Car insurance: address change charges: are they fair?

laimtoh

'Lo all, this is my first post so greetings everyone.

I've been meaning to find out more about how car insurance companies get their postcode data from, as each and every time I have moved address (4 times), my premium has gone up by at least 20% (not including the admin charge).

I'd understand if I moved from a low to a high crime area, but given several of my moves have not been to significantly 'dodgier' areas and in one case, un-garaged EH2 (Edinburgh city centre) to off road parking in a village near Shaftesbury, Dorset where almost no crime occurs, I feel they are definitely using address moves as a way of making more money unfairly.

I notice Quinn has come into the news about this very issue recently, where someone was quoted an outrageous premium increase for moving address, yet posing as a new customer it was significantly less.

I've changed my insurance company pretty much each year, so it seems this practice is very common.

Sounds like an echo of unfair bank charges to me!

I recall Tesco insurance saying they get their postcode crime statistics (amongst other metrics I can't recall) from a 3rd party, but wouldn't disclose who they are. It sounded to me like a license to print money and makes me quite angry.

Does anyone here know:

Who these "3rd party" companies are?

Do all insurers use them, or do it in-house?

Is this regulated by anyone - who would investigate?

If I phone up for a quote pretending to be a resident in that postcode with that car, get a lower quote, is that the best way to lever a reduction in my premium (a la the Quinn article), or just shop around? I can cancel my policy with Priviledge reasonably cheaply, I started the policy end of August 2009.

Thanks!

glider3560

This thread explains a little more: http://forums.moneysavingexpert.com/showthread.html?t=1966515

My understanding is that most companies will use the same criteria to calculate the additional premium that they would have used when your policy started, had you been living in the new area. This is why there can be a difference between the price for the amendment and being a new customer.

dzug1

laimtoh wrote: »

Sounds like an echo of unfair bank charges to me!

Which so far no-one has been able to prove as actually unfair. Vigorously assert, yes, but every attempt at proof has failed.

And yes, you could take out a new policy and cancel the old - but that's going to involve charges too.

raskazz

laimtoh wrote: »

'Lo all, this is my first post so greetings everyone.

I've been meaning to find out more about how car insurance companies get their postcode data from, as each and every time I have moved address (4 times), my premium has gone up by at least 20% (not including the admin charge).

I'd understand if I moved from a low to a high crime area, but given several of my moves have not been to significantly 'dodgier' areas and in one case, un-garaged EH2 (Edinburgh city centre) to off road parking in a village near Shaftesbury, Dorset where almost no crime occurs, I feel they are definitely using address moves as a way of making more money unfairly.

There are many other risk factors related to the area other than crime. Predominantly accident frequency/severity (i.e. the historical experience of the insurer), fraud hotspots and socio-economic/lifestyle profiling such as Experian's MOSAIC (http://strategies.experian.co.uk/Products/Demographic%20Classifications/~/media/Files/Events/MosaicUKlaunch09/Mosaic%20UK%202009%20brochure.ashx).

You also have to understand that even if you move to a lower risk area your premium can still increase due to general rate changes since the policy was incepted or renewed.

For example, you start off an area which attracts no load or discount. Your premium is £300. You move to an area which attracts a 5% discount but overall rates have gone up by 10%. Thus the new annual rate will be £300*0.95*1.1 = £313.50.

laimtoh wrote: »

I notice Quinn has come into the news about this very issue recently, where someone was quoted an outrageous premium increase for moving address, yet posing as a new customer it was significantly less.

Again, if you understand how insurers price their policies then there is nothing suspicious about this. Clearly where an insurer has increased their new customer discount the new business rate will be less than the rate for a mid-term adjustment.

laimtoh wrote: »

Sounds like an echo of unfair bank charges to me!

It's nothing like the bank charges issue as such changes in premium are not penalties for breaches.

laimtoh wrote: »

I recall Tesco insurance saying they get their postcode crime statistics (amongst other metrics I can't recall) from a 3rd party, but wouldn't disclose who they are. It sounded to me like a license to print money and makes me quite angry.

I would be amazed if you had actually spoke to someone who knew about the intricacies of how insurers price risks.

laimtoh wrote: »

Does anyone here know:

Who these "3rd party" companies are?

I don't know of any 3rd party companies which motor insurers use to obtain crime data. That's not to say that they don't exist. The main 3rd party company that insurers use to profile their customers by socio-economic group is Experian, which I linked to above.

laimtoh wrote: »

Do all insurers use them, or do it in-house?

Some will, some won't.

laimtoh wrote: »

Is this regulated by anyone - who would investigate?

Fundamentally insurers are regulated by the FSA. However, I haven't seen any evidence to suggest that there needs to be any across the board investigation into changes in premium for mid-term adjustments.

dunstonh

Sounds like an echo of unfair bank charges to me!

You mean that they have not been deemed unfair.

I recall Tesco insurance saying they get their postcode crime statistics (amongst other metrics I can't recall) from a 3rd party, but wouldn't disclose who they are. It sounded to me like a license to print money and makes me quite angry.

You are very unlikely to have spoken to anyone that is involved in pricing of their product. However, the use third parties is logical as Tesco were just a retailer of the product and not the underwriter.

Who these "3rd party" companies are?

The insurance company that underwrites it for starters. They will have their own data suppliers as well as their own in-house information.

Do all insurers use them, or do it in-house?

Tescos are not an insurer.

Is this regulated by anyone - who would investigate?

The FSA are the regulator. However, they will not be interested. They are actually in favour of explicit charging rather than implicit charging which is the opposite of what you want.

The FOS rule have ruled on complaints like this in the past and admin charges up-to £50 have been considered fair and they have ruled in favour of the insurer, broker or retailer (depending on whom you are complaining about). On top of that, they are allowed to discount or rebate premium remaining based on risk changes.

I have seen many rebates over the years. However, most of Norfolk and Suffolk is amongst the lowest risk areas and people coming into the area often save money. (exception of the inner town centres)

laimtoh

OK, but where can I get a transparent answer why my premium has gone up, by 20%+? Tesco blanked me; if that's the case, they could charge what they like, expect say 50% of customers to lump it as they're too lazy to change and get away with it.

What's needed is a clear, transparent explanation of why the area I've moved to is more expensive; heck, I could even factor this into where I'm looking to move too...

(By the way, my reference to the bank charges was ironic, but it seems to have flown over a few heads here . Lighten up guys!)

OK I'm angry about the issue as I feel I've been ripped off (surely this is a forum for such?) and I appreciate those who have answered have given experience backed answers but answer this please - if these companies say they're going to charge me more, I feel I have a strong right to know why; can this information not be made clear to me, so I can see it's not a mistake (or, as my gut tells me, a rip off)?? Surely for us to trust the system, we need to know this.

I'd also like to know how many people have (truthfully) had a reduction for moving to a different address. (The move I told from Edinburgh to Shaftesbury (about 30% increase, early in the term) simply doesn't make sense, I checked the SP7 vs EH2 crime stats and they were 1/4 and it's a more affluent area overall, so I seriously doubt claims are more prevalent, than an inner city, come on man! But, if anyone has access to any "system" then facts please - if EH2 has a good reason for having lower insurance than SP7, do tell. And I don't believe that insurance companies never tell lies.).

olly300

laimtoh wrote: »

I'd also like to know how many people have (truthfully) had a reduction for moving to a different address. (The move I told from Edinburgh to Shaftesbury (about 30% increase, early in the term) simply doesn't make sense, I checked the SP7 vs EH2 crime stats and they were 1/4 and it's a more affluent area overall, so I seriously doubt claims are more prevalent, than an inner city, come on man! But, if anyone has access to any "system" then facts please - if EH2 has a good reason for having lower insurance than SP7, do tell. And I don't believe that insurance companies never tell lies.).

I moved from a flat in an area in London full of large flats and detached houses where virtually everyone parked in a garage or a drive and was a neighbourhood watch area, to an area with terrace houses where everyone parked on the street that was in inner city London. My insurers recalculated my premium and gave me £20 back.

The cars in the first area tended to be new and more expensive vehicles.

Just because an area looks wealthy doesn't mean that particular insurance company or their under writers don't have lots of claims for the area and the claims they have are not of a larger value.

To be fair I knew I was moving and knew the postcode of the area I was moving to so put in both post codes and chose the insurer who was cheaper for both of them but who wasn't the cheapest.

dacouch

Ultimately it comes down to how much the Insurer pays out in claims for each post code, these can be affected by density of traffic, the actual cost of the garages (Their labour costs are more expensive in wealthy areas eg due to the actual cost of labour and the cost of renting/owning the premises), cost of injury claims (Some people in some areas are more likely to claim and / or the loss of earnings can be higher in areas where the wages are higher), the type of vehicles in an area can also have an influence, (in wealthy areas the vehicles you may hit may cost a lot more than the vehicles in a poor area), the quality / type of roads (country roads although being quieter can be affected by bad weather / bad driving), in some post codes people may have to commute for longer distances to get to work which can increase the chances of a claim, the crime rate has an affect but it is no where near as bigger influence as people think apart from very high crime areas

There are many other reasons that can influence the rating of a post code but it all comes down to how much a particular Insurer pays out in claims in relation to the premiums they collect for each post code which will determine how much they charge for a post code. As a knock on if an Insurer has been pitching their prices at a particularly competitive price for a post code and then gets a lot of claims in they are likely to increase their price for that postal area to try and get the premiums for that area back into profitiability.