Tip - Admiral - definitely don't just accept their renewal quote!

nobbysn*ts

InsideInsurance wrote: »

Which business doesnt charge the maximum they think they can for their market/ segment etc? Show me one that doesnt and I will show you angry shareholders

Plus a Savile Row suit doesnt make you respectable, it just makes you look good

Indeed, get as much as you can out of the customer, by every shady trick in the book, then insist the customer, and solely the customer have to act in 'utmost good faith'. I agree with you, they're not respectable, and really have got the market sewn up. We do need to remember it's about getting as much money in, and paying as little out here. Good job the FOS were created to rein them in a bit.

roddydogs

Dont savvy people haggle with any insurance company, any insurance as a matter of course?

nobbysn*ts

roddydogs wrote: »

Dont savvy people haggle with any insurance company, any insurance as a matter of course?

Probably. The problem is they are often portrayed as an upstanding respectable business, so they fool a lot of non savvy people, who don't see them as simple low life money grabbers out to fleece their customers, solely focussed on the benefit of the shareholders, as InsideInsurance says. They mistakenly believe it'll be a fair contract for both sides.

InsideInsurance

nobbysn*ts wrote: »

Indeed, get as much as you can out of the customer, by every shady trick in the book, then insist the customer, and solely the customer have to act in 'utmost good faith'. I agree with you, they're not respectable, and really have got the market sewn up. We do need to remember it's about getting as much money in, and paying as little out here. Good job the FOS were created to rein them in a bit.

What do you consider "shady tricks"? New customer discounts? Administration fees? Cancellation fees? All things again done by almost every company outside of insurance too.

Insurance is also a distress purchase, no one buys insurance because they want it. Its also one of the few things we buy hoping never to use. All of these inevitably mean it sells 99.9% on price rather than quality or service or any other normal additional consideration.

When I go to Sainsburys I see more people buying Heinz baked beans rather than Sainsburys' Basics despite them being 3 times as expensive. If people were willing to apply the same logic to insurance you would see many more companies like Hiscox in existence which do sell on quality and service rather than price.

Whilst people will switch insurers for the sake of saving £1 then you will see insurers react to the customers demand and do whatever they can to slash headline prices. Shareholders dont want loss of value and so you will find new customer discounts dont last forever and administration fees apply to those that require additional services etc.

We do at least agree that the FOS is a good thing - having had to use other ombudsmen in recent months the FOS has much more teeth than the others do.

nobbysn*ts

InsideInsurance wrote: »

What do you consider "shady tricks"? New customer discounts? Administration fees? Cancellation fees? All things again done by almost every company outside of insurance too.

Insurance is also a distress purchase, no one buys insurance because they want it. Its also one of the few things we buy hoping never to use. All of these inevitably mean it sells 99.9% on price rather than quality or service or any other normal additional consideration.

When I go to Sainsburys I see more people buying Heinz baked beans rather than Sainsburys' Basics despite them being 3 times as expensive. If people were willing to apply the same logic to insurance you would see many more companies like Hiscox in existence which do sell on quality and service rather than price.

Whilst people will switch insurers for the sake of saving £1 then you will see insurers react to the customers demand and do whatever they can to slash headline prices. Shareholders dont want loss of value and so you will find new customer discounts dont last forever and administration fees apply to those that require additional services etc.

We do at least agree that the FOS is a good thing - having had to use other ombudsmen in recent months the FOS has much more teeth than the others do.

'Shady tricks', well the one you're propagating here for example. It's certainly not a 'new customer discount' It's a profit making price at the start, then it's a massively inflated penalty for customer loyalty. If it was a true discount, if would be more cost effective to let a customer go, when they clearly aren't going to renew at the offered price. Keeping them, and reducing the premium, as in this thread, simply means still making a good profit, rather than an excessive one, and worth retaining the customer for future years, even though you know they'll be haggling in the future. Very reminiscent of the double glazing special offer, '£7000 sir, but I can ring my manager, we're in the area, we can do it for £2000 if you sign today'

InsideInsurance

nobbysn*ts wrote: »

'Shady tricks', well the one you're propagating here for example. It's certainly not a 'new customer discount' It's a profit making price at the start, then it's a massively inflated penalty for customer loyalty. If it was a true discount, if would be more cost effective to let a customer go, when they clearly aren't going to renew at the offered price. Keeping them, and reducing the premium, as in this thread, simply means still making a good profit, rather than an excessive one, and worth retaining the customer for future years, even though you know they'll be haggling in the future. Very reminiscent of the double glazing special offer, '£7000 sir, but I can ring my manager, we're in the area, we can do it for £2000 if you sign today'

I assume you ignore the combined ratios which show that Motor, for example, have been making an underwriting loss for over a decade?

Obviously insurers have cash and so also have an investment income which isnt reflected in the combined ratio but realistically for Motor many are just about washing their face. Now for other product lines like Home there is more profit to be made.

Year 1 business is frequently written at a loss, those new customer discounts are funded by those paying full price. Even if it wasnt why does this make it shady business. Gyms, Sky TV, National Trust, Royal Horticultural Society all give people a discount in year one and raise their price in year 2, do you consider all of these shady businesses too? Presumably they all make a "profit" in year 1 too ("profit" as some of these are legally charities).

You also have to remember how insurance works and the theory of the common pool. An insurer has to hold capital to ensure it can meet the claims it will be hit by. The bigger and more diverse the risks that they are covering then the less proportionally the capital they need to hold is as the laws of averages plays out. So even writing additional business at break even from an underwriting perspective can in the long term benefit the insurer because the growth of the pool means they need to put a smaller proportion of their cash into liquid assets which typically give a lower return.

If I insured 10 cars I may need to hold £50,000,000 of capital because of the risk that one of them causes a major accident. If I insure 11 cars I dont need to hold £55,000,000 because the maximum probable loss hasnt gone up 10% despite the fact that my common pool has increased 10%

nobbysn*ts

InsideInsurance wrote: »

I assume you ignore the combined ratios which show that Motor, for example, have been making an underwriting loss for over a decade?

Obviously insurers have cash and so also have an investment income which isnt reflected in the combined ratio but realistically for Motor many are just about washing their face. Now for other product lines like Home there is more profit to be made.

Year 1 business is frequently written at a loss, those new customer discounts are funded by those paying full price. Even if it wasnt why does this make it shady business. Gyms, Sky TV, National Trust, Royal Horticultural Society all give people a discount in year one and raise their price in year 2, do you consider all of these shady businesses too? Presumably they all make a "profit" in year 1 too ("profit" as some of these are legally charities).

You also have to remember how insurance works and the theory of the common pool. An insurer has to hold capital to ensure it can meet the claims it will be hit by. The bigger and more diverse the risks that they are covering then the less proportionally the capital they need to hold is as the laws of averages plays out. So even writing additional business at break even from an underwriting perspective can in the long term benefit the insurer because the growth of the pool means they need to put a smaller proportion of their cash into liquid assets which typically give a lower return.

If I insured 10 cars I may need to hold £50,000,000 of capital because of the risk that one of them causes a major accident. If I insure 11 cars I dont need to hold £55,000,000 because the maximum probable loss hasnt gone up 10% despite the fact that my common pool has increased 10%

Ok, so we agree the insurer, who makes a fortune on accident repair, credit hire, and all the extras that go with car insurance, under separate businesses, engineer a paper loss on insurance, and avoid any tax. We also agree that any 'real' profits, are converted to losses by the fact they are obliged to ring fence all the millions, or even billions into a large pot they ultimately can cash in. So, all the losses are on paper, and all the profits are in an ever increasing pot, and they are very, very asset rich? I believe that's what you're saying?

InsideInsurance

They are legally required to be asset rich, though those assets have to be in a form that is required to be liquidated exceptionally easily if not actually liquid. You have to remember that you pay them £500 for your Car insurance but they must be able to meet your legal requirement of paying out £750,000,000,000,000 if required.

Yes, if they stop writing business or diversify their portfolio without growing their book then capital can be released but in many cases a significant amount of the assets are from loans or outside investment. From memory one high street insurer has a £10b loan that is a core of their ability to write business.

Insurance losses and business losses are different, they are reported to different organisations. A company can make an insurance loss, as it would have to report to the PRA but a business profit which is reported to HMRC and Companies House. IPT is the same as VAT so is payable on revenues not profit and so making an insurance loss doesnt reduce their tax bill. Their corporation tax is paid on their business P&L and so if they make an actual loss on pure insurance but make a profit from credit hire referrals or ARC shops that out weighs the losses then they pay corporation tax on the combined profit.

You appear to be mixing up P&L and balance sheet. A company is taxed on its profit not on its bank balance, just as you are taxed on your salary not the full balance of all your savings and assets.

nobbysn*ts

InsideInsurance wrote: »

They are legally required to be asset rich, though those assets have to be in a form that is required to be liquidated exceptionally easily if not actually liquid. You have to remember that you pay them £500 for your Car insurance but they must be able to meet your legal requirement of paying out £750,000,000,000,000 if required.

Yes, if they stop writing business or diversify their portfolio without growing their book then capital can be released but in many cases a significant amount of the assets are from loans or outside investment. From memory one high street insurer has a £10b loan that is a core of their ability to write business.

Insurance losses and business losses are different, they are reported to different organisations. A company can make an insurance loss, as it would have to report to the PRA but a business profit which is reported to HMRC and Companies House. IPT is the same as VAT so is payable on revenues not profit and so making an insurance loss doesnt reduce their tax bill. Their corporation tax is paid on their business P&L and so if they make an actual loss on pure insurance but make a profit from credit hire referrals or ARC shops that out weighs the losses then they pay corporation tax on the combined profit.

You appear to be mixing up P&L and balance sheet. A company is taxed on its profit not on its bank balance, just as you are taxed on your salary not the full balance of all your savings and assets.

No, I'm not mixing it up, they keep separate businesses, so they can cry loss on insurance, and write off the tax from the interest on the assets, or the loss from the loan. And if they keep the businesses as separate identities, they pay separate corporation tax, after threshold. Just as you pay tax after your personal allowance, then at a lower rate, then your wife does the same. Not as a combined household with one allowance. As you say, but I'm not sure why, IPT is simply collected on behalf of the government, as is VAT, so doesn't even figure in the calculations.

nobbysn*ts

As to having to have cash for 750 trillion pounds, are you sure are insurers are that cash rich? 400 times the uk gdp, held by each and every insurer. And you cry 'poor'? That's actually 30 tons of gold for every insurer if that's what you claim they have to have as cash.