Revving Up the Absurdity: How Inflation, Capitalism, and a Dash of Piracy Made Your Car Insurance Cost More Than Nadine Dorries' Bar Bill
We've all become well-acquainted with the incessant drumbeat of the 'cost of living crisis' reverberating through the news. It's as if we're trapped in a ceaseless loop of ominous predictions and unsettling bulletins. The cost of food continues its upward march, housing expenses are reaching astronomical heights, and the notion of something for nothing feels like a distant memory.
Picture my disbelief when the chime of an incoming email heralded the arrival of a message from LV=, my car insurance provider. The contents were enough to make my heart sink: a notification that my insurance premium for the coming year was about to take a considerable leap. A staggering jump from a seemingly manageable £597.23 to an eye-watering £1076.21 per annum! Yes, you read that right—a jaw-dropping 80.75% surge! To provide some context about my personal driving circumstances, I reside on a quiet island in Orkney, far removed from the spectre of car-related crime or the rush-hour frenzy. My driving routine rarely extends beyond a quick trip to the local shop and back. Needless to say, the renewal email caught me entirely off-guard, and an 80% hike was the last thing I anticipated. To put this into further context the UK is currently experiencing a 43.1% inflation rate increase compared to less that 2% increase in Europe.
And the justification provided by LV= for this exponential spike? Brace yourself—COVID and the conflict in Ukraine. Apparently, the leading car insurance companies have collectively attributed escalating premiums to 'global supply challenges,' and as quoted from LV='s actual email 'The war in Ukraine and the sanctions placed on Russia have pushed up prices of materials needed for repairs and caused significant supply chain delays in getting parts to the UK' however, the more you delve into their reasoning, the more the situation appears murkier than a poorly executed oil change.
It has always been assumed that when calculating how much an individuals premium will cost these factors are taken into consideration;
Most of us have had the dubious honor of dealing with insurance companies at some point or another, enduring the agonizing hold music while a call center operator navigates the perils of their minimum wage existence. Here's a revelation: insurance companies are not particularly keen on honoring policy payouts or, at the very least, they seek the most economical route. Disturbingly, it has come to light that certain companies are opting to scrap vehicles altogether instead of facilitating repairs or providing replacement cars. Unsurprisingly, this practice has a ripple effect, driving up costs for consumers. To add to the intrigue, those elusive 'spare parts' that mysteriously elude the repair process are conveniently reserved for new vehicle production. An interesting tidbit—despite the creation of 1.6 million new cars, a significant portion still languish unsold.
Amidst the pandemic, we were often reminded that we were collectively navigating the challenges as a united front. So, in light of this sentiment, one might wonder why the gears of car manufacturing can't be slowed down a tad to grant the supply of crucial car parts for repairs a chance to catch up. Particularly when the industry proudly unveiled an astonishing profit tally of $128.4 billion in the year 2022.
In the face of rage of increasing bills I deep-dived into the history of my car insurance company and found some interesting things of note that have been glossed over in discussions of why prices are increasing.
LV= has a long history dating back to 1843, when they dealt in 'penny policy' where agents collected a penny a time so that poorer Liverpudlians could pay for funerals and leave inheritance to loved one. In 2021, LV= appeared poised to undergo an acquisition by Bain Capital—an occurrence that curiously evaded scrutiny from Rishi Sunak, the current UK Prime Minister, who occupied the role of Chief Secretary of the Treasury at the time. It's worth noting that this potential takeover would have generated substantial profits for one of Sunak's donors, an aspect that seemingly remained detached from Sunak's decision-making process... or so it appears.. wink wink. The deal collapsing was ultimately attributed to LV='s members, who, in their capacity as proprietors due to its mutual structure, failed to attain the requisite threshold of votes necessary for the transaction to proceed.
In the year 2022, LV= faced substantial setbacks, recording losses amounting to £265 million. This financial turbulence raises questions, particularly as the company managed to allocate £35 million to its members. Curiously, amidst these losses, LV= also disbursed £766,000 to its former CEO, Mark Hartigan. This remuneration is particularly notable given the contentious and ill-fated nature of his involvement in the unsuccessful takeover endeavor.
This brings us to the pivotal concern of the escalating car insurance premiums, a phenomenon interwoven with the fabric of piracy capitalism. Under the guise of current global events, profits are being propelled to unprecedented heights, enriching CEOs and mammoth corporations by billions, even amidst ongoing global uncertainties, while ordinary individuals are saddled with ever-increasing bills.
The surge in inflation rates isn't accelerated by calls for higher wages from the public, but rather by the insatiable hunger for corporate gains— a reality that the UK conservative government appears all too unwilling to tax adequately. This imbalance was underscored by the International Monetary Fund (IMF) in their June 2023 report, revealing that corporate profits exert a more substantial impact on inflation than even the conflict in Ukraine. Astonishingly, Eurozone's corporate profits were estimated to constitute half of the driving force behind inflation, a phenomenon aptly dubbed 'greedflation'. This term encapsulates the practice where companies raise prices under the smokescreen of inflation, solely to maximize their profit potential. Instances of this disconcerting trend abound, exemplified by the energy sector where wholesale gas prices have decreased, yet customer bills remain exorbitant. Similarly, supermarkets reflect the paradox as costs of raw materials like wheat decrease, but the cost of products like a loaf of bread sees no corresponding reduction. This is not merely a crisis of the cost of living, nor a mere demand for fairer wages aligned with inflation; it's unequivocally a crisis borne from the excesses of capitalism. While global factors undoubtedly exert influence, corporations are manipulating the narrative to their advantage.
Trickle-down economics, a theory perpetually presented as a solution, gaslights us into believing that amassing wealth among the affluent will invariably spawn job creation, higher tax revenues, and increased spending throughout society. In reality, this concept is farcical. It's a trickle-up phenomenon where money flows unabatedly to the top echelons and steadfastly remains there. Ultimately this is one of the main reasons I believe that car insurance premiums are rocketing - not because they have to but because the insurance companies want them to.
As you grapple with a car insurance bill reaching four figures, juggle rent or mortgage payments, and contend with the relentless rise in food prices, it's worth noting that Rishi Sunak is proclaiming from his private helicopter that he stands firmly 'on the side of motorists'.
What a stalled engine this country has become.
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