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MSE News: 'Dysfunctional' motor insurance market pushes up premiums
Former_MSE_Helen
Former MSE 2.4K Posts
"An OFT report finds the motor insurance market is 'dysfunctional' and may be pushing up premiums by £225 million a year ..."
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About time this rip off industry was exposed. Start clearing your desks lads.
Then the Competitions Commission will start all over again. Meanwhile we all carry on getting ripped off on our premiums and the insurance companies go on getting their kickbacks.
It's not only the insurance market that is dysfunctional.
It's not just insurance companies who get referral fees, there are many different people in the supply chain doing it; many insurers would like to get rid of this system. If insurers didn't get involved with the mucky referral fees business under the current system they'd go elsewhere increasing premiums further.
I'm sure many in the industry would agree that it is dysfunctional at the moment, the fees being paid to ancillary parties does push costs up.
I'm yet to hear a sensible suggestion on how to improve the situation though, just lots of shouting and blaming insurers. Anyone care to suggest how this could be sorted?
Also in the vast majority of circumstnaces people wouldn't base their judgement of which insurer to go with based on the information of how much they get in referral fees et certera; they'l just do what they always have done and go with the cheapest insurer.
One of the biggest receivers of ancillary income is Admiral and they're pretty open about it in their Annual Report.
Most insurers don't have stakes in CMCs and CHOs hence referral fees (if they owned them they wouldn't have to have a referral fee). In my personal opinion, what you've suggested wouldn't make one iota of difference to consumer behaviour and if anything may put premiums up as more man hours would have to be spent producing accounts and reports meaning more employees so more costs.
As for solutions they are not really that hard. No referrals allowed with or without payment. The driver chooses which garage does the work, submitting the quote to the insurer first who can only make them switch to their "approved" choice if it works out cheaper. I would also like to make whiplash un-claimable without medical proof. A bit tough of any with a genuine injury but they are few and far between.
That's just off the top of my head. I'm sure I could refine them with more thought.
You seem to think nobody is to blame and we should carry on as we are. I don't share that view.
I agree with your first two points but if you want medical proof for whiplash you might need to invent some form of test to prove it. I would much rather have a system like some other countries where you cannot claim below x speed, although proving what speed it was of course brings its own problems.
I appreciate that a lot of people have bad feelings towards insurers, but in all honesty some are really good and will tend to believe their policy holder over everything else. Others however, are everything some people expect and I hate dealing with a claim for them.
Be no problem in them stating that then. Otherwise, it would seem to make perfect sense to own a credit hire company, so my insurer could pass my name to them, get a referral fee, the credit hire company would inflate the hire price, charge that to the third party insurer, and make a tidy profit. The insurers clame insurance doesn't make a profit, increase the premium, and the holding company at the top makes a very nice profit thankyou. Let's not forget, no insurer ever publishes the loss from any car insurance as an actual figure, it's all in the company accounts, which normally has so many areas of business in, it's actually very profitable overall. Just always made elsewhere, honest, trust us, would we lie to you, sorry that confidential.
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Referral fees would still be paid to other non-insurers meaning claims costs would stay the same but income to insurers would go down, therefore premiums go up.
On the whiplash point, how do you get "medical proof" for this? Whiplash is a soft tissue injury which there is no objective test for. The only test is whether the patient is in pain in a certain way, they do currently need to get a medical report for it to stand up in court; it's just very easy for unscrupulous people to fake the symptoms. Also in many cases vigorously defending the case will cost more than paying the claim so it means less costs to just pay.
On the referral fees point, I don't know how workable that is. How do you legislate for that and what is the impact on other industries where money is paid for lead referrals? Do we effectively wipe out a lot of our service industry in the hope of saving £10 on our insurance? Slightly exaggerating the impact maybe but you do have to think of the knock on consequences.
Regarding the local garages, having an approved repairer network will streamline costs with economies of scale so while the top line cost of the actual repair may be similar or even lower at the local garage the invoicing and administration will work out a lot cheaper. This is precisely why insurers build up approved repairer networks in order to bring cossts down.
I don't think trying to find someone to "blame" is helpful and would love it if the system could be improved to pull these costs out of the system, bringing down the claims costs and therefore premiums.
I don't think all is perfect but neither do I think we live in sort of utopia with an easy fix.