Insurance add-ons: claims ratios to be published?

consumer_champ

The add-on insurance market (where consumers are sold an insurance product on the back of buying another main product) is a hugely profitable one.

So it was comforting to read the final findings from the Financial Conduct Authority's (FCA) recent market study into the sale of general insurance add-ons. In it, the FCA proposes that firms should be required to publish their claims ratios, so consumers can assess the true value of the insurance being offered. Let's hear it for the FCA :A

rs65

consumer_champ wrote: »

The add-on insurance market (where consumers are sold an insurance product on the back of buying another main product) is a hugely profitable one.

So it was comforting to read the final findings from the Financial Conduct Authority's (FCA) recent market study into the sale of general insurance add-ons. In it, the FCA proposes that firms should be required to publish their claims ratios, so consumers can assess the true value of the insurance being offered. Let's hear it for the FCA :A

Have you actually read the study?

GAP insurance was flagged as being highly profitable. I have two concerns here.

1. A consumer may see the ratios and therefore decide not to take the cover. That decision could have a huge financial effect on that individual. A consumer needs facts about the effect a uninsured claim would have on them not the ratios of insurers.

2. A car retailer makes profit from GAP which allows him to make less profit on the cost of the car. I doubt the dealer will lose out so the cost of the car goes up, which ironically increases the need for GAP.

consumer_champ

rs65 wrote: »

GAP insurance was flagged as being highly profitable. I have two concerns here.

1. A consumer may see the ratios and therefore decide not to take the cover. That decision could have a huge financial effect on that individual. A consumer needs facts about the effect a uninsured claim would have on them not the ratios of insurers.

2. A car retailer makes profit from GAP which allows him to make less profit on the cost of the car. I doubt the dealer will lose out so the cost of the car goes up, which ironically increases the need for GAP.

Are you seriously suggesting that consumers shouldn't be given all the facts before parting with their hard earned cash? Or that they are incapable of making rational decisions?

There's nothing wrong with GAP insurance per se, but if consumers are going to make an informed decision as to the level of risk then having access to the claims ratios is an important part of that process.

In its Report (yes, I have read it) the FCA says that "competition in general insurance add-on markets is not effective, and these markets are broadly not working for consumers". I agree 100% with this and in my view consumers can only benefit from the FCA's intervention. Let's face it, no-one else is going to look after their interests.

rs65

consumer_champ wrote: »

In its Report (yes, I have read it) the FCA says that "competition in general insurance add-on markets is not effective, and these markets are broadly not working for consumers". I agree 100% with this and in my view consumers can only benefit from the FCA's intervention. Let's face it, no-one else is going to look after their interests.

I agree with this as well but I don't agree that publishing claims ratios is the answer.

Changing the sales process should be the start point. There are frequent threads here asking if someone should buy GAP cover at £399 from the dealer followed by several answers saying that they could get it for £200 elsewhere. They may not even need it for the first year.

consumer_champ

rs65 wrote: »

Changing the sales process should be the start point. There are frequent threads here asking if someone should buy GAP cover at £399 from the dealer followed by several answers saying that they could get it for £200 elsewhere. They may not even need it for the first year.

Firms selling add-on insurance often have a 'point of sale advantage' and this in turn may be reflected in the price. So the sales environment and context is certainly a factor. But I still think that we should treat consumers as adults and if information is available that can help them to get a better idea of the actual risk then they should have access to that.


I guess we'll have to agree to disagree. Interesting discussion though :-)

OnanTheBarbarian

It would be interesting to see if the actual payouts (or lack of) were published by motor legal expenses insurers.

consumer_champ

OnanTheBarbarian wrote: »

It would be interesting to see if the actual payouts (or lack of) were published by motor legal expenses insurers.

In my view, the more transparency the better. However, I guess that being able to see the claims ratios should suffice in terms of being able to assess the likelihood of needing to make a claim.

I do hope the FCA will stand firm in the face of the inevitable lobbying from the insurance industry.

InsideInsurance

consumer_champ wrote: »

Are you seriously suggesting that consumers shouldn't be given all the facts before parting with their hard earned cash? Or that they are incapable of making rational decisions?

How much is the materials cost of Hermes handbag as a ratio of its retail price?

How about a Tesco Finest Cheddar?

How about a Samsung 65" LED TV?

Since when did consumers need the non-operational cost of a product to decide if they should buy it or not?

OnanTheBarbarian

InsideInsurance wrote: »

Since when did consumers need the non-operational cost of a product to decide if they should buy it or not?

When the subject is a slippery insurance company and the marketplace is capable of manipulation by the stats and figures they publish without challenge/ verification.