Quidco - do I understand it right?

Geoffo_M

I understand the concept with quidco in refunding agent's commission, much in the same way as discount brokers refund initial charges when purchasing unit trusts - typically 5%.

What I have difficulty with is understanding how insurance companies can make a profit refunding such large sums of money. I'm looking for home insurance and Lloyds TSB are offering cashback of £120. My quote came out at £188. How can the insurance company sustain such a low premium of £68. Many other companies are offering high cashbacks as well - it seems almost too good to be true?

Geoff

RichyRich

I think that the insurance companies make their money not through the actual insurance but via the opportunity to cross-sell once the insurance is bought. So whilst they might make a loss on the insurance if they can flog you an uncompetitive bank account, mortgage, loan, saving account etc they will be quids in.

However, maybe they're not actually making a loss. Maybe we've been overcharged so much in the past that we have become brainwashed to what things "should" cost - does it actually cost £120 to underwrite an insurance policy? I don't know - without all the data that TSB spends a fortune collecting and so keeps close to its chest I haven't a clue, but I'd be willing to hedge my bets that the profit they make on it isn't negligible.

In answer to your main question, no, it isn't too good to be true. If you go via quidco, you will be charged £188 and receive your cashback of £120 in the next few months. Good, eh?

Rich

Geoffo_M

Thanks Rich - a lot of what you say makes sense. I'm new to quidco so I don't know if Lloyds (as in this example) are always offering the £120 cashback, or if this is an offer available for a limited time.

I do feel that the insurance companies couldn't afford to give everyone buying insurance this sort of discount and still expect to make a profit. There is one there from Prudential who are offering £130 on car insurance. I just can't see how they can sustain that, unless, as you say, it is a loss leader, just to get "bums on seats", keep you as a customer and then flood you with all its other financial deals.

Interesting marketing

Geoff

homealone_2

i have just applied for my lloyds insurance, how long will i have to wait until i receive my cashback from quidco have only just joined them?

homealone_2

i have just applied for my lloyds insurance, how long will i have to wait until i receive my cashback from quidco have only just joined them?

RichyRich

Geoffo M: I think you're right; it is a limited-time offer. Get in quick!

homealone: It depends on a number of factors, including how quickly Lloyd's pay the network, how quickly the network pays quidco and the day of the month you get paid by quidco. So, for example: Lloyd's might pay commission to the network twice a month, on the first and the fifteenth. So if you ordered your insurance today (15 Mar) the money would be paid to the agent on the 1 Apr. Say if they pay Quidco every month on the tenth, Quidco would get paid on 10 Apr. The money would then be in your Quidco account, and will be paid to you on whatever day you normally receive payments from Quidco (normally the same day every month). These figures have just been made up, but it can take up to about 3 months from when you make the purchase to when you actually receive the cold, hard, cash in your hand.

HtH

Rich