MSE News: Car and home insurers to be banned from charging existing customers more than newbies

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  • naedangernaedanger Forumite
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    Sandtree said:
    naedanger said:
    kaMelo said:
    naedanger said:
    daveyjp said:
    Go back 30 years, buying insurance was a pain. It was a broker, or a dozen phone calls to get a price, it took hours.

    The insurance market is now one of the most open, free markets we have.  Comparing prices is easy, deciding which one to go with is easy, changing providers is easy.

    If people are happy to pay for being lazy good for them, I am not lazy, I shop around so I shouldn't have to pay an apathy payment.

    I am glad things have got easier over the last 30 years, and this change means things will get easier still.
    Why will it get easier? Staying put is still unlikely to get the best price even after this is brought in.

    I don't condone price gouging but seriously, it has never been easier to save money on energy, insurance, phone/broadband etc.all the tools are available yet there is always a constant stream of people whining about their situation but not prepared to help themselves out of it.
    It will get easier because I won't need to switch so often because normal competitive pressures will be at play. (I won't bother switching if my existing provider remains reasonably competitive, provides me with a reasonable service and, as far as I can tell, retains a reasonably good reputation.)
    Your premium can still become highly uncompetitive. If your insurers decide they don’t like your car or postcode any more they can still ramp your premium to high levels just as long as they are doing the same to new businesses. 

    What could be interesting is if a large multi brand company decided to make certain brands a true cash cow. Intentionally over price new business to enable them to further increase the back book prices accepting little new business coming in as a consequence  
    I am only saying that I think I will need to switch less often, not that I will never need to switch. 
  • AretnapAretnap Forumite
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    Sandtree said:
    blueste said:
    I do wonder if this is going to result in higher prices for those of us that always shop around and switch?
    The regulator has predicted it is likely that it will but that on balance its better to do that and protect vulnerable customers from funding those lower prices.
    ISTR at least part of the reasoning was that it's anti-competitive, wasn't it?

    As in, large established insurers have already built up a bank of renewing customers paying fairly profitable premiums, which they can use to subsidise losses they make on offers to new customers.

    Whereas new entrants to the insurance market have no established customers, so to be competitive they have to essentially accept a loss on every customer they take on in the first year or so. Meaning that new insurers have to be able to burn money for the first few years, massively increasing the cost of entry to the market.

    That reasoning would seem stronger to me though if insurance was an oligopoly with a handful of big players making massive profits. It's actually pretty competitive already, so there must be diminishing returns for the consumer in making things easier for new entrants... 
  • kaMelokaMelo Forumite
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    naedanger said:
    Sandtree said:
    naedanger said:
    kaMelo said:
    naedanger said:
    daveyjp said:
    Go back 30 years, buying insurance was a pain. It was a broker, or a dozen phone calls to get a price, it took hours.

    The insurance market is now one of the most open, free markets we have.  Comparing prices is easy, deciding which one to go with is easy, changing providers is easy.

    If people are happy to pay for being lazy good for them, I am not lazy, I shop around so I shouldn't have to pay an apathy payment.

    I am glad things have got easier over the last 30 years, and this change means things will get easier still.
    Why will it get easier? Staying put is still unlikely to get the best price even after this is brought in.

    I don't condone price gouging but seriously, it has never been easier to save money on energy, insurance, phone/broadband etc.all the tools are available yet there is always a constant stream of people whining about their situation but not prepared to help themselves out of it.
    It will get easier because I won't need to switch so often because normal competitive pressures will be at play. (I won't bother switching if my existing provider remains reasonably competitive, provides me with a reasonable service and, as far as I can tell, retains a reasonably good reputation.)
    Your premium can still become highly uncompetitive. If your insurers decide they don’t like your car or postcode any more they can still ramp your premium to high levels just as long as they are doing the same to new businesses. 

    What could be interesting is if a large multi brand company decided to make certain brands a true cash cow. Intentionally over price new business to enable them to further increase the back book prices accepting little new business coming in as a consequence  
    I am only saying that I think I will need to switch less often, not that I will never need to switch. 
    Checking your car insurance is a once a year event.
    There are over 525,000 minutes in one year, surely spending 15 of those is doing so is not exactly a taxing event.
    This is why it irks me that some complain they simply haven't got the time or have way better things to be doing in their lives when it probably took longer to whine about not having the time to do it.

  • naedangernaedanger Forumite
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    kaMelo said:
    naedanger said:
    Sandtree said:
    naedanger said:
    kaMelo said:
    naedanger said:
    daveyjp said:
    Go back 30 years, buying insurance was a pain. It was a broker, or a dozen phone calls to get a price, it took hours.

    The insurance market is now one of the most open, free markets we have.  Comparing prices is easy, deciding which one to go with is easy, changing providers is easy.

    If people are happy to pay for being lazy good for them, I am not lazy, I shop around so I shouldn't have to pay an apathy payment.

    I am glad things have got easier over the last 30 years, and this change means things will get easier still.
    Why will it get easier? Staying put is still unlikely to get the best price even after this is brought in.

    I don't condone price gouging but seriously, it has never been easier to save money on energy, insurance, phone/broadband etc.all the tools are available yet there is always a constant stream of people whining about their situation but not prepared to help themselves out of it.
    It will get easier because I won't need to switch so often because normal competitive pressures will be at play. (I won't bother switching if my existing provider remains reasonably competitive, provides me with a reasonable service and, as far as I can tell, retains a reasonably good reputation.)
    Your premium can still become highly uncompetitive. If your insurers decide they don’t like your car or postcode any more they can still ramp your premium to high levels just as long as they are doing the same to new businesses. 

    What could be interesting is if a large multi brand company decided to make certain brands a true cash cow. Intentionally over price new business to enable them to further increase the back book prices accepting little new business coming in as a consequence  
    I am only saying that I think I will need to switch less often, not that I will never need to switch. 
    Checking your car insurance is a once a year event.
    There are over 525,000 minutes in one year, surely spending 15 of those is doing so is not exactly a taxing event.
    This is why it irks me that some complain they simply haven't got the time or have way better things to be doing in their lives when it probably took longer to whine about not having the time to do it.

    I am not saying it is a taxing event but it is even less taxing if I can stick with my existing insurer.
  • Grumpy_chapGrumpy_chap Forumite
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    What could be interesting is if a large multi brand company decided to make certain brands a true cash cow. Intentionally over price new business to enable them to further increase the back book prices accepting little new business coming in as a consequence  
    If Company A decided to increase the premium on all Brand X cars, so new and repeat business can be inflated, I am sure a sufficient number of people owning the cars would notice the high jump in premiums and then go to the market and get competitive cover from Company B insurance. 
    The "cash cow" outcome would only arise if all insurers acted in a similar way (cohort).
    That would then crash sales of Brand X cars and the likely outcome is Brand X offering cars plus their own insurance product.

    I suspect, in any case, that insurers will find ways around this through suitably inventive marketing gimmics - cash back, free teddy bear, etc.
  • AretnapAretnap Forumite
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    What could be interesting is if a large multi brand company decided to make certain brands a true cash cow. Intentionally over price new business to enable them to further increase the back book prices accepting little new business coming in as a consequence  
    If Company A decided to increase the premium on all Brand X cars, so new and repeat business can be inflated, I am sure a sufficient number of people owning the cars would notice the high jump in premiums and then go to the market and get competitive cover from Company B insurance. 
    Not sure why you'd think that. If most people noticed that their renewal premiums were uncompetitive and flocked to comparison sites, there would be no need for the new regulations in the first place.

    I took Sandtree to be referring to companies like Admiral who run multiple brands. They could price, say, Elephant Insurance highly, accept that they're not going to get many new Elephant customers, but use the existing bank of Elephant customers to subsidise Diamond. Then in a few years when the number of Elephant customers has dwindled, raise the prices for Diamond and cut them for Elephant. Rinse and repeat.

    You don't even necessarily need different brands. Just have lots different types of policy with very slightly different levels of cover - Admiral Premium, Admiral Superior, Admiral Basics, Admiral Essentials, Admiral Value etc etc, and rotate which one you're offering promotional prices on (or promoting full stop) this year.

    But doing it by car brand would also work. Notice that you don't insure many Fiestas so cut your prices for Fiestas. Next year put them up again but cut prices for Golfs. If you wanted to be even less subtle you could rate postcode AB12 CDE really cheaply. Next year decide that it's actually quite a high risk postcode after all, but cut the price for AB12 CDF round the corner where coincidentally Mr Smith has just cancelled his renewal.

    I imagine the FCA regulations will include some measures to stop some of the more blatant gaming of the system that I've just described. However I also imagine that cleverer people than me will be able to think of more subtle ways of doing it. 
  • Grumpy_chapGrumpy_chap Forumite
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    Aretnap said:
    What could be interesting is if a large multi brand company decided to make certain brands a true cash cow. Intentionally over price new business to enable them to further increase the back book prices accepting little new business coming in as a consequence  
    If Company A decided to increase the premium on all Brand X cars, so new and repeat business can be inflated, I am sure a sufficient number of people owning the cars would notice the high jump in premiums and then go to the market and get competitive cover from Company B insurance. 
    Not sure why you'd think that. If most people noticed that their renewal premiums were uncompetitive and flocked to comparison sites, there would be no need for the new regulations in the first place.

    I took Sandtree to be referring to companies like Admiral who run multiple brands. They could price, say, Elephant Insurance highly, accept that they're not going to get many new Elephant customers, but use the existing bank of Elephant customers to subsidise Diamond. Then in a few years when the number of Elephant customers has dwindled, raise the prices for Diamond and cut them for Elephant. Rinse and repeat.

    You don't even necessarily need different brands. Just have lots different types of policy with very slightly different levels of cover - Admiral Premium, Admiral Superior, Admiral Basics, Admiral Essentials, Admiral Value etc etc, and rotate which one you're offering promotional prices on (or promoting full stop) this year.

    But doing it by car brand would also work. Notice that you don't insure many Fiestas so cut your prices for Fiestas. Next year put them up again but cut prices for Golfs. If you wanted to be even less subtle you could rate postcode AB12 CDE really cheaply. Next year decide that it's actually quite a high risk postcode after all, but cut the price for AB12 CDF round the corner where coincidentally Mr Smith has just cancelled his renewal.

    I imagine the FCA regulations will include some measures to stop some of the more blatant gaming of the system that I've just described. However I also imagine that cleverer people than me will be able to think of more subtle ways of doing it. 
    Aaah, yes.  That's a different interpretation of Sandtree's comments and probably makes more sense.

    InsureCo sells under brand Car 2021, then next year Car 2021 can charge whatever but new customers offered competitive quote under brand Car 2022.

    This legislation is perhaps tinged as part of the message it sends is that there will be less need to shop at each renewal.
  • SandtreeSandtree Forumite
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    What could be interesting is if a large multi brand company decided to make certain brands a true cash cow. Intentionally over price new business to enable them to further increase the back book prices accepting little new business coming in as a consequence  
    If Company A decided to increase the premium on all Brand X cars, so new and repeat business can be inflated, I am sure a sufficient number of people owning the cars would notice the high jump in premiums and then go to the market and get competitive cover from Company B insurance. 
    The "cash cow" outcome would only arise if all insurers acted in a similar way (cohort).
    That would then crash sales of Brand X cars and the likely outcome is Brand X offering cars plus their own insurance product.

    I suspect, in any case, that insurers will find ways around this through suitably inventive marketing gimmics - cash back, free teddy bear, etc.
    As @aretnap says, I was considering those with many different brands where they can sacrifice the new business of one to become a cash how but remain competitive on others to secure new business and so as a group be better off.

    Aretnap said:
    That reasoning would seem stronger to me though if insurance was an oligopoly with a handful of big players making massive profits. It's actually pretty competitive already, so there must be diminishing returns for the consumer in making things easier for new entrants... 

    I am not convinced the argument was really about new entrants but was more a poor excuse to rationalise the acceptable negative outcome to a significant number of customers that would also could be labeled as vulnerable... their paper states its better for customers as a whole if all pay a fair price rather than some pay a higher price and some pay a lower price than the base technical premium. 

    It will be interesting when the technical papers are released and how they intend to factor in things like propensity modelling etc... where I adjust your premium not because of the risk you represent but based on my views of your pricing sensitivity or probability to stick around for a few years. 

    naedanger said:
    I am only saying that I think I will need to switch less often, not that I will never need to switch. 

    For the many people they will continue to need to switch each year to get the best deal; just staying put won't be as bad deal as it has been.

    To be honest, the new rules best favour someone like me who has particular needs only serviced by a tiny number of providers and so can now be lazy and know it'll make little difference. For those with more orthodox requirements that everyone is wanting to attract they still need to shop around each year.
  • MrFrugalFeverMrFrugalFever Forumite
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    In all reality we will most likely all see a small rise in premiums purely because there are far too many variables involved to even consider disputing it.

    the chances of somebody having the exact same car, job, doing the exact same mileage, with the car having the exact same market value in the same address area is just so marginal.

    in truth, these insurance companies can charge what they like because their whole defence lies on a string of algorithms to determine risk which cannot be disputed easily at all because each case is uniquely individual.

    everyone with any form of financial savvy will want the best and cheapest deal, with comparison sites allowing us to work out what this is, we will still continue to use them and switch because it matters not about renewing for loyalty as often there is no loyalty by them - BAU I reckon.
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  • SandtreeSandtree Forumite
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    In all reality we will most likely all see a small rise in premiums purely because there are far too many variables involved to even consider disputing it.
    The regulator will easily be able to check insurers are following the rules, same way they did when gender was banned as a rating factor.
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