Insurance prices like Whaaat?
Discussion
Poor old TwigtheWonderKid keeps coming on and telling everyone the boring old facts about insurance and gets howled down every time. I do wonder why he bothers sometimes. Everything he says is right; it's a very varied, competitive market. It's 99% down to data, lots of it. Nearly every policyholder (especially in car insurance, where there are 20 million-odd policies out there) is part of a demographic that can be looked at. Prices are set by reference to this data; the idea that you individually can be looked, like a school report as someone said, is nonsense. You will be part of many different demographics and be assessed that way by complex algorithms.
Having said that, while that accounts for most claims experience, in my 25 years of insurance, the really big, multi-million pound claims often happen completely at random, and are often just plain bad luck. 50 years old, 20 years NCD, Ford Mondeo 2.0, hits the wrong pedal/slips on black ice/ bursts a tyre and takes out a bus queue. You look back at the original risk and think 'I'd insure that any day of the week at that price'.
This is the real value of insurance, the mega-claim. It's those claims that are being massively impacted by the Ogden discount rate changes, which I would think this year will add 10-13% to the average premium. The perceived arbritrary nature of the change is also causing big overseas insurers to even question whether they want to be in the UK market, which reduces what is called capacity in the insurance market and increases prices further.
In motorcycles, or motorhomes, or classic cars, etc, where the volumes are way smaller, there's less scope for big demographics, and these premiums can tend to regress to a norm as there isn't as wide a variety of data. Specialist underwriters and brokers will be more active in these sort of markets and will look to understand individual risks a bit more.
Arguably, the future of car insurance is down this route, where everything is compartmentalised into smaller niches and better understood, but that is in contrast to the commoditisation of the insurance product, driven by the need to keep prices down by driving costs out of the system, which is where the industry has been going for a long time. The question is, is the policyholder prepared to pay for the extra attention on his particular demographics in the hope that he will get a better deal, (and 50% of the time he won't)?
Having said that, while that accounts for most claims experience, in my 25 years of insurance, the really big, multi-million pound claims often happen completely at random, and are often just plain bad luck. 50 years old, 20 years NCD, Ford Mondeo 2.0, hits the wrong pedal/slips on black ice/ bursts a tyre and takes out a bus queue. You look back at the original risk and think 'I'd insure that any day of the week at that price'.
This is the real value of insurance, the mega-claim. It's those claims that are being massively impacted by the Ogden discount rate changes, which I would think this year will add 10-13% to the average premium. The perceived arbritrary nature of the change is also causing big overseas insurers to even question whether they want to be in the UK market, which reduces what is called capacity in the insurance market and increases prices further.
In motorcycles, or motorhomes, or classic cars, etc, where the volumes are way smaller, there's less scope for big demographics, and these premiums can tend to regress to a norm as there isn't as wide a variety of data. Specialist underwriters and brokers will be more active in these sort of markets and will look to understand individual risks a bit more.
Arguably, the future of car insurance is down this route, where everything is compartmentalised into smaller niches and better understood, but that is in contrast to the commoditisation of the insurance product, driven by the need to keep prices down by driving costs out of the system, which is where the industry has been going for a long time. The question is, is the policyholder prepared to pay for the extra attention on his particular demographics in the hope that he will get a better deal, (and 50% of the time he won't)?
popeyewhite said:
TwigtheWonderkid said:
The post office charge me about 50p to deliver a letter from London to Inverness. DHL want £79 to do the same. I guess that although they are both in the delivery business, they are each looking for different types of customer.
Except you're not comparing like for like as DHL don't provide the same service, DHL are a parcel delivery company and don't deliver letters. God knows where you plucked £79 from.TwigtheWonderkid said:
Some insurers want XKRs and price to attract them, others wouldn't touch them with a barge pole and price accordingly.
Whilst this is true it doesn't explain the huge variance in quotes from companies that purport to insure the same car.TwigtheWonderkid said:
I'm not sure how this is a constant source of amazement to otherwise intelligent people.
Your uncertainty has clouded your thinking: Another factor is people aren't legally obliged to use The Post Office or DHL. They are legally obliged to take car insurance. This implies to many that an industry standard or set of regulations are in place to ensure fairness. So when they receive wildly different quotes they understandably question the system.popeyewhite said:
TwigtheWonderkid said:
I'm backing out of this on the grounds of "never argue with an idiot...they'll drag you down to their level and beat you with experience"
Have a word - you're the one who said DHL would charge you £79 for a letter 
damianke said:
Poor old TwigtheWonderKid keeps coming on and telling everyone the boring old facts about insurance and gets howled down every time. I do wonder why he bothers sometimes. (...) Everything he says is right
No it's not, I explained it to him yesterday why he's wrong using basic concepts/foundations of free market economy. Yet I see he's repeating same old bulls
te as if that didn't happen. He must be getting paid to do this. No other reason. And since he's knuckles deep in the business I hope that once I'm in position to start underwriting insurance he'll help me to join the club. There aren't that many opportunities on the market where you can hold your customers by their ballsack and squeeeeeze it at will without any explanation claiming "we're doing you a favour". I guess I could also look into starting a TOC. 
VGTICE said:
And since he's knuckles deep in the business .
What on Earth gave you that idea?
That's exactly the kind of nonsense you get on here. A bunch of bandwagon riders who think that moaning about insurance is a sign of a car enthusiast, and anyone who actually steps back and looks at it logically must be in the business.
I repeat, millions of people in this country pay sub £250, many sub £200, for comp insurance. I pay circa £260 for comp on a 2.0 4x4 in outer London. How does that equate to this massive cartel/rip off industry who are fleecing us all?
TwigtheWonderkid said:
What on Earth gave you that idea?
TwigtheWonderkid said:
That's exactly the kind of nonsense you get on here. A bunch of bandwagon riders who think that moaning about insurance is a sign of a car enthusiast, and anyone who actually steps back and looks at it logically must be in the business.
I repeat, millions of people in this country pay sub £250, many sub £200, for comp insurance. I pay circa £260 for comp on a 2.0 4x4 in outer London. How does that equate to this massive cartel/rip off industry who are fleecing us all?
My brother in need, it's all good but as we've established in the other thread you can't say why some pay so low, it's not because they shop around (it's an argument worthy of a 5 year old) but because they have a risk profile which prices their insurance this way or the other. They might be paying 250 this year but next year they might be quoted 2x 3x times as much without any changes in circumstances (excluding +1yr in NCB) and they wouldn't know why. And they have no choice but say thank you for squeezing my balls I'll see you next year. Unless the data driving the price is made available it's a guessing game. If car insurance wasn't compulsory it would have been a totally different environment. That - again, maybe print it out and read it over and over again until it clicks - is why this is a pretty nice industry to be in. I count on your connections in the future my man.I repeat, millions of people in this country pay sub £250, many sub £200, for comp insurance. I pay circa £260 for comp on a 2.0 4x4 in outer London. How does that equate to this massive cartel/rip off industry who are fleecing us all?
TwigtheWonderkid said:
That's exactly the kind of nonsense you get on here.
And just to prove it:TwigtheWonderkid said:
Millions of people in this country pay sub £250, many sub £200, for comp insurance.
Either an outright lie or just internet belligerence, do you fabricate facts like this when not in your internet persona? Which demographic pays this?FYI the average cost of car insurance last year was £462 (Willis Towers Watson, OFT guideline research). The average insurance price increase for 2016 was 16%.
popeyewhite said:
Either an outright lie or just internet belligerence, do you fabricate facts like this when not in your internet persona? Which demographic pays this?
FYI the average cost of car insurance last year was £462 (Willis Towers Watson, OFT guideline research). The average insurance price increase for 2016 was 16%.
Nonononono but you need to understand his mother in laws boyfriends dad pays 50quid for a FFRR living in Bishops Avenue in Hampstead. Now tell me how is that not a totally amazing free market industry?FYI the average cost of car insurance last year was £462 (Willis Towers Watson, OFT guideline research). The average insurance price increase for 2016 was 16%.
On a lighter note......
Why do young people insist on using "like" innapropriately ?
"It was, like, amazing". It was 'like' amazing ? Not actually amazing ? But something similar to amazing ?
"I was like really happy". But not actually really happy ?
Anyway, I'll hand back now to the ranty arguing people.....
Why do young people insist on using "like" innapropriately ?
"It was, like, amazing". It was 'like' amazing ? Not actually amazing ? But something similar to amazing ?
"I was like really happy". But not actually really happy ?
Anyway, I'll hand back now to the ranty arguing people.....
popeyewhite said:
TwigtheWonderkid said:
Millions of people in this country pay sub £250, many sub £200, for comp insurance.
Either an outright lie or just internet belligerence, do you fabricate facts like this when not in your internet persona? Which demographic pays this?FYI the average cost of car insurance last year was £462 (Willis Towers Watson, OFT guideline research). The average insurance price increase for 2016 was 16%.
Take 10 guys each 6ft tall. 9 of them weigh 11st, one of them weighs 51 st. The average weight per person of that group is 15st. But that doesn't mean most of them are overweight. In fact, 90% of them are perfectly fine.
Millions of people do pay sub £250. Over 40, boring 1.4 hatch, not living in a city centre, max bonus, clean record. But the average if of course higher, as hardly anyone is paying more than £100 under that figure, but loads of people are paying many hundreds, in some cases thousands more.
If you were brighter, you'd see that given the numbers of young drivers paying thousands, and others paying £7/800 for a nice car in their 20s and 30s, there must be vast numbers of people paying a couple of hundred quid, in order to get an average premium of £462.
Let me tell you something about average. The average human has less than 2 legs. No one has 3, but loads of folk have 1 or none. But telling an alien that the average human has less than 2 legs probably doesn't give him an accurate idea of what most humans look like.
Edited by TwigtheWonderkid on Saturday 22 April 12:20
TwigtheWonderkid said:
Let me tell you something about average. The average human has less than 2 legs. No one has 3, but loads of folk have 1 or none. But telling an alien that the average human has less than 2 legs probably doesn't give him an accurate idea of what most humans look like.
And, apparently .991 testicles.eldar said:
TwigtheWonderkid said:
Let me tell you something about average. The average human has less than 2 legs. No one has 3, but loads of folk have 1 or none. But telling an alien that the average human has less than 2 legs probably doesn't give him an accurate idea of what most humans look like.
And, apparently .991 testicles.TwigtheWonderkid said:
You clearly don't get average, mean, median, mode etc.
Actually I understand statistics far better than you. You don't have a clue what median and mode are, quite apart from the fact they don't relate to the discussion in any way. 'Average ' and 'mean' are the same thing btw. It's no use suggesting outliers are capable of generating an average £462 even with a data spread lower than £200. The spread will be concentrated around the £300-£700 mark. You're welcome to show your figures, but as you've plucked them from the ether it's unlikely that's going to happen. 
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