Cost cutting tips - is sharing a good idea?

Astaroth

Insurance works on the very basic principles of statistics, if on average a certain criteria causes people to have lower or higher claims (based on both frequency and value) then an insurer will rate higher or lower based on this statistical evidence - whilst some will then go on to try and explain the variances with logic this is a nice to have and not actually part of the insurance rating system for mass market products.

In addition to these rating decisions insurers will also offer additional discounts to certain groups (most commonly new customers) in an attempt to attract/ retain business.

All monies collected go into a common pool which is used to pay the operational costs of running an insurance company and to pay off claims. At present however many forms of insurance (most notably private car insurance) are currently making a loss due to the additional discounts and therefore we are seeing the call from many of the big names for companies to raise their rates/ remove these discounts.

Now there are a number of "tricks" for getting lower insurance that are published on a number of websites like switching insurance every year or young drivers adding another older/ more experienced driver to their policy which will currently result in lower premiums. Of cause this means that insurance companies common pool gets smaller without any reduction in either claims or operational costs.

It goes without saying that as more customers use methods to reduce a companies income - especially for companies that are currently making a loss - then the natural result is that rates will increase or discounts decrease.

Is it therefore really in peoples best interests to share their tips knowing that the long term effect is that everyone pays more or should we keep them as closely guarded secretes and ensure we maximise our own cost savings?

DavidHM

Is it therefore really in peoples best interests to share their tips knowing that the long term effect is that everyone pays more or should we keep them as closely guarded secrets and ensure we maximise our own cost savings?

Hmm... interesting point. Some people are always going to be net information providers (you included) and some net consumers of information.

If information in either or both of the consumer and supplier parts of the market increases then prices will tend towards a mean that reflects true economic cost (including "normal" profit for the supplier - what constitues normal profit will be where any information imbalance between consumers and suppliers is reflected).

Obviously there will be both winners and losers and those who might otherwise have 'secretly' held the information will clearly be more likely to be losers in those price movements.

However they might benefit from improved information by being in a category of risk that appears more attractive in general due to a change in proposals; or they might come into possession of information that is more valuable (and adds to) the information they previously had, or they may simply value increased "certainty" in that they become more able to align their own perceptions of risk with those of their insurers

Therefore it may be (or appear) rational and self-interested to reveal the information individually, particularly on the basis that there are enough other consumers in the market that the information is likely to be revealed anyway and therefore they will not perceive their own individual actions as making any difference other than possibly being rewarded in kind with valuable, complementary information.

Interesting question though and one that I must admit I hadn't considered.