No claim made for car incident but premium still increased

raskazz

JonBoy_SCFC wrote: »

also i have a friend who is an actuary and he tells me that he very much doubts that your commetn below is true

"the premium loading for a non-fault claim in the last year will be the same for renewals as it is for new business."

Quite simply I don't believe you on this one. Perhaps you could ask him to contribute to this thread?

JonBoy_SCFC wrote: »

do you really think the rate loadings for every rate variable is the same for renewals as it is for new business?????

I don't think JonBoy - I know because it is my job. The base premium and loadings/discounts will be the same; there will be some other loading/discount which will cater for the differentiation in price between new business and renewal. Why would an insurer rate, say, a minor motoring conviction any differently for somone who is a new customer when compared to someone who is at their first renewal or is making an adjustment, given that there are no statistically significant difference betweeen the two in terms of the change in risk - and also given that any 'willingness to pay' factor can be accommodated more efficiently by the administration fee?

To compare this with price flexibility at new business/renewal is a nonsense as is to try to imply that such new business/renewal premiums are not based on risk - clearly they are. The insurer will know what element of the premium they require to cover expected claims costs, what element if the premium will cover their expenses and what element will provide some profit. Of course they will negotiate because it would be foolish not to, but they will not drop the rate below that which will not by any means cover losses, expenses and costs. Once the new business/renewal figure is set then any subsequent adjustments will be calculated relative to that according to standard loadings/discounts. No 'willingness to pay' element is involved apart from any adjustment fee which is added on top of the risk premium. We can go round in circles on this all day long but it's not particularly enlightening for anyone.

JonBoy_SCFC

raskazz wrote: »

I don't think JonBoy - I know because it is my job. The base premium and loadings/discounts will be the same; there will be some other loading/discount which will cater for the differentiation in price between new business and renewal. Why would an insurer rate, say, a minor motoring conviction any differently for somone who is a new customer when compared to someone who is at their first renewal or is making an adjustment, given that there are no statistically significant difference betweeen the two in terms of the change in risk - and also given that any 'willingness to pay' factor can be accommodated more efficiently by the administration fee?

any "willingness to pay" factor can't be accomodated more efficiently by the admin fee if the "willingness to pay" factor varies from one customer to another, which it clearly will. This is because the admin fee is a fixed cost, the same for all.

simple example, customer with premium £2000 gets the same admin fee as a customer with premium £200. clearly more scope to push up premium increase and "get away with it" for the £2000 customer than the £200 customer

raskazz

JonBoy_SCFC wrote: »

1) maybe not for a motoring conviction, but if you take something like "previuous claims" clearly there will be a big difference between the NB and RN rating because the company has a much more reliable and detailed knowledeg of the claim at RN if it's a claim from the policy on cover with them.

No, this doesn't happen. In reality, at renewal there are two situations the arise in relation to claims:

1) The claim frequency and severity fall within acceptable limits, in which case premiums are subjected to the normal loadings which apply to claims whether at new business or renewal. 'Knowledge' doesn't come into it because you cannot train a computer to read pages of claims notes.

2) The claim frequency and severity fall outside those acceptable limits, in which case the renewal will be scrutinised by an underwriter, who will decide whether to offer normal terms and rates, load the premium and/or apply different terms or to decline to offer a renewal. There is only a difference between new business and renewal rating in this case because insurer would not have offered cover at all for a new business case - but will consider a renewal as declining a renewal is not something which can be taken lightly as it is something which the insured would have to declare to prospective insurers in the future.

JonBoy_SCFC wrote: »

2) any "willingness to pay" factor can't be accomodated more efficiently by the admin fee if the "willingness to pay" factor varies from one customer to another, which it clearly will. This is because the admin fee is a fixed cost, the same for all.

Erm, you seem to particularly struggling with this point. This nebulous 'willingness to pay factor' which you are so het up about could not possibly be measured for an individual consumer, because there are no available statistics which the insurer could use to build a rating system, and even if they did, to try and build one would be woefully inefficient as a sensibly chosen admin fee across the board is cheaper and fairer.

JonBoy_SCFC wrote: »

simple example, customer with premium £2000 gets the same admin fee as a customer with premium £200. clearly more scope to push up premium increase and "get away with it" for the £2000 customer than the £200 customer

This doesn't happen through differential rating; if only because it happens naturally, and if you understood how premiums are calculated you would realise this:

Adjustment figures are all relative. So, say a change results in a 10% loading and is done halfway through the policy year - the customer with the £200 premium would pay an extra £10 + admin fee; the customer with the £2000 premium would pay an extra £100 + admin fee.

You should have thought about that example before posting it.

Again, you seem unable to accept that what you think happens simply doesn't happen. I honestly believe that there is nothing which anyone could say which would convince you that you are mistaken - in which case, why bother debating it?

JonBoy_SCFC

raskazz wrote: »

Again, you seem unable to accept that what you think happens simply doesn't happen.

such a comment is patronising and arrogant - i could of course turn it on it's head and suggest that you simply can't accept that what you think is impossible is actually possible.

JonBoy_SCFC

and the point i was makiing for claims is say you have a company who feel due toi their data they should have a different rate strructure at RN for claims with an injury element.

but at new business the customer themselves don't even realise there's an injury element, so often you don't know about the injury element, so you're unable to set the same claims rate structure at new business compared to renewal

hope this helps

FlameCloud

JonBoy_SCFC wrote: »

They can't do this because the admin fee is the same for all customers, so commercially speaking, why would they not do it via the premium charged for the change?


You clearly know a bit about insurance, so would be interested in knowing why you think the above is not possible

This is more Raskazzs area than mine, but at the moment, the only real thing that the vast majority of policy holders care about when buying a policy is the amount it costs them. As a result, insurers need to be able to offer a cheap headline rate to get near the top of the list of results in aggregator websites. As such, anything that even slightly bumps up the cost is a no no.

raskazz

JonBoy_SCFC wrote: »

such a comment is patronising and arrogant - i could of course turn it on it's head and suggest that you simply can't accept that what you think is impossible is actually possible.

Ah, so you've subtly changed the terms of reference from it happening to it 'being possible'. You didn't seriously think that no-one would notice that did you?

JonBoy_SCFC wrote: »

What is to stop an insurer from testing 2 levels of admin fee - £10 in Januaryu and £20 in Feb. the results of this test would probably show that customers with expensive cars are more willing to accept the £20 fee than customers with cheap cars.

The are a few reasons, primarily that it would never get past the compliance department because the FSA would kick them up the proverbial !!!! if they tried it.

JonBoy_SCFC wrote: »

They can't do this because the admin fee is the same for all customers, so commercially speaking, why would they not do it via the premium charged for the change?

Because - to reiterate, as you have strangly not commented further on the quite amusing 'example' you gave - someone with a higher premium will naturally face a greater additional premium becuause of the relative nature of the pricing. There's no need to tinker with it any further.

raskazz

JonBoy_SCFC wrote: »

and the point i was makiing for claims is say you have a company who feel due toi their data they should have a different rate strructure at RN for claims with an injury element.

but at new business the customer themselves don't even realise there's an injury element, so often you don't know about the injury element, so you're unable to set the same claims rate structure at new business compared to renewal

hope this helps

Doesn't happen. As long as the experience falls within the pre-determined frequency and severity limits then the ratings are the same. If personal injury has been occasioned which merits any change from standard terms it will be be reflected in a higher cost which will then be picked up on and sent to an underwriter for consideration. You will have noticed that a lot of insurers now specifically ask whether a claim involved personal injury at new business anyway.

JonBoy_SCFC

raskazz wrote: »

The are a few reasons, primarily that it would never get past the compliance department because the FSA would kick them up the proverbial !!!! if they tried it.

different companies charge different admin fees. what's wrong with a company charging £10 admin fee for Jan policies, £20 for Feb policies. no copmpliance issue there - just changing your admin fee like most companies do every now and then anyway

JonBoy_SCFC

raskazz wrote: »

Because - to reiterate, as you have strangly not commented further on the quite amusing 'example' you gave - someone with a higher premium will naturally face a greater additional premium becuause of the relative nature of the pricing. There's no need to tinker with it any further.

i am suggesting that a £2000 customer will be "willing to pay" a higher percentage amount (as well as a higher pound amount)

you should really be able to understand that price elasticity in percentage terms will change according to opriginal premium size?