Insurance - Will they ever pay out?

CityofCarlisle

The site gives loads of good advice on reducing your premium but are you then selecting a supplier who never pay out?

We have had a few problems where we paid, thought we were covered, only to find that somewhere in the small print, they had a get-out clause.

I therefore started asking companies what percentage of my premium went towards making payouts and what percentage went to their total business costs - salaries, buildings, computer systems, advertising, profits, etc..

To a man (or woman), they refused to tell me.

Why are they allowed to get away with this?

Loan and credit card companies now have to give an APR but how can I make an informed decision on who it is best to insure with if I don't know the likelihood of being paid when I have a problem?

If one company allocates 90% of premium revenue to pay-outs and another only 10%, by comparing quotes, I can then work out which is the better deal.

And I don't understand why they refuse.

What is it they are hiding?

clear_blu

If you sold fruit for a living would you be prepared to disgust how much you pay for rental of your building, turnover, profit margin etc with someone who just wants to buy a bag of oranges??
I think it is unreasonable of anyone to expect an insurance company to discuss the details you suggest before offering cover.
Now that said I find that personal recommendations are usually the best pointers to performance.
Find a company that is recommended by a relative or friend then come on here and ask people what they think, I garantee anyone who has had a problem with said company will be more than happy to tell you.
However at the end of the day...................you pays your money and you takes your chance in life..................:D

CityofCarlisle

I don't want to know how much they pay for the rent, I just want to know how much they put aside for paying me when I have a problem.

The difference with the fruit seller is that he takes your money and gives you your oranges. He doesn't say, "OK, I'll have your money and in certain circumstances, (see this long and complicated list) you might get some oranges in six months time."

A more accurate analogy is the bookies. There you give them the money and if your horse wins, he gives you some back. But he tells you what the chances are that you'll get paid. It's 2-1 if you put money on that horse, 20-1if you put it on another. The insurance companies keep their odds to themselves.

HelpWhereIcan

It really depends on what type of cover you are talking about.

IFAs and other advisers have access to reports such as those by Defaqto and sometimes their networks. The insurers do produce their own reports for the like of Life & critical illness, but these are generally only available to advisers.

It could be argued that this is a reason to ask a broker or IFA to help you do your research, but you may not want to do that.

I am not sure where you may get public access to these reports, but you may want to try googling something like

"insert insurance type claims report"

such as

Critical illness claims report

I would try and find one produced by the company themselves (or a re-insurer) as these should also break non payment of claims down by more than a basic news article would eg what % of claims were rejected for non disclosure and what form that non disclosure tended to take

Standard & Poors and other organisations laos produce reports on the Financial strength of companies with an expression of an opinion of that company's ability to meet ongoing liabilities, but again you will probably have to look deeper into the info than you may be able to get publically to find the real info you want.

I am not convinced that the £ & p amount that is put aside to meet claims will be available anywhere other than the company accounts (even then, it may only be an amount put aside to meet liabilities) but it is more likely that the above methods (claims history and financial strength) will be the more accurate indications of how likely a company is to pay any claim.

Taking your analogy of the bookie, he may tell you the odds he will pay on a winning bet (insurance companies tell you how much they will pay in the event of a claim), but he will not neccesarily tell you how much he keeps back from bets laid to pay out winning bets.

For all you know he may have a good record for paying good odds and paying out to winners but be very precarious financially (a la Equitable Life perhaps) whereas the guy next door may offer slightly lower odds but be in a much better position to pay out if the results go against the bookies (a la Prudential, Norwich Union, AXA etc). Not ideal extrapolation of your analogy I know, but one that has a point.

iceicebaby

Is this because your insurance company have not paid out for something that you have tried to claim for?

Insurance policies do not pay out for everything, there are always exclusions which are all stated in the t&c of the policy. If you were not happy with the exclusions when you took out the policy then you always have your right to cancel it within 14 days no questions asked and find a policy which does cover whatever exclusion you want covering. If that makes sense.

Companies dont put a set amount of what you pay them aside to pay you out. Basically, if you have a claim, and its a valid claim within the t&c of your policy they will pay it out. If you are trying to claim for something thats in their eclusions then they wont pay out. Simple. and the onus is on you to understand the exclusions to see whether that policy is the right one for you

Astaroth

Insurance companies do report their ratios in their annual reports... most will have them on their websites but they can be purchased from Companies House for £1 if they arent otherwise available. I would imagine that the call centre people are simply unaware of the loss ratio for their company. The Times/ FT often publish a league table of the combined ratio too.

I am not sure what you intend to learn from it though? If you read that Royal & Sun Alliance currently pay out 110% of premiums but Direct Line pays out 75% which is better?

The second issue of cause is that the claims cost are made of three elements... 1) Paid out claims, 2) Reserved claims (ie reported but not settled) 3) IBNR (incurred but not reported - ie a figure put aside for claims where the accident has happened but not yet reported to the insurance company - these can be very big when you are considering industrial insurance and claims for things like asbestosis which can have a 50 year incubation period). Whilst there are guidelines on how these should be done there is no legal definition so insurer A may reserve all claims as £1000 for each third party involved irrespective of if that TP had a knackered old fiesta and was in a 2 mile an hour incident or if it was a Royals Royce and all occupants were killed.

CityofCarlisle

Thanks for all the advice and help.

I have had a number of claims rejected and as you say, it is my responsibility to understand the T&C's. However these are long and complex and what tends to happen is that I read them when I first get them, go five years without a problem and then when I get one, find I am not covered for what happened. e.g. We missed a holiday flight because of an accident on the M6 just in front of us and we couldn't move for nearly four hours. We had to pay extra to go on another flight two days later and we weren't covered because the holiday only starts when you get to the airport. After five years without a claim, I had forgotten that, if I ever knew it. A bigger problem was a burst boiler which cost £1000+ for re-decoration but was apparently not covered by either the house insurance or contents insurance.

If one company quotes me £800 and another £1000, what I really want to know is, when I get a problem are they equally likely to pay out? Perhaps a statistic saying how many customers have successfully made claims would help.

At present, I have no insurance unless it's a legal necessity because I've never been able to make a successful claim (well, perhaps once on somebody else's) and had to pay for all problems myself anyway. It therefore seems that it is all a complete waste of money.

Astaroth

I have to agree that people are too price sensitive and dont actually look at the cover provided. Home insurance varies greatly between policies and motor is increasingly different too.

I dont however believe that any stats would significantly help you make a constructive decision on which insurer to go for. If you opt for an insurer with lower levels of cover then you are going to have more claims rejected because as you say, people dont read their policy documents and you can hardly blame an insurer for rejecting a claim for own vehicle damage when the policyholder has saved money by going for TPFT cover.

You will also get a skew caused by target market. There are insurers out there who aim at "lower class" people with cheap old cars... they inevitably have lower claims frequencies and lower claim values (theory being that if they get a minor dent whilst the car is parked in a supermarket they will simply think that it now matches the one on the other side of the car rather than someone with a brand new merc who would almost certainly put in a claim)

darky

CityofCarlisle wrote:

I don't want to know how much they pay for the rent, I just want to know how much they put aside for paying me when I have a problem.

The difference with the fruit seller is that he takes your money and gives you your oranges. He doesn't say, "OK, I'll have your money and in certain circumstances, (see this long and complicated list) you might get some oranges in six months time."

A more accurate analogy is the bookies. There you give them the money and if your horse wins, he gives you some back. But he tells you what the chances are that you'll get paid. It's 2-1 if you put money on that horse, 20-1if you put it on another. The insurance companies keep their odds to themselves.

They don't set aside any specified amount for claims - how could they? They don't know what level of payments they will have to make without a crystal ball to see who will claim. In any event its no business of yours what their business costs are - no wonder they wont tell you.

Astaroth

Yes insurers do put aside a specified amount for claims.... actuaries "work out" what they estimate the IBNR value should be based on past experience in comparison to the known claims. In addition to this claims departments will also reserve on a claim that has been reported but not settled yet... as I said previously though the methodologies for doing both of these vary greatly though after Iron Trade collapsed due to reserving all claims at £1 and no reserve for IBNR the authorities are much tighter on ensuring insurers reserve a sensible amount.