Insurance on the up ?

Lemonade_Pockets

Hi,

Just seeing what anyone else's feelings are, my renewal as expected was a bit of joke. However from a quick scout around on the comparison sites it seems policies seem to be on average £150 more expensive than last year, despite having 1years more NCB.

Also the usual suspects are conspicuous by their absence or appearing a lot further down the list.

I was expecting a small hike because of the snow chaos, but am i missing something or has everyone just sacked of the price comparison sites?

Thoughts and opinions please.

Cheers

dacouch

Insurance normally goes up in a recession

savemoney

Hope mine doesn't go up, had a hit and run while car was stationery 4 days after I got new insurance, 9 years NOCD before that but I have insured for past few years protected No claims

somech

last year i paid norwich union £330 fully comp with full no claims:)
renewal came through in jan £1025 fully comp:rotfl::rotfl:
cheapest camparision site qoute £208 fully comp:D

Nilrem

I've heard that it's gone up in a lot of cases due to the number of small claims over the winter from accidents in the ice/snow, which is quite believable as the actual profit for the insurance companies tends to be rather small (IIRC most of them make little/no profit on the premiums themselves, but use the money from the premiums to invest in the market/projects that do normally make money).

Lemonade_Pockets

dacouch wrote: »

Insurance normally goes up in a recession

I fail to see the correlation. Why?

savemoney

There has also been a lot of fraud which obviously goes up when times are bad plus ambulance chasers looking for no win no fee. One such case mentioned on radio other day solicitor was aiding customer to make the claim worse than it is

dacouch

Lemonade_Pockets wrote: »

I fail to see the correlation. Why?

Insurers basically pay out in claims the same amount as they receive in premiums, they actually make their money by investing the vast amounts of money they receive in between you paying the premium and them having to pay the claims out. A recession means they make less returns on their investments in addition the value of their assets / investments have reduced, they are obliged to keep a certain value of liquid assets free to cover their liabilities. The recession means the value of the liquid investments have reduced so they have to pump more money into them. They can accept a certain amount of premiums against the value of their liquid assets. So it also they accept less customers but for higher premiums.

The volitile market also means some of the companies withdraw from the market so the supply and demand aspect has an effect.

If you then factor in you get more claims in a recession and that personal injury claims are increasing they all add up to higher premiums.

It's whats known in the market as a "Hard" market (When premiums are articifialy low as they have been it's known as a "soft" market). The current market is new ground as the internet and comparison sites mean the Insurers are spending massive amounts of money to acquire new customers.

You may not believe it but because Insurers are battling to become brand names and achieve market share a large amount of them have actually been losing money on car insurance for many years. It's a loss leading product for them, they hope to gain your home insurance and other products that they will actually make money on

Lemonade_Pockets

dacouch wrote: »

Insurers basically pay out in claims the same amount as they receive in premiums, they actually make their money by investing the vast amounts of money they receive in between you paying the premium and them having to pay the claims out. A recession means they make less returns on their investments in addition the value of their assets / investments have reduced, they are obliged to keep a certain value of liquid assets free to cover their liabilities. The recession means the value of the liquid investments have reduced so they have to pump more money into them. They can accept a certain amount of premiums against the value of their liquid assets. So it also they accept less customers but for higher premiums.

The volitile market also means some of the companies withdraw from the market so the supply and demand aspect has an effect.

If you then factor in you get more claims in a recession and that personal injury claims are increasing they all add up to higher premiums.

It's whats known in the market as a "Hard" market (When premiums are articifialy low as they have been it's known as a "soft" market). The current market is new ground as the internet and comparison sites mean the Insurers are spending massive amounts of money to acquire new customers.

You may not believe it but because Insurers are battling to become brand names and achieve market share a large amount of them have actually been losing money on car insurance for many years. It's a loss leading product for them, they hope to gain your home insurance and other products that they will actually make money on

Understood, whats the time delay then? As given your explanation i would of thought this time last year would have been worse. From memory and very simplistically vs last year the stock market is up, base rate is down or the same etc etc, so are they now playing catch up?

jaydeeuk1

Mine went down by about 30% (after current insurer matched best comparison quote). Originally they asked for 30% more than last year!

dacouch

Lemonade_Pockets wrote: »

Understood, whats the time delay then? As given your explanation i would of thought this time last year would have been worse. From memory and very simplistically vs last year the stock market is up, base rate is down or the same etc etc, so are they now playing catch up?

It's quite complicated as believe it or not the UK car insurance market is probably the most competitive in the market. Insurers try and hold off price increases as long as possible as they know when they put their prices up they lose a large amount of customers to a competitor who has held off for longer.

The market goes in cycles, Insurers move out of the market reducing "Capacity" which tends to increase the premiums. When the premiums go up, companies then see the potential to make money so go into the market and the extra capacity tends to reduce premiums.

It's very hard to predict the market cycles but they tend to be a few years of hard market and then a lot longer of a soft market (Just like the boom and bust of the normal UK economy). Returns on investments increasing will hasten the return of the soft market

As I mentioned before the internet and comparision sites are an unknown factor in insurance cycles. Also that so many customers now days shop around at renewal and the market is so competitive this could mean insurers don't pass on the full increases they need to as they want to retain their had won (And expensively aquired) customer base.

http://209.85.229.132/search?q=cache:bOsLx_Br7nMJ:www.cpcusociety.org/file_depot/0-10000000/0-10000/3267/folder/17866/Hard-Soft%2BMarkets.doc+hard+market+explanation&cd=1&hl=en&ct=clnk&gl=uk

http://www.theaa.com/services/insuranceandfinance/insuranceindex/