Changing Address with car insurance firms

nevica

pedro123456 wrote: »

Oh that’s it then, read the policy booklet? And everything is ok? :undecided

I like simple solutions like that


Thanks for sharing

Pedro,

I like the slant of your reply. It sums the problem up in one fail swoop. The fact is, this does not make it OK.

The reason in the first place that people choose cheap premiums is that they are cheap. Because life is always uncertain there are times when one has make ammendments to a policy thereby incurring large fees such as £25, £50 or even £100 as has been stated already in this feed.

This, to me, defeats the object of taking out a cheap premium in the first place.

No-one on this feed has given me a good enough reason for insurance companies charging such large fees for doing so little work.

Rascazz, please tell me what these small marginal costs are. I am pretty sure that they do not add up to £25.

Nevica

nevica

glider3560 wrote: »

You have the opportunity to read the policy booklet BEFORE you buy the policy. If you don't like it, go somewhere else.

And before you say anything, yes there are companies who don't have admin fees for policy amendments. Zurich are one of these - but you'll find the costs have been factored into the premium anyway - so everyone pays more for the work required for a minority of customers.

Glider,

Isn't that what an insurance policy is. All previous claims have been factored into your insurance premium. It simply doesn't make sense and is unethical to charge such large fees. The insurance companies have simply become greedy just like the banks and this needs to change by changing laws governing what they can and can't do!!

Nevica

raskazz

nevica wrote: »

Rascazz, please tell me what these small marginal costs are. I am pretty sure that they do not add up to £25.

Erm, this reply proves my point, really. You clearly don't understand the difference between a marginal cost and an average cost (the latter of which is the 'actual' cost which must be borne by an insurer)

A marginal cost of 1 amendment is small - say the firm has taken 99,000 calls so far in the year, the 100,000th call individually only adds, say, a pound to the firm's overall costs. If you base your opinion of the amendment fee on its relationship to marginal cost then you are misunderstanding the economics behind the situation.

The average cost of 1 amendment (i.e. the total cost of providing the service of processing amendments divided by the total number of amendments made) is the true cost to the firm of 1 amendment. This takes into account the much, much larger fixed costs which allow that call to be taken in the first place - buildings, staffing costs including wages, training, utilities, IT hardware, software and support, telephony, quality audit, compliance, management, HR support and so on and so forth. Going back to the scenario of the 100,000th call, if the fixed costs are, say, £2,500,000, then the true cost of the call - the average cost - is at least £2,500,000/100,000 = £25. Not such a silly figure.

dunstonh

The insurance companies have simply become greedy just like the banks and this needs to change by changing laws governing what they can and can't do!!

On what basis do you say that? Car insurance has never been cheaper and many firms run with hardly any profit margin or at a loss.

The reason in the first place that people choose cheap premiums is that they are cheap. Because life is always uncertain there are times when one has make ammendments to a policy thereby incurring large fees such as £25, £50 or even £100 as has been stated already in this feed.

There is no charges at £100. The typical fee is around £25 and the FOS have rejected complaints where the fee has been up to £50.

You have personal choice here and what you are suggesting is a restriction of trade. At the moment you can choose to use an insurer that has no admin fees but factors it into their annual premium (the historical way of doing it) or you can go with a lower premium and pay admin fees on the rare occasions you have to make changes (which is the fairer way of doing it).

nevica

No, I'm not an economist and it is clear that you have studied economics.

So tell me, where did you get the figures of 2,500,000 and 100,000 from.

We can go on arguing until your blue in the face and it will still not justify the high price of £25 for changing an address on a policy. And that is what the crucks of the matter is. It is not a matter of whether or not I understand what marginal and average costs are. It is a matter of business and whether the customer will want to buy their product again. I am sorry to say that these practices do not invoke confidence in the customer and are detrimental in the long run to business. Both the company and the customer are both worse of for being involved in such a contract (in the small print.)

Where do they get their figures from? Who is to say that £25 is correct? To me it has been plucked out of thin air, stuck into the small print and woe betide anyone who wants to have their address changed.

Nevica

raskazz

nevica wrote: »

No, I'm not an economist and it is clear that you have studied economics.

So tell me, where did you get the figures of 2,500,000 and 100,000 from.

I didn't 'get them' from anywhere, it was merely a an illustrative scenario which isn't that far away from reality.

nevica wrote: »

It is a matter of business and whether the customer will want to buy their product again. I am sorry to say that these practices do not invoke confidence in the customer and are detrimental in the long run to business. Both the company and the customer are both worse of for being involved in such a contract (in the small print.)

I'm afraid the experience of insurers proves you wrong on this point also. Insurers who do not charge administration fees cover the costs of processing amendments in the upfront premium. This means that their point of sale prices are less competitive, which means that they as a business are not as competitive - because consumers (like yourself) in general don't bother to ascertain the quality and terms associated with the product which they are buying, they just look at the upfront cost, especially since the proliferation of the aggregators.

I would also take issue with such terms being in 'small print'. I would wager that the fees are actually quite clearly spelled out in your policy documents but you didn't bother reading them.

nevica wrote: »

Where do they get their figures from? Who is to say that £25 is correct? To me it has been plucked out of thin air, stuck into the small print and woe betide anyone who wants to have their address changed.

Who is to say that it is incorrect?

nevica

dunstonh wrote: »

On what basis do you say that? Car insurance has never been cheaper and many firms run with hardly any profit margin or at a loss.


There is no charges at £100. The typical fee is around £25 and the FOS have rejected complaints where the fee has been up to £50.

You have personal choice here and what you are suggesting is a restriction of trade. At the moment you can choose to use an insurer that has no admin fees but factors it into their annual premium (the historical way of doing it) or you can go with a lower premium and pay admin fees on the rare occasions you have to make changes (which is the fairer way of doing it).

So, if insurance is covering financially against risk then I am not really getting a good insurance by taking out a cheap insurance. Because by taking out a cheap insurance there is a risk that I will have to pay out large fees for normal things that happen in life. Like moving house. So really, the cheap insurances aren't worth the paper they are printed on in the first place and I end up forking out more money than in the first instance. The cheap insurances are really a higher risk insurance than the more expensive insurance.

So really Dunstonh, when you say it is a fairer way of doing it I disagree with you. What the average man on the street doesn't realise is that the lower priced policies are much higher risk in the long run. Is this FAIR?

This is the crucks of the matter. The insurance companies know this and realise they can make money by selling cheap insurances of high risk. So, tell me, what does my insurance premium cover if it doesn't cover administrative costs. I realise that I am paying for covering risk but surely there are administrative charges involved.

This is why I say it again that the insurance companies are in the business of making money and have become greedy just like the banks.

Nevica

nevica

raskazz wrote: »

I didn't 'get them' from anywhere, it was merely a an illustrative scenario which isn't that far away from reality.



I'm afraid the experience of insurers proves you wrong on this point also. Insurers who do not charge administration fees cover the costs of processing amendments in the upfront premium. This means that their point of sale prices are less competitive, which means that they as a business are not as competitive - because consumers (like yourself) in general don't bother to ascertain the quality and terms associated with the product which they are buying, they just look at the upfront cost, especially since the proliferation of the aggregators.

I would also take issue with such terms being in 'small print'. I would wager that the fees are actually quite clearly spelled out in your policy documents but you didn't bother reading them.



Who is to say that it is incorrect?

Well, thank-you for clarifying what insurers do. You have put it into avery succint statement of what the insurers actually do. They rely upon the fact that a consumer will only look at the upfront charges and not the small print. This is the point of Pedro also. Is this ethical, is this right. NO. Raskazz, you shouldn't really give away financial secrets like that. It makes you look silly!!!

Please also read my last mail on risk and tell me what the difference is between selling cheap insurances and what the banks have done in the last few years. I think you will find that there is no difference.

Nevica

raskazz

nevica wrote: »

Well, thank-you for clarifying what insurers do. You have put it into avery succint statement of what the insurers actually do. They rely upon the fact that a consumer will only look at the upfront charges and not the small print. This is the point of Pedro also. Is this ethical, is this right. NO. Raskazz, you shouldn't really give away financial secrets like that. It makes you look silly!!!

I think it is entirely right and ethical that those who actually cause the costs of administration pay for those additional costs. I virtually never alter my insurance details and I certainly don't want to subsidise those who do so.

With respect, I think not reading a policy and not understanding the issues beyond knee-jerk reaction makes you look quite silly.

nevica wrote: »

Please also read my last mail on risk and tell me what the difference is between selling cheap insurances and what the banks have done in the last few years. I think you will find that there is no difference.

I think that you will find that there is every difference if you actually take the time to consider the circumstances:

1) The legal challenge against bank penalty charges is on the basis that they are a penalty for a breach of contract which is greater than the cost incurred by the bank due to that breach. Insurer administration fees are not penalties for breaches.

2) General insurers, and specifically car insurers, make nowhere near the supernormal levels of profit which were generated by banks in the last few years.

3) Banks did not really levy these fees to alter the incidence of the costs of providing amendments, as insurers did.

4) On a more general moral note, by their nature banking penalty charges particularly impact on those who are financially the worst off. This is not the case for insurer administration fees.

nevica wrote: »

This is why I say it again that the insurance companies are in the business of making money

Presumably you work for a charity then?

dunstonh

So, if insurance is covering financially against risk then I am not really getting a good insurance by taking out a cheap insurance. Because by taking out a cheap insurance there is a risk that I will have to pay out large fees for normal things that happen in life. Like moving house. So really, the cheap insurances aren't worth the paper they are printed on in the first place and I end up forking out more money than in the first instance. The cheap insurances are really a higher risk insurance than the more expensive insurance.

Ok, lets do a scenario. Lets say the insurance with admin fees is £250 a year and the insurance without admin fees is £300 a year.

Over a 10 year term you pay £2500 with the admin fee insurer and £3000 with the no admin fee one. How many times are you likely to change address in that 10 year period? none, once, twice maybe. Lets say once. and lets change the car three times. So, thats four lots of £25. Making a £100 addition to the £2500 which still makes it £400 cheaper than the the insurer that has no admin fees.

So really Dunstonh, when you say it is a fairer way of doing it I disagree with you.

So, what you are saying is that you think its fairer that everyone should pay a higher premium so the minority of people that make amendments to their policy during the policy year dont have to pay an admin charge?

At the moment you have consumer choice to pick either or. However, you want a system where there is no choice and that everyone pays for the minority that use a certain service.

What the average man on the street doesn't realise is that the lower priced policies are much higher risk in the long run. Is this FAIR?

What has risk got to do with the admin charges?

So, tell me, what does my insurance premium cover if it doesn't cover administrative costs. I realise that I am paying for covering risk but surely there are administrative charges involved.

It covers the setting up of the plan and giving you 12 months cover on the basis of the information supplied at the point of sale/renewal.