Low insurance offer
Discussion
surveyor said:
Loon is always quick to jump to the defence of the industry he works in. I understand that, although there are many things that he has said that seem contradictory to my experience.
I would however chuck insurance companies in with this:
Motor insurance - there''s no money in it. (still seem to be in the market though!)
Banks - we don't make money on current accounts (still seem to be offering them!)
Car dealers - we don't make money selling cars (still seem to be keen!)
It's worth more because of the extra's (until you trade it in - then it will be worth no more...)
etc.
We don't make money on selling Petrol (yet you still seem to!)
Are you really this naive as to how to run a business ?I would however chuck insurance companies in with this:
Motor insurance - there''s no money in it. (still seem to be in the market though!)
Banks - we don't make money on current accounts (still seem to be offering them!)
Car dealers - we don't make money selling cars (still seem to be keen!)
It's worth more because of the extra's (until you trade it in - then it will be worth no more...)
etc.
We don't make money on selling Petrol (yet you still seem to!)
Edited by surveyor on Saturday 13th October 13:52
Banks - they sell you loans and credit cards at high APR
Car Dealers - not my area, but I guess they make it in the servicing side ?
Tesco - sell cheap food to get you the door, make it back on a narrow range of other goods
Insurers - upsell you legal cover and AA, cross sell to household and travel
iPhone App maker - free app, charge you for "in app purchase" to remove the ads (or whatever)
etc
Isn't THAT hard to grasp the concept, is it ?
Red Devil said:
Ah, the same argument that most gamblers use. Just one more bet and I'll win it all back. They all end up losing their shirts. It makes no business sense whatsoever to carry on making losses year after year.
Not a great analogy, but let's torture it. It is like a gambler who has placed bets in the past for many years to come. And is using his current month's "winnings" to make more bets for the future. He gets interest on the "in flight" bets.Firstly, it is difficult to get off the cycle, as you still have your future bets in play. You can't just quit.
Secondly, if you can make a overall profit, whilst having some bad days/weeks, it will smooth out over time.
Noger said:
surveyor said:
Loon is always quick to jump to the defence of the industry he works in. I understand that, although there are many things that he has said that seem contradictory to my experience.
I would however chuck insurance companies in with this:
Motor insurance - there''s no money in it. (still seem to be in the market though!)
Banks - we don't make money on current accounts (still seem to be offering them!)
Car dealers - we don't make money selling cars (still seem to be keen!)
It's worth more because of the extra's (until you trade it in - then it will be worth no more...)
etc.
We don't make money on selling Petrol (yet you still seem to!)
Are you really this naive as to how to run a business ?I would however chuck insurance companies in with this:
Motor insurance - there''s no money in it. (still seem to be in the market though!)
Banks - we don't make money on current accounts (still seem to be offering them!)
Car dealers - we don't make money selling cars (still seem to be keen!)
It's worth more because of the extra's (until you trade it in - then it will be worth no more...)
etc.
We don't make money on selling Petrol (yet you still seem to!)
Edited by surveyor on Saturday 13th October 13:52
Banks - they sell you loans and credit cards at high APR
Car Dealers - not my area, but I guess they make it in the servicing side ?
Tesco - sell cheap food to get you the door, make it back on a narrow range of other goods
Insurers - upsell you legal cover and AA, cross sell to household and travel
iPhone App maker - free app, charge you for "in app purchase" to remove the ads (or whatever)
etc
Isn't THAT hard to grasp the concept, is it ?
With the insurance companies it will be interesting to see if the OFT can get to the bottom of how much of this comes from referrals to ACM, Hire Companies etc. - especially the ones that the insurers have an interest in.
surveyor said:
Nope. But if I believed the line 'we don't make any money doing this' I would be. It's usually a case that there is another income stream as you have so ably identified above.
With the insurance companies it will be interesting to see if the OFT can get to the bottom of how much of this comes from referrals to ACM, Hire Companies etc. - especially the ones that the insurers have an interest in.
By "interest" I presume you mean owns a controlling stake? If so that'll be none then. Most insurers have an agreement to refer non fault claims to offset the far higher fault claims. Ditto on injury claims. With the insurance companies it will be interesting to see if the OFT can get to the bottom of how much of this comes from referrals to ACM, Hire Companies etc. - especially the ones that the insurers have an interest in.
Unfortunately for your profit obsession on this at best each referral generates around 10 - 20% of the money that a fault costs and we don't get 5 - 10 times more non faults than faults.
LoonR1 said:
surveyor said:
Nope. But if I believed the line 'we don't make any money doing this' I would be. It's usually a case that there is another income stream as you have so ably identified above.
With the insurance companies it will be interesting to see if the OFT can get to the bottom of how much of this comes from referrals to ACM, Hire Companies etc. - especially the ones that the insurers have an interest in.
By "interest" I presume you mean owns a controlling stake? If so that'll be none then. Most insurers have an agreement to refer non fault claims to offset the far higher fault claims. Ditto on injury claims. With the insurance companies it will be interesting to see if the OFT can get to the bottom of how much of this comes from referrals to ACM, Hire Companies etc. - especially the ones that the insurers have an interest in.
Unfortunately for your profit obsession on this at best each referral generates around 10 - 20% of the money that a fault costs and we don't get 5 - 10 times more non faults than faults.
surveyor said:
No that is not what I meant. I meant what I typed.
Then going back to your comment. The OFT are not the ones doing this now. It's the Competition Commission. They are lookin at a "dysfunctional insurance MARKET". For clarity that is everyone involved not just the insurers. Insurers are welcoming this review with open arms. Hardly the sign of a group o companies who are desperate to hang into referral income streams. The CHOs are the ones most nervous.
Noger said:
Red Devil said:
Ah, the same argument that most gamblers use. Just one more bet and I'll win it all back. They all end up losing their shirts. It makes no business sense whatsoever to carry on making losses year after year.
Not a great analogy, but let's torture it. It is like a gambler who has placed bets in the past for many years to come.Noger said:
And is using his current month's "winnings" to make more bets for the future. He gets interest on the "in flight" bets.
What "winnings"?Noger said:
Firstly, it is difficult to get off the cycle, as you still have your future bets in play. You can't just quit.
See above. The maximum exposure from any given date will be 2 years. It seems my comparison with gambling was more apt than I realised. Those people find it difficult to quit because they are addicted. They need help to break the cycle. Also, it is quite possible to quit but first you have to want to. That's the hard part.
Noger said:
Secondly, if you can make a overall profit, whilst having some bad days/weeks, it will smooth out over time.
I am curious about that overall profit as well as the "winnings" mentioned above. You told us earlier that motor insurance hasn't made any profit for 15 years. Make your mind up.It would seem that the only game plan is to hang in there until the tide turns. It might not for another 15. There is no way of knowing. There aren't many companies that can survive continuous losses without declaring bankruptcy which brings me back to my point about cross subsidy from other products. Without that the business model is not sustainable.
On iPhone so can't quote.
You might not have ha a policy the runs for more than 12 months but an insurer remains liable for a further 3 years for injury ( theoretically 21 in terms of a minor) and 6 years for property damage. So new claims can appear long after you walked away from that insurer.
It's not gambling that analogy was given by you and expanded upon by Noger.
Don't forget that I clarified 10 year cycles earlier and this 15 year one is unprecedented. Hence the last four years of significant price hikes.
You might not have ha a policy the runs for more than 12 months but an insurer remains liable for a further 3 years for injury ( theoretically 21 in terms of a minor) and 6 years for property damage. So new claims can appear long after you walked away from that insurer.
It's not gambling that analogy was given by you and expanded upon by Noger.
Don't forget that I clarified 10 year cycles earlier and this 15 year one is unprecedented. Hence the last four years of significant price hikes.
LoonR1 said:
You might not have ha a policy the runs for more than 12 months but an insurer remains liable for a further 3 years for injury ( theoretically 21 in terms of a minor) and 6 years for property damage. So new claims can appear long after you walked away from that insurer.
But you know that when you quote for the cover, and whilst the claim can be received at any point in the time you detail, the exposure for incidents giving rise to a claim remains limited to a twelve month period in time.If you can't stand the heat, the simple premise is stay away from the fire.
daz3210 said:
But you know that when you quote for the cover, and whilst the claim can be received at any point in the time you detail, the exposure for incidents giving rise to a claim remains limited to a twelve month period in time.
If you can't stand the heat, the simple premise is stay away from the fire.
So if every insurer that loses money on their personal lines motor followed your advice, how much do you think Admiral would charge for what would be a monopoly?If you can't stand the heat, the simple premise is stay away from the fire.
For reference their business model that makes money is coming under severe pressure an it wouldn't work in a monopoly situation.
Just to show how it should work.
I had a car written off in Germany when I worked out there.An agent was appionted by my ins co to handle my claim.he was independent of the ins co's involved.
The car was an old Datsun Cherry just used for running around on the camp I worked on value £300 they valued at£900.two weeks hire car payment as I was in hospital for planned knee surgery £300. Removal of car radio and fitting into new car £75.DE REGISTER car re register replacement £50. Token payment tor postage and phone calls £50
Total £1375 for a car I paid £300 for all the rest was free as part of being attached to the armed forces . I only had to make two phone calls and everything was paid direct to my bank acc. All thos took place twenty odd years ago.
I had a car written off in Germany when I worked out there.An agent was appionted by my ins co to handle my claim.he was independent of the ins co's involved.
The car was an old Datsun Cherry just used for running around on the camp I worked on value £300 they valued at£900.two weeks hire car payment as I was in hospital for planned knee surgery £300. Removal of car radio and fitting into new car £75.DE REGISTER car re register replacement £50. Token payment tor postage and phone calls £50
Total £1375 for a car I paid £300 for all the rest was free as part of being attached to the armed forces . I only had to make two phone calls and everything was paid direct to my bank acc. All thos took place twenty odd years ago.
Red Devil said:
You told us earlier that motor insurance hasn't made any profit for 15 years. Make your mind up.
It is quite happily made up. The difference is between an UNDERWRITING profit, and OPERATING profit.I sell a policy for £100. I pay £70 in claims, £10 in Commission, and £20 in expenses. I haven't made a "profit".
However, I can invest my reserves, and I can release those reserves in future years, and thus make a profit.
LoonR1 said:
So if every insurer that loses money on their personal lines motor followed your advice, how much do you think Admiral would charge for what would be a monopoly?
For reference their business model that makes money is coming under severe pressure an it wouldn't work in a monopoly situation.
No, my point was that even when you walk away from an insurer, they know there is a possibility of having to pay as a result of selling you that policy for the periods you said (3-21 years depending on circumstances), and if insurers don't like that, they shouldn't be in the business.For reference their business model that makes money is coming under severe pressure an it wouldn't work in a monopoly situation.
And actually I do not believe that insurers don't actually make money. Maybe not on every policy, but overall they must. For one thing, our work policy is on average around £10k for motor fleet. In the last five years I can recall 5 windscreen repair claims, and one no fault accident. Autoglass or whoever our insurer use must charge a lot for the repair of windscreens, or the admin must be huge if they haven't made money on us! (But of course I do realise that others may not be quite so lucky/claim free)
daz3210 said:
No, my point was that even when you walk away from an insurer, they know there is a possibility of having to pay as a result of selling you that policy for the periods you said (3-21 years depending on circumstances), and if insurers don't like that, they shouldn't be in the business.
And actually I do not believe that insurers don't actually make money. Maybe not on every policy, but overall they must. For one thing, our work policy is on average around £10k for motor fleet. In the last five years I can recall 5 windscreen repair claims, and one no fault accident. Autoglass or whoever our insurer use must charge a lot for the repair of windscreens, or the admin must be huge if they haven't made money on us! (But of course I do realise that others may not be quite so lucky/claim free)
If you're going to pick you out as the typical example then I'll pick the large losses I've had in the last six months from four claims totalling £25million. How many other claim free policies do we have to sell to offset those?And actually I do not believe that insurers don't actually make money. Maybe not on every policy, but overall they must. For one thing, our work policy is on average around £10k for motor fleet. In the last five years I can recall 5 windscreen repair claims, and one no fault accident. Autoglass or whoever our insurer use must charge a lot for the repair of windscreens, or the admin must be huge if they haven't made money on us! (But of course I do realise that others may not be quite so lucky/claim free)
LoonR1 said:
If you're going to pick you out as the typical example then I'll pick the large losses I've had in the last six months from four claims totalling £25million. How many other claim free policies do we have to sell to offset those?
Is that four motor claims?(And if you take note, I did point out that others may not have been so lucky, I never said we were typical.)
daz3210 said:
Is that four motor claims?
(And if you take note, I did point out that others may not have been so lucky, I never said we were typical.)
Yep. Four personal lines motor claims. All were genuine. None have any fraud attached to them and all had full dispute at inception. Just normal run of the mill policies with no suggestions of the claims that were coming. (And if you take note, I did point out that others may not have been so lucky, I never said we were typical.)
LoonR1 said:
Yep. Four personal lines motor claims. All were genuine. None have any fraud attached to them and all had full dispute at inception. Just normal run of the mill policies with no suggestions of the claims that were coming.
I understand that you may have problems with confidentiality, but I have to wonder what gave rise to such high payouts. This is an average of £6.25mill each. What were they major multi car pile-ups? Or huge injury claims?daz3210 said:
I understand that you may have problems with confidentiality, but I have to wonder what gave rise to such high payouts. This is an average of £6.25mill each. What were they major multi car pile-ups? Or huge injury claims?
Mainly injury, sometimes as a result of a pile up. Costs build up very quickly on life changing injuries, let alone the compensation paid.These aren't that unusual, as most insurers will get these sort of losses annually and they are already often reserved for if the insurer has half a brain). In reality a lot of this is offset with reinsurance as well, but it still hurts, as the cost of reinsurance rises, so personal premiums follow suit.
On a serious note, these are the sort of claims that get forgotten in the rounds, but the impact of low value claims really does impact just as severely when you factor in the frequency of these claims.
Damage to vehicles (policyholder or TP) is neither here nor there in the overall picture.
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