Car and home insurers face ban on charging existing customers more than newbies - MSE News

Sandtree

I agree @convolvulus that there will be a lot of intelligent guys/gals locked in rooms right now thinking on possible work arounds and damage limitation. Will need to see the exact ICOBs and guidance notes (or however the FCA intend to implement it) before really speculating. Plus there will be some that play things with a straight bat and others that will look for any get out clause.

Obviously I'm now sitting by the phone awaiting to be invited into the room

convolvulus

ayayay said:

Effective competition depends upon a critical mass of consumers shopping around to keep suppliers competitive.

True, but the present system does not do that, because there is a firewall between the customers who do the shopping around and the bulk of the products being sold. Effectively most of the pricing is sheltered from competition, at the cost of a few loss making "shopper" customers.

If, as Sandtree argues, the changes reduce the barrier to entry for new insurers, we should eventually see costs taken out of the industry and prices taken lower overall through effective competition.

paddyandstumpy

convolvulus said:

ayayay said:

Effective competition depends upon a critical mass of consumers shopping around to keep suppliers competitive.

True, but the present system does not do that, because there is a firewall between the customers who do the shopping around and the bulk of the products being sold. Effectively most of the pricing is sheltered from competition, at the cost of a few loss making "shopper" customers.

If, as Sandtree argues, the changes reduce the barrier to entry for new insurers, we should eventually see costs taken out of the industry and prices taken lower overall through effective competition.

I can't see this happening. 

Who nowadays will contact each insurer to get their price? People when shopping around will either engage the services of a broker, or hit the comparison sites. 

If you then take out a policy via either of those methods, the cost to the insurer is that 'acquisition cost'. 

A broker may make 20% commission on a car policy. That amount needs to pay for the cost of running that brokers, employing the staff, software house license fee, regulatory costs, plus then the cost of running the premises they broker operates from. 

Comparison websites charge in excess of £60 per policy acquisition, and will then aggressively market the customer the following year to return to the comparison website and shop around, ensuring the comparison website can then make another £60+ by moving you to another insurer. 

If insurers or brokers cannot recoup their outlay over a period of years by retaining the customer, and spreading that cost; they will need to factor this cost into the year 1 price. 

As others have posted, the lazy benefit, whilst the financially savvy and the MSE-r's out there, will suffer the consequence. 

Sandtree

paddyandstumpy said:
I can't see this happening. 

I'm not convinced it will either but I suspect its what the thinking has been and one of the stated benefits was to increase competitiveness 

Ultimately regulators/nanny state are there to protect those who cannot protect themselves but all these things come at a cost which get baked into the price. Unfortunately you cannot chose to waive your rights in exchange for a lower cost and so those who are more astute or less risk adverse end up paying more.

I am not convinced people either use an aggregator or engage the services of a broker... many have no idea if the company they've bought from is a broker, MGA or insurer or a white label of any of the above. There are hundreds of posts on here where brokers are referred to as insurers etc. Even some of the aggregators are actually brokers when you move away from Home, Motor etc (eg many of them are a white label of Simply Business for SME insurance).

PS. I'd love to know a personal lines broker getting anything close to 20% on mainstream Motor

rudekid48

PS. I'd love to know a personal lines broker getting anything close to 20% on mainstream Motor

Exactly what I was thinking!  Most Brokers are lucky to get 8% for mainstream motor now.

csgohan4

sadly the lazy people will be the vulnerable and elderly who are being taken for a ride. That's why I've taken over my parents insurance renewals completely, they don't know how to use the internet well. 

Difficult on both sides tbh, on the one hand, reduces prices for the 'lazy' or those that are not computer savvy, and on the other may increase prices for those that spend a few hours every year sorting all their insurance out

paddyandstumpy

I will confess the commission level mentioned for motor is harking back to my old PL UW days, I'm going back 5+ years. Then, there were a couple of the larger high street broker names earning 20% on Motor, and 35% on Household. 

This is just the gross rated brokers, when you then think of the net rated brokers (BGL, the AA, Saga etc), their commission was usually in excess of those levels! 

The £60 aggregator cost fee is also 5+ years old, I suspect much higher now, but can't back this up. 

I know it won't be lower though, the aggs hold all the cards when negotiating fees with insurers! 

Old_Lifer

As   Sandtree  says  it is   ' to protect those who cannot protect themselves '    and as   csgohan 4  says  ' the lazy people will be  the vulnerable and elderly  who are being taken for a ride '.      Many  MSE  members are internet savvy and shop around but there is still a technology underclass who don't have a computer  and  some who have the values of yesteryear and expect their Insurer will treat them fairly.    Some people will have been 'overpaying for years or even decades.

I do wonder  if the claims management companies will soon be  asking  '  have you been paying too much for your home insurance for the last  ten, twenty,  thirty years. or more  ? '

Sandtree

Interestingly they haven’t fully levelled the playing field and you can have channel specific pricing so non-internet users can be charged more still.

gordyp

Yahoo_Mail said:

Takmon said:

Another change that if successful will slightly reduce the price of people too lazy to do any kind of comparison but increase the price for people who make the effort to shop around. I don't see why the financially lazy should have their hand held with measures like this.

Precisely.  But then Martin was a big fan of getting rid of bank charges, which were not too dissimilar, the stupid subsidising the savvy.

convolvulus said:

@Sandtree
I take your point. But insurers will find some angle similar to the way mobile service providers did with roaming charges - a profitable element that escapes competitive pressure. Up till now that need has been fulfilled by renewal pricing. If that is taken from them they will innovate to find an alternative. Maybe there will be an increased excess if the house has been vacant for over 10 days, or something.

I guess they will also look to provide more portfolio products to cover house, cars, breakdown, kids at Uni, etc, with bundle discounts, until it becomes just too opaque or inconvenient to change provider.

OMG talk about petty. So you price around every year! Some don't for one reason or another. Big deal. Get over it.