MSE News: Jobless get walloped when buying insurance

dunstonh

Well how does that explain quotes staying the same when someone changes their occupation and then changes it back again?

It means that particular platform/provider is not running the software.

You cannot commit fraud merely by changing quotation answers and not proceeding with the purchase.

Correct you cant. No-one has said you can. However, some providers will increase the premium when you return to the original occupation as they consider it a higher risk of fraud. i.e. someone is fishing for the options that give them the lowest price and is willing to tell porkies in doing so.

mikey72

dunstonh wrote: »

It means that particular platform/provider is not running the software.



Correct you cant. No-one has said you can. However, some providers will increase the premium when you return to the original occupation as they consider it a higher risk of fraud. i.e. someone is fishing for the options that give them the lowest price and is willing to tell porkies in doing so.

Yes, you're a far greater risk if you don't stump up on the first price, and try to see if there is any logic behind it.

Jezzamk

mikey72 wrote: »

Who defined volunteering as work? If you don't have the statistics, how do you know insurers are paying out more? How do you know unemployed people have a higher ratio of accidents due to bald tyres and poor brakes? Do you have a link to those statistics? A link to the losses would be good as well. I personally doubt that the day I became unemployed, my tyres and brakes went out in sympathy, in fact, I think they where probably more worn 6 months later when I stopped claiming JSA and became self employed. As I also service my own car, it was probably beter looked after during the 6 months when I had more time on my hands.

If you are using your car in connection with voluntary work you should declare this to your insurers. Depending on the nature of the work they may decide that it affects your premium.

There is a condition that you must declare to insurers anything that you (or a reasonable person) belives may influence the underwriters decision as to whether to accept a risk or the premium for that risk (even if the question hasn't been asked). This will be on the proposal form. Failing to declare that your car is being used for voluntary work could fall within that.

If I use my car to visit and help out a friend or family member I wouldn't expect this to be classified as voluntary work. However, if I was delivering Meals on Wheels (just an example as I don't know if this is voluntary) I would be using the car more and therefore the opportunity for an accident increases.

Whilst I don't have the statistics to show which groups cost more in claims than others, the insurers do. If the unemployed represented a better risk than the employed then insurers would charge lower premiums as they want to attract the groups that are most likely to make a profit. I belive that some groups have higher rates than the unemployed (such as actors, professional sportsmen etc).


NB - Although I work in insurance I do not deal with motor insurance. However, the same prinicples apply to all classes of insurance. Insurers manage a pool of money into which all the insureds contribute. Claims are then paid out of this pool. Insurers try to ensure that it is fair by charging according to the percieved risk. They have to ensure that there is sufficient money in the pool to pay all the claims. Obviously some money is taken out of the pool to cover thier costs and unless it is a mutual company these costs include a profit. Insurers are the same as any other company, they have to show a return for their investors.

I have been on the receiving end of what felt like unfair treatment. My holiday & travel insurance was loaded becuase I declared that I had broken my wrist and required hospital treatment. It had healed by the time I took out the insurance. However, insurers obviously felt that I was a higher risk. (Perhaps a fall would be more likely to result in a further injury?). I wasn't happy but insurance runs on statistics and tries to be fair (even though it often feels that it isn't).

wozearly

mikey72 wrote: »

But now as the insurance underwriters are becoming so much more selective, software is becoming so much better, it's unlikely anyone would go from office worker to drug dealer overnight, so a mid term change of details when made redundant, or leaving college and changing from student to unemployed, shouldn't really carry the same loading as as trying to insure your new blacked out BMW in the middle of Birmingham, with no ncd due to bullet damges, for the seventh year unemployed.

Logic says you're right, but insurers aren't duty-bound to try to match your premium as accurately as possible to the risk you pose.

Over the long-run they'll tend to make improvements, because otherwise competitors with a more accurate pricing strategy will attract additional (generally lower risk) customers, leaving the other insurer with the expensive risks who are now underpriced (not a good strategy for staying in business), or forcing them to apply significant premium hikes to reflect their new riskier portfolio (and the risk of those riskier customers switching to an insurer without the same issue).

Creating a smoother transition between changes in jobs is technically possible, but would have a setup cost and an additional ongoing cost (underwriters will probably need to review that new risk profile across all product combinations).

The key question is whether this setup and maintenance cost is lower than the profits expected from making the change and not losing those customers. If it was about fairness, we as customers should be arguing for insurers to delay reductions in premiums when we change to a less risky employment category, because we're still the same person and presumably the same risk we were yesterday (funnily enough, I don't expect we'll be queuing up to do that!)

As the recently unemployed are a relative minority there isn't a huge market to attract for this type of change. The boost to loyalty in keeping the customer by being 'fair' to them could be another angle, but as many people have very little loyalty to their car insurers outside of price, its not likely to justify much being spent on it.

Finally, if few other insurers are doing anything to soften the blow for the unemployed, then the customer's options for switching are limited and so there's not likely to be a great deal of competitive pressure.

dunstonh

Finally, if few other insurers are doing anything to soften the blow for the unemployed, then the customer's options for switching are limited and so there's not likely to be a great deal of competitive pressure.

Which is what happens in a hard market. Once the price increases to a level that the insurers feel the risk premium is attractive, it will attract more insurers (or re-assurers) to offer terms and then the market moves to a soft market as competition drives the price down until they still pulling out again as the risk premium is no longer attractive and the spiral starts again.

vaio

Jezzamk wrote: »

If you are using your car in connection with voluntary work you should declare this to your insurers. Depending on the nature of the work they may decide that it affects your premium.........

Do you not agree with the ABI view that voluntary work is covered under standard SDP insurance so no need to declare?

Jezzamk wrote: »

........There is a condition that you must declare to insurers anything that you (or a reasonable person) belives may influence the underwriters decision as to whether to accept a risk or the premium for that risk (even if the question hasn't been asked). This will be on the proposal form. Failing to declare that your car is being used for voluntary work could fall within that..........

Do you not agree with the ABI/FOS view that it's not the punters job to try and guess what an insurer might regard as a "material fact"? Their view is that insurers need to ask the appropriate questions to gather the information they need about anything they care about

Jezzamk wrote: »

........If I use my car to visit and help out a friend or family member I wouldn't expect this to be classified as voluntary work. However, if I was delivering Meals on Wheels (just an example as I don't know if this is voluntary) I would be using the car more and therefore the opportunity for an accident increases.........

See my first point. Also, the amount you use your car is already uncovered by the milage questions that insurers ask and presumably that factors into the premium

CautiousKate

What about using 'carer' if you've actually been forced to give up work to care for a close family member? Would this pass muster with the insurance companies? (I'm asking because it might happen to me soon if my daughter doesn't get any better).

catus

Many insurance companies also have no section for the long term sick, who are not working and not looking for work, but are they a homemaker? Often there is no other option on the insurance company websites than to choose unemployed.

mikey72

catus wrote: »

Many insurance companies also have no section for the long term sick, who are not working and not looking for work, but are they a homemaker? Often there is no other option on the insurance company websites than to choose unemployed.

A classic definition of unemployed is seeking employment, and/or claiming JSA. If you are doing neither, you shouldn't be unemployed. So homemaker seems ok. Retired could be another option.

kento_2

What needs investigating is how insurers assess all the risks that they allege to justify premium differences. Employment type, licence points, use for commuting and residential postcode.

I have long suspected that the underwriters do not properly analyse these factors, but instead just follow the market set by the collective market because they become worried that they will acquire to much business in the perceived (rather than proven) high risk.

This applies to postcodes which have been a key factor in premium fixing ever since car insurance began and long before commuting distances increased with the effect that many driving in urban areas now have semi-rural residential postcodes.

The only way an insurer can get volume business across the entire market is to use loaded premium income to support cheaper premiums offered to those generally regarded as lower risks by the other insurers. So as soon as competitor insurers start loading a category (or invent a new one) then every other insurer follows suit driven by marketing demand for targeted income rather than factual proof of claims demand.

Remember a reduction of insurance loading for the unemployed will have to be met by a premium increase for the employed so as to maintain income. You might even question what momentum will an investigation have when pursuing this issue because the outcome would be a rise premiums for everyone else.