The Effects of Recession on the Claims Market

The recession has had some obvious effects on businesses and individuals alike   less cash flow in general, plus the lack of access to credit, means purchasing power has been somewhat depleted. While there have been some positive signs of change in the last few years, the economy has been slow to rejuvenate, which has had an effect on the claims market. Troubles in personal income can have a knock-on effect on claims.

For example, if you drive a car you will need to maintain the vehicle’s upkeep. This is more difficult to do if you are experiencing cash flow issues. If your car requires servicing but you haven’t got the money in the bank to indulge in such “luxuries” your vehicle will be less roadworthy and may even become unsafe. This is something many people choose to forego when they need the vehicle to get to work, to maintain an income and support their family but are already so far stretched to make ends meet that they can’t afford to take the best possible care of their car. Something has to give.

Similarly, drivers may choose to drive a damaged vehicle simply out of necessity, rather than pay out for repairs which puts people at an increased risk of having an accident. And this increases the level of claims.

Cuts in the level of insurance

In the event that insurance becomes unaffordable for the driver due to the economy, it is entirely possible that people will decide that driving without insurance is a risk worth taking. In the event of an accident, this can mean more people attempting to claim from uninsured drivers. If you can afford it, a recession is a good time to take out an uninsured driver’s policy to ensure that, if the worst happens, you have a level of protection and do not need to pay for expensive repairs out of your own pocket.

In today’s society a car is a requirement rather than an option in lots of people’s lives. Even if you lose your job, you may require such transport to enable you to get to job interviews and undertake daily life activities. Most people, rather than completely getting rid of insurance in this situation will choose to take out only a minimal level of cover necessary under their local law. This can mean that you are not covered for any damage beyond the level of your policy cover and could mean you do not get enough from your policy to repair or replace your vehicle.

If you find yourself in a situation where your income is reduced, rest assured that even minimal insurance is better than none at all.

The effect of insurance companies

The effect on insurance companies due to recession can also cause changes in the claims market. While these are often large enterprises, they too will be feeling the pinch and may try to limit claims or even deny them. If this happens to you, don’t hesitate to gain help from your solicitor.

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