MSE News: Drivers face soaring car insurance costs

mikey72

raskazz wrote: »

Er mikey72:

I think you need to do you GCSE maths again as you are absolutely mangling the figures which you have found!

From your own figures:

"13% of drivers aged 17 and 18 have a crash as opposed to 6.5% overall"

Note the part in bold. If the 6.5% figure includes drivers aged 17 and 18 (which it does as it is an overall figure), then the actual frequency for people who are not 17 or 18 (or even 19, 20 and 21) will be much lower than 6.5%. You seem to have misread the piece and assumed that 6.5% is the claim frequency for drivers who are not 17 or 18. That is incorrect.

You have made exactly the same mistake with the claim severity figures! And a further obfuscation is revealed when you consider that the claim severity for 'overall' will be inflated by not only young drivers but also old drivers; the segment in the middle will experience a substantially lower claim severity than the one you claim.

Not to mention your bizarrre fixation with Admiral, it's pretty clear that you prefer to refer to them on all occasions whilst ignoring the wider market, merely because they are in the minority of private motor insurers who make a profit.



:rotfl:

Ok, if you really want to break it by ages, rather than just focus on young drivers versus the average overall figure.

Just 4.5% of motorists in their 40s are involved in a crash and 2% of those over 50. Read the link, rather than keep rubbishing Admiral for actually publishing it.

So, as I notice once again you're not actually disputing the figures, but just trying to muddy the waters again, I'll work out the specific figures for you.

1000 young drivers at £3500 each equals £3.5 million income
13% have claims at £3500 equals £455,000 paid out.
Profit equals £3.million

1000 older drivers at £300 equals £300,000 income
4.5% claims equals £78345 paid out
Profit equals £221655

Why not Admiral, or do you dispute the fact they have surveyed 2 million drivers.

Like I have said, by all means put up some real figures of your own, rather than the ones in your head. But please stop with the pure nonsense if you don't actually have any.
If you are in insurance, a reasoned discussion is welcome, if it's just an attack on anyone that post real figures from the industry that you just don’t like to see, don't bother.

raskazz

If you want figures mikey72, I'm here all day an am comfortable with the fact that I can demonstrate quite clearly why the difference between young driver rates and experienced driver rates are so marked.

See the below document:

http://www.bvrla.co.uk/Document/Default.aspx?DocumentUid=DE72DC4C-76FE-4868-9E37-C784D84038A6

Take a look at the chart near the end of page 4. It uses fairly old data but there's not much more recent data in the public domain, and a fairly rough-and-ready process can be used to extrapolate recent experience from the data.

Note the claim frequency of young male drivers: Circa 36-37%. Let's call it 36.5%.

Then note the claim severity of young male drivers: Around £1500

Note that claim frequency of male drivers aged 36-40 - it's around 19%.

Then note the claim severity of male drivers aged 36-40 - it's approximately £300.

As claim frequency has remained fairly static with possibly a very slight reduction since 2005, that data doesn't really require any modification.

However, claim severity has been running at around 11-12% from 2005-2008, and more like 20-30% since then (see http://www.actuaries.org.uk/news/articles/car-insurance-price-rises-%E2%80%9Cunsurprising%E2%80%9D-say-actuaries and other sources).

Thus, the modified claim severity for young males becomes £3287 (£1500*1.12*1.12*1.12*1.2*1.3)

The modified claim severity for males aged 36-40 becomes £657.51 (£300*1.12*1.12*1.12*1.2*1.3)

So where does this leave us in terms of overall risk:

Young male drivers: 36.5%*£3287= £1199.76
Male drivers aged 36-40: 19%*657.51 = £124.93

To calculate a premium from these figures we would then have to add in expenses, including reinsurance (more expensive for books of business which include younger drivers), the costs of actually processing claims, commissions and so on.

Regardless, as you can see, the differential in risk is nearly 10x. I would be interested to see whether you dispute the figures in my post, and if so, on what basis. Especially as the foundation data is drawn from ABI figures which include 90% of the market rather than just one insurer.

Anyway, as you have shown no inclination to accept the reality that the motor insurance market is currently heavily loss-making, please go back to the actuaries.org link I posted above and note the below:

"With the combined operating ratio for private car insurance running above 120%, the industry was always going to have to increase premiums to turn profit. And, even though premiums have increased, questions remain if they have been increased enough."

If you disagree with this comment, on what basis do you disagree? What actuarial skills do you possess that h
the Institute of Actuaries do not?

raskazz

mikey72 wrote: »

Like I have said, by all means put up some real figures of your own, rather than the ones in your head. But please stop with the pure nonsense if you don't actually have any.

So do you or do you not accept that when you took 6.5% to be the claim frequency of older drivers, despite this being the overall figure including 17 and 18 year-olds, this was an invalid deduction?

mikey72

raskazz wrote: »

If you want figures mikey72, I'm here all day an am comfortable with the fact that I can demonstrate quite clearly why the difference between young driver rates and experienced driver rates are so marked.

See the below document:

http://www.bvrla.co.uk/Document/Default.aspx?DocumentUid=DE72DC4C-76FE-4868-9E37-C784D84038A6

Take a look at the chart near the end of page 4. It uses fairly old data but there's not much more recent data in the public domain, and a fairly rough-and-ready process can be used to extrapolate recent experience from the data.

Note the claim frequency of young male drivers: Circa 36-37%. Let's call it 36.5%.

Then note the claim severity of young male drivers: Around £1500

Note that claim frequency of male drivers aged 36-40 - it's around 19%.

Then note the claim severity of male drivers aged 36-40 - it's approximately £300.

As claim frequency has remained fairly static with possibly a very slight reduction since 2005, that data doesn't really require any modification.

However, claim severity has been running at around 11-12% from 2005-2008, and more like 20-30% since then (see http://www.actuaries.org.uk/news/articles/car-insurance-price-rises-%E2%80%9Cunsurprising%E2%80%9D-say-actuaries and other sources).

Thus, the modified claim severity for young males becomes £3287 (£1500*1.12*1.12*1.12*1.2*1.3)

The modified claim severity for males aged 36-40 becomes £657.51 (£300*1.12*1.12*1.12*1.2*1.3)

So where does this leave us in terms of overall risk:

Young male drivers: 36.5%*£3287= £1199.76
Male drivers aged 36-40: 19%*657.51 = £124.93

To calculate a premium from these figures we would then have to add in expenses, including reinsurance (more expensive for books of business which include younger drivers), the costs of actually processing claims, commissions and so on.

Regardless, as you can see, the differential in risk is nearly 10x. I would be interested to see whether you dispute the figures in my post, and if so, on what basis. Especially as the foundation data is drawn from ABI figures which include 90% of the market rather than just one insurer.

Anyway, as you have shown no inclination to accept the reality that the motor insurance market is currently heavily loss-making, please go back to the actuaries.org link I posted above and note the below:

"With the combined operating ratio for private car insurance running above 120%, the industry was always going to have to increase premiums to turn profit. And, even though premiums have increased, questions remain if they have been increased enough."

If you disagree with this comment, on what basis do you disagree? What actuarial skills do you possess that h
the Institute of Actuaries do not?

They're close enough to Admiral's so we'll use yours.

Raskazz’s figures for drivers 17 to 18.
1000 drivers at £3500 premium equals £3.5 million
Claims 36.5% at £3287 is £1.12 million paid out

Profit £2.3 million pounds from male drivers age 17 to 18 per thousand drivers.

This is the same as Raskazz’s figure that every risk is £1199.76, so for a premium of £3500, each driver is £2300 profit. As he says, that’s on the risk; there are all the other costs to pay for.
But from his figures, a male driver 36- 40 is a risk of only £124.93.

Now my premium was about £200, so a profit of £75 for the insurance company.

If they can make money on my £75 profit, why can’t they make money on a 17 year olds £2300 profit?

And these are Raskazz’s actual figures, not mine.
As he says, he can find the right figures, and he works in the industry.
I think it is definitely time that it was looked at.

Quote

I like the refund idea. Everyone overpays for insurance and if you drive claim free for a year you get a predetermined amount of it back, depending on your age, location, vehicle, cover etc...

mikey72

raskazz wrote: »

So do you or do you not accept that when you took 6.5% to be the claim frequency of older drivers, despite this being the overall figure including 17 and 18 year-olds, this was an invalid deduction?

Raskazz is quite right to point out the average profit from using the overall figure is
(from my figures, but I’m happy Raskazz’s are similar enough, so we can use his if he prefers from now on)

£386835 per thousand drivers, if you average them all out, or just £386 per driver
As he insists I point out, from older drivers they make even less, just £221655 per thousand, or £221 per driver.
So why do they need to make £3000 per 17 year old, (or even £2300 per 17 year old from his own figures)?

raskazz

mikey72 wrote: »

They're close enough to Admiral's so we'll use yours.

Raskazz’s figures for drivers 17 to 18.
1000 drivers at £3500 premium equals £3.5 million
Claims 36.5% at £3287 is £1.12 million paid out

Profit £2.3 million pounds from male drivers age 17 to 18 per thousand drivers.

This is the same as Raskazz’s figure that every risk is £1199.76, so for a premium of £3500, each driver is £2300 profit. As he says, that’s on the risk; there are all the other costs to pay for.
But from his figures, a male driver 36- 40 is a risk of only £124.93.

Now my premium was about £200, so a profit of £75 for the insurance company.

If they can make money on my £75 profit, why can’t they make money on a 17 year olds £2300 profit?

And these are Raskazz’s actual figures, not mine.
As he says, he can find the right figures, and he works in the industry.
I think it is definitely time that it was looked at.

Are you not aware that premium minus claims payments does not equal profit? Where do you think the expenses I linked to above come from (commission, reinsurance, operating expenses especially the actual costs of processing claims)?

And, stepping aside from the issue of young drivers for the moment, I'm still waiting for your comments on the Institute of Actuaries' remarks on the wider market?

mikey72

raskazz wrote: »

Are you not aware that premium minus claims payments does not equal profit? Where do you think the expenses I linked to above come from (commission, reinsurance, operating expenses especially the actual costs of processing claims)?

And, stepping aside from the issue of young drivers for the moment, I'm still waiting for your comments on the Institute of Actuaries' remarks on the wider market?

Now you're grasping.
They're your figures, you tell me, I'll do the maths for you.

raskazz

mikey72 wrote: »

Now you're grasping.
They're your figures, you tell me, I'll do the maths for you.

I'll ask again then:

Are you not aware that premium minus claims payments does not equal profit? Where do you think the expenses I linked to above come from (commission, reinsurance, operating expenses especially the actual costs of processing claims)?

And, stepping aside from the issue of young drivers for the moment, I'm still waiting for your comments on the Institute of Actuaries' remarks on the wider market?

mikey72

raskazz wrote: »

Are you not aware that premium minus claims payments does not equal profit? Where do you think the expenses I linked to above come from (commission, reinsurance, operating expenses especially the actual costs of processing claims)?

And, stepping aside from the issue of young drivers for the moment, I'm still waiting for your comments on the Institute of Actuaries' remarks on the wider market?

They haven't made any earth shattering remarks recently, I believe you linked one, and indeed I was happy to use it in the calculations, but I think the most interesting one is the question of EU gender equality, that would be very interesting if it was forced on car insurance.

Just to cut though Raskazz's smoke and mirrors again, as to the profit,
as I quite cleary wrote when I used Raskazz's figures to make the calculation above:

"each driver is £2300 profit. As he (Raskazz) says, that’s on the risk; there are all the other costs to pay for."

"they can make money on my £75 profit" (on the risk)