MSE News - Insurers report huge costs hike: how to beat them

Former_MSE_Guy · 5 August 2010 at 3:09PM

This is the discussion thread for the following MSE News Story:

"Aviva and More Than have revealed insurance costs have soared over recent months but you can fight back ..."

Read the full story:
Insurers report huge costs hike: how to beat them

raskazz · 5 August 2010 at 6:18PM

Another week, another MSE article which focuses almost entirely on the price of a product whilst devoting no attention to the quality of the product.

That's not particularly surprising. What is surprising is the very disingenuous information provided in the article:

"The rates blow comes as both firms reported half-year figures that cheered investors.

Aviva profits were up 21% to £1.3 billion in the first six months of 2010, while RSA's profits remained flat at £302 million, though this beat City forecasts."

I think that we would all agree that insurers would not, and indeed should not, be expected to subsidise their motor accounts from the returns of other areas of their business, or subsidise one geographical market from the results of other geographical markets.

If you actually look behind the rather sensationalist wording above you see a slightly different picture.

Take Aviva. Their overall operating profit is up 21%. However, their operating profit in UK General Insurance is actually 6% down on the first six months of 2009 (£268m from £284m) although their UK General Insurance combined ratio moved back to 98% from 99% (see http://www.aviva.com/library/pdfs/investor/results-and-reports/results/2010/half-year-2010.pdf). I also strongly suspect that within the UK General Insurance result, private motor profit will be negative or close to nil.

As for RSA, their UK operating profit fell by 9% from £157m to £143m, as their UK combined ratio moved out to 98.9% from 97.4% (see http://www.rsagroup.com/rsa/uploads/reports/RSA_2010HalfYearFinancialStatements.xls). Again, I suspect that performance in private motor was less than spectacular.

dacouch · 5 August 2010 at 6:39PM

To make Raskazz's great post into context for non insurance industry members, an Insurers combined ratio the amount of expenses (Including claims) against premiums received. So if you look at Aviva's combined ratio for the UK it basically means their profit (Before investments) was 2p ifor every pound in premium they received. As with all Insurers they make their profits from investing the money, however in the current climate investment returns are not great.

Aviva's ratio is not an unusual ratio, an Insurer would be very very pleased if they had a ratio of 95%, there will be plenty of Insurers with a ratio of 105% meaning they actually lose 5p for every £1 in premium they receive.

With regard to MSE guy's article he did not mention that getting quotes from cashback sites can actually increase your premium as some Insurers load the premiums for business from cashback sites. So it's worth getting quotes from cash back sites and then deleting your cookies and getting the same quotes avoding cash back sites

Paulgonnabedebtfree · 7 August 2010 at 9:28PM

Indeed vehicle insurance can be a complex issue and the price of the premium is only one aspect.
Shopping around is very limited for me because I need commercial cover for a van that has certain modifications that enable me to do my work. Most insurers won't touch a van with such modifications so there is little competition. However, I have to allow for such things when costing my work.
I don't know the truth of this but I have been told that insurance tends to be more expensive during economic difficulties as more drivers don't insure and house insurance is higher due to the higher level of burglaries.

Rolandtheroadie · 7 August 2010 at 9:48PM

Think fraudulent claims are up when everyone is a bit short.
I'm looking just now and the quotes are up around 20% on the wifes car and around 10% on mine.
Quotes on confused resubmitted once then again the next day were up £10.

dunstonh · 7 August 2010 at 11:54PM

Got to agree with what has already been said. Car insurance is mostly loss making or breakeven at best and often requires cross subsidy to make a profit in other areas. To link Aviva's 1.3 billion to a car insurance is disingenuous as it just plays to those that read headlines and take an opinion without knowing the facts.

Just because they make a profit overall, doesnt mean they want to or should offer other products at a loss. They may do at times to improve market share or use the funds to cross subsidise other areas which in turn may provide a profit but they cant sustain it long term (especially if the other areas are not profitable for a period).

Its well known and well publicised that the UK market is one of the most unprofitable there is and the bulk of the profits come from overseas. That is why you have seen so many insurance companies close their doors over the last 10 years and why now you have so few left and even they are considering moving away.

MSE News - Insurers report huge costs hike: how to beat them

Comments

Confirm your email address to Create Threads and Reply

🚀 Getting Started

Categories

Is this how you want to be seen?

Get our FREE Weekly email full of deals & guides - and it’s spam-free