No fault incident which was not even claimed increasing my premiums

InsideInsurance

The most logical reason seems to be because the insurer can raise the premium.
If it was a statistical fact, surely it would apply across all insurers, and they would all raise the premium. As it is, it had been stated only about 40% do.
That would suggest it was more of a marketing ploy, and an invented justification.

1) With different insurers going after different market segments etc they do not have universal experiences.

2) Technical pricing is only one part of the equation, there are other commercial considerations that are then applied over the top. Some insurers may find that technical pricing should show an increase but they decide that they will eradicate it because they want to explicitly target these customers for some reason or to go inline with a marketing campaign etc.

Insurance is increasingly being written on a customer life time value basis. You can write certain business as a loss in exchange for trying to secure their other business as at a larger profit.

The vast majority of customers do just allow their policies to renew each year and without doubt they do subsidise both new business and those that are more proactive in shopping around etc. Again cannot provide the actual numbers behind it but propensity modelling and customer elasticity is a big area of interest for mass market insurers

Certainly insurers making bad commercial decisions isnt an unknown event, I remember a very embarrassing senior director visit to a call centre where an agent undercut a quote from one of their sister brands - ultimately that resulted in a multi million pound project to restructure the organisation to prevent self canibalisation etc.

InsideInsurance

mikey72 wrote: »

All of which will give you the lowest premium required to give enough to maintain the business. Added on top of that are the ways to maximise profits, and increase the technical premium to the best return, without losing the customer. A bit of spin always helps, particuarly if you can turn it into an urban myth that anyone will repeat.

Which is exactly what I said:

Technical premium - the pure risk/ claims exposure

Operational costs - the cost of running the company

Commercial considerations - profit margin but as you say, it is a sophisticated model considering propensity modelling, customer elasticity etc with an eye to customer level life time value rather than a flat value or percentage

dunstonh

The most logical reason seems to be because the insurer can raise the premium.

The insurer can largely price their product how they like. However, they employ actuaries and have data sources for all sorts of statistics that allow analysis on the risks they are taking and how they should price those risks.

If insurers just raised premiums nilly willy then they would not remain in business long. They need to understand their liabilities and pay a fortune in finding out where the risks are.

If it was a statistical fact, surely it would apply across all insurers, and they would all raise the premium. As it is, it had been stated only about 40% do.

They wont all have the same data levels or capability of data analysis and they will run different pricing models that may see some risks carry no premium increase in one area whilst but in others whereas other insurers may do the reverse.

There is no one model in operation.

That would suggest it was more of a marketing ploy, and an invented justification.

How on earth can it be considered a marketing ploy?

mikey72

dunstonh wrote: »

............How on earth can it be considered a marketing ploy?

If you say it enough times, enough people will believe it's true.

So it's an easy £45 or so you can add to anyones premium, and they'll simply accept it.

Spiderham

I can answer a couple of Mikey's questions.

mikey72 wrote: »

What branch of car insurance do you work in, and have you personally seen proof of that statistic?

I work in personal lines motor insurance for an insurer and I am involved with the actuarial/pricing/underwriting side of things as I'm into Mathsy type stuff.

I haven't only seen "this statistic" but have actually as part of my job had to analyse this particular bit starting with the assumption that there is no difference. I therefore didn't have it given to me and told it as gospel but worked it out from the raw data (and a bit of help from my computer) and then came to that conclusion myself.

I imagine other insurance companies with enough customers to look at this in detail have done similar.

mikey72 wrote: »

If so, can you provide a link to it?

No, I can't as it isn't information that I am allowed to share, what with it being commercially sensitive and all that.

Mikey to try and frame this in an analogy with your own area of work, can I ask what industy you work in?

mikey72

Spiderham wrote: »

I can answer a couple of Mikey's questions.



I work in personal lines motor insurance for an insurer and I am involved with the actuarial/pricing/underwriting side of things as I'm into Mathsy type stuff.

I haven't only seen "this statistic" but have actually as part of my job had to analyse this particular bit starting with the assumption that there is no difference. I therefore didn't have it given to me and told it as gospel but worked it out from the raw data (and a bit of help from my computer) and then came to that conclusion myself.

I imagine other insurance companies with enough customers to look at this in detail have done similar.



No, I can't as it isn't information that I am allowed to share, what with it being commercially sensitive and all that.

Mikey to try and frame this in an analogy with your own area of work, can I ask what industy you work in?

What conclusion?
That someone having a third party no fault accident is more likely to have a fault accident, or no more likely?

You can give me a comparison from statistical analysis of quality data, mainly six sigma, but you can include mtbf for semiconductors, on accelerated stress test, or autoclave, as they seems to work best.
If you know Taguchi, that's a fairly simple statistical technique.

Or just tell me the way you do it, and I'll try to keep up.

(Or I bet you I could show you why blue cars could have more accidents from your raw data, if you want to charge them more this month, I may need to be selective in the data I use, but I could justify that too)

InsideInsurance

You couldnt show WHY blue cars have more accidents from the data, you could simply show if they have more accidents, what the average cost is etc

There most likely is actually a correlation between car colour and accident rates but you have three issues of:

1) Defining a colour in simple terms and the inevitable arguments - at what point does a metallic grey stop being grey and becomes silver?

2) Insurers at the moment dont capture the colour to do the analysis and buying the data from the DVLA would be expensive

3) Even if there is a difference in technical risk the operational cost of asking an additional question etc can outweigh the "benefit" of a more technically accurate unlaying premium - hence why some insurers stopped asking "where do you keep your car"

mikey72

InsideInsurance wrote: »

You couldnt show WHY blue cars have more accidents from the data, you could simply show if they have more accidents, what the average cost is etc

There most likely is actually a correlation between car colour and accident rates but you have three issues of:

1) Defining a colour in simple terms and the inevitable arguments - at what point does a metallic grey stop being grey and becomes silver?

2) Insurers at the moment dont capture the colour to do the analysis and buying the data from the DVLA would be expensive

3) Even if there is a difference in technical risk the operational cost of asking an additional question etc can outweigh the "benefit" of a more technically accurate unlaying premium - hence why some insurers stopped asking "where do you keep your car"

1) Which way do you what the money to go?

2) What do you want to justify. I only need about 30 samples from garage costings where they have put colour on to show statistically either way.

3) I don't need to ask, I'm just proving blue cars should cost more.

Bradden

Just wanted to say this is a great thread! I remember a watchdog feature a while ago where insurers were encouraging customers to report accidents with no claims.. and then using the info to pump their premiums.
Sadly it only enocurages people not to report incidents. I would have thought this goes against the long term interests of the insurance companies.

Quentin

Bradden wrote: »

.... I remember a watchdog feature a while ago where insurers were encouraging customers to report accidents with no claims.. and then using the info to pump their premiums.
Sadly it only enocurages people not to report incidents. I would have thought this goes against the long term interests of the insurance companies.

Did you see the watchdog about the guy who didn't disclose his windscreen repair to his car insurer (ended up with a cancelled policy to disclose for evermore), or the dear old lady (Doris) who failed to disclose incidents to her home insurer?

She ended up with a proper claim (£23k) that was refused, her policy cancelled, and only able to get insurance via a "specialist" broker at great expense.

http://www.bbc.co.uk/blogs/watchdog/2011/10/insurance_exclusions.html

Not reporting incidents just means your policy can be worthless and cancelled if you need to claim or when the insurer finds out you failed to disclose.

Is it worth the risk? Your call!