Do insurers lose money on every motor policy

InsideInsurance

Name a UK insurer that has been bailed out? Independant Insurance was allowed to go bust

TSx

2sides2everystory wrote: »

Smoke and mirrors.

Do "combined operating ratios" include "admin fees" for this that and the other I wonder? And what about the effect of providing credit finance in the form of monthly instalments? How much of a monthly premium is redesignated as interest and how much of that gets included in the combined operating ratios ?

Oh and the big one - what about the third party referral fees ? Where do they sit ?

COR's should include all expenses and income - admin fees, referral fees and so on.

What it doesn't include is investment income which is why a company with a 100% COR can still make a profit. Investment income has dropped massively though which is why there is a focus on underwriting profits.

2sides2everystory

InsideInsurance wrote: »

Name a UK insurer that has been bailed out? Independant Insurance was allowed to go bust

Well did AIG UK fare any better than AIG in the broader sense ? And where does the credit default swap spiral lead ? BTW, the way I heard it, Independent (3 e's/no a) Insurance was a bloody disgrace, and I am sure they were pretty creative too. They were the company that for a few halcyon years seemed to have their combined ratios supremely under control, and few knew how they did it

Sally_A

In response to the original question. No they do not lose money on every insurance policy. I've probably paid £6000 plus over 30 years, and only claimed around £750 max, so I am running at a 7.5% loss maximum.

Where they do lose money are with the premium tarts, that massage the questions on comparison sites to get the cheapest offering.

Despite how much the online bargain hunters play with the figures, fronting, undeclared info, etc, will still end up with the insurer who insures the vehicle at the time, paying out for RTA cover, ie TP Property and injury.

Comparison sites do not give people the chance to expand on their answers (even if half of the proposers wanted to), and if it all goes pear shaped, the insurer will bear the brunt, under the rules of the RTA, or "The Near as Dammit" policy that I call it; the individual will win in a court of law.

mikey72

Interestingly, while you mention price comparison sites

the FSA actually shift the onus from the customer, to the company.
So if they don't ask the right questions, or don't check the answers, they can't try to wriggle out later.

"Key issues


Some of the issues we have highlighted to firms include:

• making it clear that responsibility for checking customer eligibility or that the relevant information has been disclosed lies with the firms rather than the customer; "

http://www.fsa.gov.uk/pages/consumerinformation/product_news/insurance/price_comparison/index.shtml

vaio

But practically, isn’t that just a reiteration of the long held FOS stance that firms rather than punters have to decide what is a material fact?

Ie, firms can’t say “you must disclose at material facts” which leaves the non expert punter to guess what a firm will consider material, rather the firm must decide what facts it considers to be material and then ask clear & unambiguous questions about them.

dacouch

For the record, Hiscox are not really a motor insurer, Aig at the time of the bailout by the U.S government were in effect a commercial insurance with a very small if at all motor account.

mikey72

vaio wrote: »

But practically, isn’t that just a reiteration of the long held FOS stance that firms rather than punters have to decide what is a material fact?

Ie, firms can’t say “you must disclose at material facts” which leaves the non expert punter to guess what a firm will consider material, rather the firm must decide what facts it considers to be material and then ask clear & unambiguous questions about them.

More to the point though, the insurer can't refuse if a glitch on the comparison site doesn't take the data over properly, if a question is ambiguous, if page 26 of the t&c says no drivers under 18, but then quotes for them etc.

dunstonh

mikey, what are you going to do now after Admiral had 25% wiped off their share value as they are likely to not be profitable on car insurance underwriting?

http://www.reuters.com/article/2011/11/09/admiral-idUSL6E7M91QI20111109?feedType=RSS&feedName=rbssFinancialServicesAndRealEstateNews&rpc=43

Also note the paragraph in that link:

British motor insurers have paid out more in claims than they have received in premiums every year since 1994, according to the Association of British Insurers, partly because of big increases in injury claims fuelled by "no win, no fee" lawyers.

mikey72

dunstonh wrote: »

mikey, what are you going to do now after Admiral had 25% wiped off their share value as they are likely to not be profitable on car insurance underwriting?

http://www.reuters.com/article/2011/11/09/admiral-idUSL6E7M91QI20111109?feedType=RSS&feedName=rbssFinancialServicesAndRealEstateNews&rpc=43

Also note the paragraph in that link:

British motor insurers have paid out more in claims than they have received in premiums every year since 1994, according to the Association of British Insurers, partly because of big increases in injury claims fuelled by "no win, no fee" lawyers.

Admiral recorded a pre-tax profit of £266m for 2010.
They'll record someting like £292 million profit, instead of £324 million this year.
They're sustaining good growth, and very likely will make a good profit on underwriting again, as they have for many years.

And once again, your focus is soley on underwriting loss, not the real profits made.

Admiral made £18 million of commission from claim management companies, for selling our data on, to the very companies they blame for all their ills.

"However, Admiral revealed in August that fees from referring its own customers to personal injury lawyers generate 6 percent of its UK pretax profit."

The CEO owns about half a billion pounds worth of shares in the company.
Either he really likes them, or that's a few good bonuses I'd have liked over the years.

If you really expect to be able to use these figure to show insurers are doing badly, and the customer should suck up even more rises, I think it's fairly clear why there is such a huge gap between our viewpoints.

(If you need the links, it's all in your article)