidious causes; fraudulent claims and compensation claims.

To add to the woes of the insurers, we are changing our buying habits where car insurance is concerned. Only a few years ago it was common for everyone to buy their insurance policy a year in advance, but now new payment systems such as monthly no deposit schemes, and perhaps more importantly temporary car insurance (details here or go here for temporary car insurance, and it is hardly surprising that associations such as the ABI are rising in importance.

According to industry insiders, temporary policies are taking an increasing hold on the insurance market, with more than half a million sold in the last two years alone. Temporary car insurance enables buyers to pick and choose when they want cover, and many people are rapidly getting used to the idea of leaving their cars laid up for much of the year, and only bringing them out on other occasions such as family holidays. There is no doubt that other factors such as the high cost of fuel and road tax are contributing towards this phenomenon.

The green lobby are delighted by this; there is little doubt that the motorcar has contributed as much as any factor to atmospheric pollution throughout the world, and any ways of getting consumers to switch from driving their own cars to using public transport or even, surprise surprise, walking or cycling would be very welcome.