ins company deliberately overcharging for tin of beans

JonBoy_SCFC

for those interested in the debate on deliberate over-charging by insurance companies

http://forums.moneysavingexpert.com/showthread.html?t=1436885

what do people think of this issue?

all we get as customers is "you must not do this", "you must not do that", "a charge for this", " a charge for that" - my message to the insurance companies is to start acting in an honourable and fair manner yourselves:mad: :mad: :mad: :mad:

Oscar_The_Grouch

For those interested, JonBoy posted the following in the thread he links to above:

For me, much more important an issue in terms of companies conduct in the insurance industry is the issue of insurers deliberately over-charging customers at renewal, effectively a tax on the less financially astute

JonBoy_SCFC

Oscar: as an established and respected poster on here, what are your thoughts on my comments?


i get mocked on this board quite often, but on this subject i really can't understand why the general concensus of opinion wouldn't be the same as mine, unless people have a vested interest in the status quo remaining, so if you do respond, would be interested to know if you are in some capacity working for a UK insurance company.


thanks:beer:

Oscar_The_Grouch

Now for my 2p:

I check the prices of my home and car insurance every time the renewal comes up. I also use Quidco to get as much cashback as I can - Got £57 from my last motor insurance, but they are still to pay out and I renewed in August!!

The thing is that I work in the industry, so it would be expected that I do this. I do not insure with my employers, because I don't want to be the one that has to admit to the Claims Department that I've done something stupid!!

If we look at non insurance things, however, I am not as astute:

I don't shop around for the best mobile phone deal - I've had the same sim and phone number for about 6 years.
I don't look at the cost of my shopping - I go where I think I may be able to get what I want, not where it's cheapest.

I'm sure that if I looked around a bit more, I could save money. The fact of the matter is that I look at the things that matter to me and hope I'm not too badly "done over" by the rest. In that, I think I'm probably about average.

Insurers, just like any other industry take advantage of this and market themselves accordingly. The problem is that they know that at least 80% of the people who came to them from a price comparison site are going to go back to that site for a better price.

I'm not a fan of it, but I do take advantage of it; I got a great deal on my phone/internet by threatening to go elsewhere!!

JonBoy_SCFC

i take it from your reply that you acknowledge that the "deliberate over-charging" happens, just that you play the system.;)

in a way you emphasis my point - it is the less financially astute that lose out most in this situation, a group which is more likely to include old people, the less well educated, those with learning difficulties.:mad:

The above groups are more prominent in the poor sections of society, and i think this is something that just helps make the rich richer and the poor poorer.:mad: :mad: :mad:


Surely the FSA has an obligation to make things a bit fairer on all of them?

Oscar_The_Grouch

JonBoy_SCFC wrote: »

i take it from your reply that you acknowledge that the "deliberate over-charging" happens, just that you play the system.;)

Yes. I think many Insurers put the price up expecting that they will lose a significant percentage of their policies at renewal. I don't think they all do, but my own personal opinion is that the direct insurers are the worst offenders.

The problem is that they have had to "buy" the business in for the first year and would argue that they make little or no money from the first year of insurance (let's face it; it's still a business and you are there to make money) so have to make up for it in later years. For this reason, I think that it is something that will continue until we get back to the "good old days" when insurers rewarded you for loyalty.

Halifax tried it in 2008, by offering £50 discount at the next renewal if you went to them direct and the same every year you were claim free. The problem was that you could get £60 through Quidco (which invalidated the offer) but on the basis you were going to switch at renewal, which would you rather have? £60 now or £50 a year?

raskazz

LIke a lot of your arguments on this forum, you've approached this in a simplistic and inaccurate manner, and I imagine it could well be another of your little trolling excursions - but here goes.

A lot of insurers discount new business to get the business through the door and generate cashflow. Clearly, discounting renewal business at the same levels, and writing business that comes nowhere near covering losses and expenses is unsustainable. As such the renewal rate will be offered - note, it is only an offer, which the consumer can reject or accept as they wish - at a rate which balances the requirement to write profitable business and the need to retain a sizeable amount of the book at renewal and avoid the marketing and inception costs of having to chase more new business. Thus in effect new business rates are subsidised by renewal rates. Thus, to assert solely that insurers are "over-charging" on renewals is to miss the big picure - to couch it in similar language, insurers are "under-charging" new business.

As more business is transacted via aggregators and customer churn increases the differential between new business rates and renewal rates will close. This means that those who traditionally held a policy for several years will benefit but those who always searched the market at renewal will lose the opportunity to achieve such bargains. You might want to be careful what you wish for, JonBoy.

There is nothing 'dishounourable' about acting lawfully and logically in search of profit, especially in the current proglonged soft market conditions. I presume your employer does not set prices to maximise profit, JonBoy?

JonBoy_SCFC

i no longer work in insurance, so my employer is nothing to do with this. my previous employer deliberately overcharged auto-renewal customers - not something i was happy with but one has to work for a living

i note you have changed your stance from denying that such over-charging happens to at admitting that it does. that in itself is a step forward;)

why did you try denying all of this initially?


incidentally, i don't really blame insurers for what they do - they play the game within the laws - it's the government/FSA that i am mainly critical of. I think it's their responsibility to look after the customer, especially those less financially astute ones

raskazz

JonBoy_SCFC wrote: »

i note you have changed your stance from denying that such over-charging happens to at admitting that it does. that in itself is a step forward;)

JonBoy, I can generally tolerate your ignorance but please to do not misrepresent my posts. I did not "try to deny" that insurers differentiate pricing between renewal business and new business. What I actually did was to take issue with your simple-minded, knee-jerk description of this as "over-charging".

JonBoy_SCFC

"differentiate pricing between new business and renewal" is just a posh way of saying "over-charging at renewal, which you did clearly deny

you also madfe a rather naieve and simpistic comparison with purchasing a tin of beans, which really bears no comparison to the new business / renewal situation. maybe you would like to retract that comparison?:rotfl: :rotfl:

raskazz

JonBoy_SCFC wrote: »

"differentiate pricing between new business and renewal" is just a posh way of saying "over-charging at renewal, which you did clearly deny

Er, no it isn't, as I have explained above. The price differentiation is a subsidy of new business and a loading of renewal business. This is rather more complex than a simplistic description of "over-charging" at renewal.

JonBoy_SCFC wrote: »

you also madfe a rather naieve and simpistic comparison with purchasing a tin of beans, which really bears no comparison to the new business / renewal situation. maybe you would like to retract that comparison?:rotfl: :rotfl:

I never stated or implied that that post was an exact metaphor for the whole of the renewal pricing argument, so please don't misrepresent me once more. Rather, that point was related to the more general concept of two parties having freedom to enter into contracts as they see fit. If someone enters into a contract at a price that has been offered, then they have agreed to pay that price, and it's a bit lame to moan that that price is not the cheapest in the market after the event. Perhaps we can return to a baked beans analogy:

If someone keeps buying their beans at Sainsbury's every week despite the price increasing, then finds out that Asda have been selling them cheaper, whose fault is that? Is it Sainsbury's fault or is the fault of the consumer's laziness?