Motor Coinsurance

richiek

Not a question, just a bit of a rant really. I recently auto-renewed my motor policy with RAC. I meant to shop around but didn't....All emails from them pre- & post-renewal have landed in my mailbox no problem.
A week after renewal, I came across an email from them in my Junk folder. This explained that there had been a mistake with my renewal. Instead of a single insurer, there were two co-insurers. Perfectly valid I'm sure, & the email reassured that no action was needed by me.
However,it explained that  the two insurers held differing percentages of the risk and in the event that I had a claim & one of the companies was no longer up & running, the second insurer would only be covering their percentage of my claim.
I know it's highly unlikely that a company goes under & I have a claim, but I wasn't happy with that as even a remote possibility, nor with the way it was communicated. So I've cancelled my RAC polcy & moved to someone else. The operator asked why I was cancelling & I said I was unhappy with the coinsurance as per the email. She asked nothing else but cancelled for me, charging for the time on cover & a small cancellation fee. 
Can't help wondering if I'm the only one, or maybe I'm just fussy......

kaMelo

As far as I'm aware your contract for insurance would have been with RAC. Your cover would only be affected should the RAC fall into difficulty.  Who the RAC choose to underwrite the policy, and any problems those underwriters may have, would be RAC's problem to sort out rather than yours.
Could you be so kind as to copy the wording exactly regarding the co-underwriters and consequences of one of them failing. 

richiek

 Thanks for your response kaMelo. Here are two sections of my email:

"We need to inform you that your motor insurance policy documents have been issued incorrectly naming ‘Tradex Insurance Company Limited’ as the sole insurer of your policy, whereas there are two insurers for this policy. We

apologise for the oversight and can confirm that this will not affect your insurance cover or process for making a claim in any way. You do not need to do anything, although please read the information outlined below and

keep this with your policy documents."

"Your cover is provided by Tradex Insurance Company Limited (33.34% agreed share) and Accredited Insurance (Europe) Limited - UK Branch (66.66% agreed share) through a coinsurance arrangement with these parties, having agreed to cover a share of the costs should a claim arise. No individual insurer is liable for any amount beyond its agreed share but collectively your insurance cover will amount to 100%. If one of the insurers does not for any reason satisfy all or part of its obligations the other insurer will not be responsible for the defaulting insurer’s obligations."

The last two sentences caused my concern. Perhaps I have over-reacted, but finding this in 'junk' didn't help!

  

DullGreyGuy

Lots of insurance is written on a co-insurance basis with various levels of visibility... my business insurance says Glemham Underwriting but if you know much you can see they are an MGA not an insurer but instead the real insurance is shared by a few insurers like Amlin and Argo.

If you look at massive corporate policies, like insuring multi-billion pound property portfolios or art collections etc then rather than 1/3 & 2/3 as per your policy but insurers taking 1% or less share. This is what Lloyds of London and London Market insurance is all about.

Co-insurance works with there being a lead and then follow insurers. The Lead sets the price, manages the claims, issues the paperwork etc, the follows, as their name suggests, just follow. It's not like you have two different insurers and have to deal with both of them or that they may come to different decisions on the same claim etc. 

Its unusual to see it overtly in consumer insurance, more commonly you just get different insurers to different sections, but its fairly common slightly covertly when you have an MGA like Towergate Underwriting that have a number of insurers providing the capacity to them. 

kaMelo

After reading that I can understand the concern, it does give an impression of 'if it al goes belly up for one underwriter then tough" Although RAC are an intermediary they are not simply a broker. They are the policy administrator so your contract is with RAC rather than directly with the insurer (as would be with an old fashioned insurance broker)  At least that's how I understand it anyway.

Much like @DullGreyGuy, I thought co-insurance was for underwriting large risks, such as a cargo ship full of containers, It seems unusual for something as simple as a car insurance policy.

DullGreyGuy

If one insurer goes belly up you have the FSCS but unlike a more typical arrangement the belly up insurer only leaves you relying on the FSCS for 33% or 66% of your policy whereas ordinarily if your Motor insurer goes bust its 100% then onto the FSCS.

For compulsory insurance FSCS protection is 100%, for discretionary insurance its 90% so for motor, which is a blend of the two Third party claims are 100% and first party claims are 90% covered. 

Arguably as such you are in a better position than those with a solo insurer as your risk is spread.