Sneaky insurance companies

[mjr]

Yes they are. The personal motor market as a whole rarely makes money. Anyone who rings up and gets a discount is likely to be getting a price at which the insurer is expecting to make a loss - although given the vagaries and risk-pooling of claims it's uncertain exactly which policies will make a profit or a loss.

That doesn't seem like a disagreement to what I wrote because is "anyone who rings up and gets a discount" that many, relative to the number of customers? And do you really think @Dan B has had insurance "below cost" - that is, that they've paid out more in claims and costs than he's paid in?

 

[Dan B]

Really? I'm pretty sure that mobile phone service retailers are starting faster than one a year... or are you one of those fools who thinks you must buy directly from 3, EE, O2 or Vodafone (aka Hutchison Whampoa, BT, Telefonica or Vodafone)?

Apply the filters "4G, not based on the Three network, huge amounts of data, no prohibition of tethering" and the options start to look a bit thinner on the ground. I won't even bother to add "ipv6, no CGNAT" because I think that would zero it out completely

 

[Dan B]

uncertain exactly which policies will make a profit or a loss.

I was under the impression that pooling risks like this to make them manageable in the aggregate is pretty much the entire point of insurance.

 

[colly]

There's nothing illegal about setting your prices at whatever level you want to, nor of charging two different people different amounts for the same product or service.

I'm sure you're right but how does that not apply when Mr Dodgy Roofer replaces a couple of loose tiles and then charges an unsuspecting or confused pensioner £2000. He sets his price at what he wants and if anyone pays it then more fool them.
I'm not saying it's right but you often hear of this kind of scam happening and if the rozzers get hold of them they end up in court. Insurance companies should too if there's a way of prosecuting them. Sauce for the goose etc etc

 

[classic33]

I think it is auto-renew by default, to avoid situations like having a major incident happen just after you forgot to renew the insurance on the right day. But adding all of those things on..... very devious indeed.

Maybe so, but there is a database of which properties are insured. So you move elsewhere after the agreed period, it's easy enough for them to check. They'll take the money quick enough, getting it back from them is another matter.

They can often overide a direct debit that's been "cancelled", as I found out.

 

[raleighnut]

British Gas is the only company I WILL never deal with...I don't hold a grudge, it's only been about 12 years since they pi$$ed me off

We did quite well out of British Gas. When Maz got them to fit an electric shower they upgraded the cover from boiler/central heating (worth it cos it was serviced every year for less than a service would cost) to full plumbing and electric cover (in with the price of the shower)
Within 18mths the cold water storage tank (galvanized) had rusted through, the drains had blocked and the RCD went daft and tripped 5-6 times a day (they couldn't get one to fit the existing 'consumer unit' so replaced the entire thing) so we got a couple of grands worth of work done for free.

Then the premium went up to about £350 a year............................................................so we cancelled it.

 

[srw]

I was under the impression that pooling risks like this to make them manageable in the aggregate is pretty much the entire point of insurance.

It is. Which is why the concept of selling policies at a profit is a bit of a nonsense, and this....

And do you really think @Dan B has had insurance "below cost" - that is, that they've paid out more in claims and costs than he's paid in?

....is just silly. And why I'm careful to talk about expected loss and profit in the case of individual policies. But I think you knew that.

 

[srw]

Insurance companies should too if there's a way of prosecuting them.

Take a look at the amount of fines levied by the FCA. Then reflect on the amount of change which insurance companies have made themselves in order to avoid those fines.

The industry is far from perfect, but the regulators do a pretty decent job of squishing the more egregious behaviour. Which is why the OP got a letter far enough in advance and clear enough that he could do what he was going to do anyway....

 

[Drago]

The reason margins are so slim for car insurers is they're busy shafting each other for ancillary costs such as hire cars etc. It all seemed a good wheeze when it first started, but now everyone is at it the monster is out of control. Sympathy quotient= zero.

The other reason I have no sympathy is because their charging model is not based, for the most part, upon 'risk' as they claim, but upon the customers perceived ability and willingness to pay. When I moved a mile to a lower crime (but more affluent, with higher house prices, a higher earning population) area with less recordable RTC's my premiums actually went up. Why, I wonder? BBC Radio also wondered why, and the insurers in question reduced my premium to a more logical lower amount once the Beebe journos started poking around.

 

[nickyboy]

Direct Line don't use resellers. They're only direct. (Although to be pedantic, Direct Line is a brand of UKI which you can only buy direct, and UKI also underwrite NIG and Churchill, who do sell via brokers and other intermediaries. And I believe that the group now has a single pricing policy, but I could be wrong.)



Yes they are. The personal motor market as a whole rarely makes money. Anyone who rings up and gets a discount is likely to be getting a price at which the insurer is expecting to make a loss - although given the vagaries and risk-pooling of claims it's uncertain exactly which policies will make a profit or a loss.

That's interesting. Care to explain the dynamics of the business model? Is it that the insurers are effectively (although not legally) obliged to offer personal vehicle insurance as part of their suite of products? Or is it that they expect to get some cross selling opportunities with other insurances? Or something else?

 

[Flying Dodo]

Take a look at the amount of fines levied by the FCA. Then reflect on the amount of change which insurance companies have made themselves in order to avoid those fines.

The industry is far from perfect, but the regulators do a pretty decent job of squishing the more egregious behaviour. Which is why the OP got a letter far enough in advance and clear enough that he could do what he was going to do anyway....

And on top of that, the FCA are requiring insurers to bring in specific wording for renewals, highlighting that consumers might get a better deal elsewhere, as well as some even stronger wording if someone has stayed with the same insurer for 5 years.

 

[Dan B]

There's nothing illegal about setting your prices at whatever level you want to, nor of charging two different people different amounts for the same product or service.

I'm sure you're right but how does that not apply when Mr Dodgy Roofer replaces a couple of loose tiles and then charges an unsuspecting or confused pensioner £2000. He sets his price at what he wants and if anyone pays it then more fool them.
I'm not saying it's right but you often hear of this kind of scam happening and if the rozzers get hold of them they end up in court. Insurance companies should too if there's a way of prosecuting them. Sauce for the goose etc etc

I have good news for you which will brighten your Tuesday morning: (1) Consumer Rights Act 2015; (2) the Financial Conduct Authority

 

[mjr]

It is. Which is why the concept of selling policies at a profit is a bit of a nonsense, and this....


....is just silly. And why I'm careful to talk about expected loss and profit in the case of individual policies. But I think you knew that.

Well, yes, but the concept of selling policies at a profit being a bit of a nonsense means the concept of a discount is a bit of a nonsense, too. Like I wrote, insurers don't deliberately sell many policies below cost, but they expect there will be some. I suspect there may even be some analysis that the people who actually read their renewal notice and switch or phone to get better prices are lower risk than those who look at double that and think "I'm lucky to get that price, the way I behave".

 

[Dan B]

Well, yes, but the concept of selling policies at a profit being a bit of a nonsense means the concept of a discount is a bit of a nonsense, too. Like I wrote, insurers don't deliberately sell many policies below cost, but they expect there will be some. I suspect there may even be some analysis that the people who actually read their renewal notice and switch or phone to get better prices are lower risk than those who look at double that and think "I'm lucky to get that price, the way I behave".

I no longer have any idea whether you're talking about actual cost (actual historical claims minus premiums paid) or expected cost (based on a statistical calculation of propensity to claim), and it seems as though you're flipping between one definition and the other to suit your argument

For the avoidance of doubt, I have in my lifetime paid more in insurance premiums than I have ever had paid out in claims. However, I think that data point is of approximately no use whatsoever to determine whether insurers are price gouging or not.

 

[srw]

Well, yes, but the concept of selling policies at a profit being a bit of a nonsense means the concept of a discount is a bit of a nonsense, too. Like I wrote, insurers don't deliberately sell many policies below cost, but they expect there will be some. I suspect there may even be some analysis that the people who actually read their renewal notice and switch or phone to get better prices are lower risk than those who look at double that and think "I'm lucky to get that price, the way I behave".

You have misunderstood. Insurers do deliberately sell many policies below expected cost, for various reasons. Which is one of the main reasons why the private motor market as a whole tends to lose money. The concept of selling an individual policy at a profit or a loss is nonsense because the majority of the actual (rather than expected) costs aren't known until the claims happen. There might be a behavioural analysis like the one you suggest, but I suspect that other factors are rather more important.

That's interesting. Care to explain the dynamics of the business model? Is it that the insurers are effectively (although not legally) obliged to offer personal vehicle insurance as part of their suite of products? Or is it that they expect to get some cross selling opportunities with other insurances? Or something else?

It's a number of things. There are some insurers who are extremely good at pricing risks - they do tend to make money. Because the market is so competitive, when you as an individual company get the price wrong you tend to get picked off all over the place and lose a lot of money. Quite a lot of the insurers in the private motor market are only (materially) in the private motor market, and need to keep up their volumes or shut down - and they seem to scrabble around to find other ways of making money. A lot has been tried, from add-ons like breakdown cover to owning brokers to cross-selling other products - but no-one seems to have found a magic bullet (and they all know that their business models are time-limited because of driverless cars).

And there are certainly companies who tolerate marginal and fluctuating results on personal motor because it's a prestige product, and the one with the biggest brand value.