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  • FIRST POST
    • MSE Guy
    • By MSE Guy 14th Dec 11, 8:56 AM
    • 1,628Posts
    • 1,255Thanks
    MSE Guy
    MSE News: OFT launches car insurance probe amid price hikes
    • #1
    • 14th Dec 11, 8:56 AM
    MSE News: OFT launches car insurance probe amid price hikes 14th Dec 11 at 8:56 AM
    This is the discussion thread for the following MSE News Story:

    "Fair trading chiefs today launched a study following big rises in premiums in recent years ..."

Page 1
    • Spiderham
    • By Spiderham 14th Dec 11, 9:21 AM
    • 323 Posts
    • 92 Thanks
    Spiderham
    • #2
    • 14th Dec 11, 9:21 AM
    • #2
    • 14th Dec 11, 9:21 AM
    Seems to me the initial findings of the last study is that premiums have increased because of more claims. It also seems to say that the pricing of insurance is fair and there isn't any funny business, but now moving on to (generally unregulated) service providers within industry to see if there is any customer-unfriendly activity there.

    Oh, and interesting to note rising PI claims is outside the scope of study, when that is the main driver. Maybe it's too easy to blame greedy insurers taking advantage then we can all scream at the bogeyman of referral fees without looking at deeper underlying reasons. Our PI rates are through the roof and I'm sure a significant minority are fraudulent, be that organised or trying it on, if we could fix that problem there would be huge scope for insurers to reduce premiums. They've (pretty much) shown the market is competitive so reduced costs in claims will lead to reduced premiums, the only problem is that current proposed ideas do remove access to justice and some innocent people will lose out on the ability to be properly compensated owing to affordability issues.

    Not sure what the answer is I'm afraid, but have to say this result doesn't surprise me at all.
    • kidcat
    • By kidcat 14th Dec 11, 9:30 AM
    • 6,042 Posts
    • 73,181 Thanks
    kidcat
    • #3
    • 14th Dec 11, 9:30 AM
    • #3
    • 14th Dec 11, 9:30 AM
    A massive problem is over inflating of repair costs by garages as well and insurance companies are aware of it but seem unwilling to address it. A few years ago I had a small collision with another car, she took her car to a local insurance approved repairer who quoted £250 for the repairs if I paid them directly, the claim then went through my insurance and the garage repair costs suddenly jumped to £1750. I contacted our insurance and provided details of the exact repair and the original quote to which they replied that it would cost them more to investigate each repair than it does to just accept and pay under £2000. Some garages know each companies threshold and will keep claims just under knowing they will get paid.


    • psyman17
    • By psyman17 14th Dec 11, 9:54 AM
    • 88 Posts
    • 77 Thanks
    psyman17
    • #4
    • 14th Dec 11, 9:54 AM
    • #4
    • 14th Dec 11, 9:54 AM
    I dont understand how motor insurance companies work out renewals. In 2010 my renewal quote was £982 up from £450. After shopping around I found someone offering to insure the car for about £420. This year my renewal was for £1120!. After shopping around again I got it down to £375.
    This is for a 10 year old car, worth £1500, full no claims & no changes to insurance details during the year. Anyone see any logic to this?
  • mikey72
    • #5
    • 14th Dec 11, 10:06 AM
    • #5
    • 14th Dec 11, 10:06 AM
    Seems to me the initial findings of the last study is that premiums have increased because of more claims. It also seems to say that the pricing of insurance is fair and there isn't any funny business, but now moving on to (generally unregulated) service providers within industry to see if there is any customer-unfriendly activity there.

    Oh, and interesting to note rising PI claims is outside the scope of study, when that is the main driver. Maybe it's too easy to blame greedy insurers taking advantage then we can all scream at the bogeyman of referral fees without looking at deeper underlying reasons. Our PI rates are through the roof and I'm sure a significant minority are fraudulent, be that organised or trying it on, if we could fix that problem there would be huge scope for insurers to reduce premiums. They've (pretty much) shown the market is competitive so reduced costs in claims will lead to reduced premiums, the only problem is that current proposed ideas do remove access to justice and some innocent people will lose out on the ability to be properly compensated owing to affordability issues.

    Not sure what the answer is I'm afraid, but have to say this result doesn't surprise me at all.
    Originally posted by Spiderham
    You'll have to put up the link to that.

    The last report was fairly accurate.

    1.7 The information we have gathered during the course of this call for evidence on both credit vehicle hire and insurers' repairer networks gives us reasonable grounds for suspecting that there are features of the market for the supply of private motor insurance in the UK are restricting and/or distorting competition. In particular we have found that:

    Private motor insurance companies responsible for meeting third party claims for credit hire replacement vehicles and/or vehicle repairs appear to have no choice over who provides the service to the claimant. They also appear to exercise only limited control over the costs that they have to meet, and appear to find it difficult to assess the extent to which the costs claimed are reasonable.

    Rival private motor insurers, brokers and credit vehicle hire providers may therefore have the opportunity, and the incentive, to exploit third party insurers’ lack of control over costs by carrying out practices which allow them to generate revenues through referral fees or rebates, while simultaneously inflating the costs that rival insurers have to meet. For example, insurance companies and others active in the private motor insurance market earn referral fees by referring drivers who have been involved in accidents to selected credit vehicle hire companies or certain repairers, neither of whose services may be most cost effective.

    Our key concerns are that the complexity of motor legal protection cover and the way that it is being sold may make it difficult for drivers to make an assessment of the product’s potential value. Further, consumers may not be fully aware that they can 'opt out' of buying this product. The OFT was also provided with data which indicated that some of the private motor insurance companies' claims ratios and combined ratios for motor legal protection cover tended to be significantly lower than for other products sold alongside standard private motor insurance, perhaps indicating that consumers are sometimes receiving poor value for money when purchasing motor legal protection cover.


    That's what started this investigation off.

    http://www.oft.gov.uk/shared_oft/markets-work/private-motor-insurance/Motor_Insurance.pdf
    • dunstonh
    • By dunstonh 14th Dec 11, 10:14 AM
    • 98,597 Posts
    • 67,050 Thanks
    dunstonh
    • #6
    • 14th Dec 11, 10:14 AM
    • #6
    • 14th Dec 11, 10:14 AM
    I dont understand how motor insurance companies work out renewals. In 2010 my renewal quote was £982 up from £450. After shopping around I found someone offering to insure the car for about £420. This year my renewal was for £1120!. After shopping around again I got it down to £375.
    This is for a 10 year old car, worth £1500, full no claims & no changes to insurance details during the year. Anyone see any logic to this?
    Year one discounting to get your business to hope you stay on in future years.

    The age and value of your car is largely irrelevant. For example, one of my cars is £65k and 12 months old but cost me £392 on insurance. If either you or I knock someone over and kill them and the resulting bill is £2 million, do you really think the value of the car is the main issue?

    Normally, I tend not to use the year one discounters having been with one that had consistent pricing instead. However, last year I went with one that did use the year one discount model and it was cheap then but nearly doubled in year two. And was able to nearly half it this year elsewhere. If you use the year one discount providers then you need to be prepared to shop around each year.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • kehall
    • #7
    • 14th Dec 11, 10:40 AM
    Arghrhgrhghahghrhgrhghaghrhgrhg!!!!
    • #7
    • 14th Dec 11, 10:40 AM

    Where's all this 12%, 9%, come from?

    Last 2 years my car insurance has gone up no less than 50% from £400 to £600, despite lowering the annual mileage to 2000, change to a lesser-risked class of employment, and increased voluntary excess to £800, with no other changes, no claims, full NCD, 19 years faultless driving. The area isn't a crime hotspot either. That premium also was the cheapest by far on all comparison sites (next highest was 700 odd).

    When I asked the insurer why on the first major 25% increase (400-500) in 2010, they said it's because the interest rates are so low so they aren't getting the same amount of interest on the 'stored premiums'!!!!!!! So they pass the cost on... and thats only part of the issue!

    Nothing I pay reflects my circumstances or driving history at all.

    It's a total scam based on nasty statistics. I'm sure it used to be based more on your personal situation and history than it is now.

    I hope something is done about it very quickly, and these ambulance chasers, referral fees and things. People should ONLY be able to claim damages if they absolutely WILL HAVE suffered those costs. Too often I hear of people getting X thousand for a minor shunt (car easily repairable) and there's nothing really that wrong with them, but they're actively encouraged to by their 'no win no fee' lawyers (obviously as they get a cut)... It's a digusting practice and those involved should be disgraced.

    Of course everyone is paying higher now and probably think 'well I should get some of my money back then' if they have a claim situation but that's just a self-fulfilling prophecy.

    As much as I hate regulation there should be regulation on this as it's clearly got out of hand.

    ARGHRHGHGRHG!!!
  • Narc
    • #8
    • 14th Dec 11, 10:47 AM
    • #8
    • 14th Dec 11, 10:47 AM
    I don't have hard evidence but have been told that most make their money from investing the money from premiums, the economy tanked so they ask for more to keep their profits up.

    In such a competitive industry premiums should not be spiralling out of control. The next trick that will run across the board is getting rid of third party insurance or making it prohibitively expensive.
    Last edited by Narc; 14-12-2011 at 10:49 AM.
  • mikey72
    • #9
    • 14th Dec 11, 10:52 AM
    • #9
    • 14th Dec 11, 10:52 AM
    Year one discounting to get your business to hope you stay on in future years.

    The age and value of your car is largely irrelevant. For example, one of my cars is £65k and 12 months old but cost me £392 on insurance. If either you or I knock someone over and kill them and the resulting bill is £2 million, do you really think the value of the car is the main issue?

    Normally, I tend not to use the year one discounters having been with one that had consistent pricing instead. However, last year I went with one that did use the year one discount model and it was cheap then but nearly doubled in year two. And was able to nearly half it this year elsewhere. If you use the year one discount providers then you need to be prepared to shop around each year.
    Originally posted by dunstonh
    At least something has rubbed off on you, if we've managed to get you shopping around at renewal.
    (You really must be in insurance though, if you can buy a 65k car)
  • Bill Badger
    Insurance companies not ethical
    My wife was recently involved in a light accident where another driver ran into the back of her. Both cars were 10 years old and it was at that time undecided whether we would claim. Just to be on the safe side, I contacted our insurer (More Than), to say what had happened and that my call was only for notification purposes and not at that time a claim. The lady taking the call accepted this. However, ten minutes later we had a call from India or somewhere telling us that they were appointing a solicitor for our claim. I pointed out that we had not made a claim but merely notified them of the incident. 30 minutes later, and we had a call from a company of solicitors in Liverpool...............! This is why the costs are going up - they are all passing information on to each other in the hope that we go for the old 'whiplash' or back injury.

    I wish I hadn't made the call, but then if I needed to at a later date they would have asked why I hadn't told them earlier......
    • Spiderham
    • By Spiderham 14th Dec 11, 11:40 AM
    • 323 Posts
    • 92 Thanks
    Spiderham
    You'll have to put up the link to that.
    Originally posted by mikey72
    I just used the link in OP and this http://www.insurancetimes.co.uk/oft-starts-vehicle-repair-and-credit-hire-probe/1394131.article also this has just been put on insurance times site http://www.insurancetimes.co.uk/abi-welcomes-oft-credit-hire-focus/1394139.article

    Have only read Janet and John reports in press, not report yet so thanks for link. Have a day off today so may well have a little browse through later.
    Last edited by Spiderham; 14-12-2011 at 11:46 AM.
  • mikey72
    That refers to the oft link I put in, so maybe we have different views of the same report.
    • Spiderham
    • By Spiderham 14th Dec 11, 12:00 PM
    • 323 Posts
    • 92 Thanks
    Spiderham
    That refers to the oft link I put in, so maybe we have different views of the same report.
    Originally posted by mikey72
    Only read the MSE article blurb.

    As I said, a lot of the issue is around the handling third party claims, where you have credit hire and Claims Management Companies involved, which was followed by a (to my mind silly) view for insurers of "what's good for the goose is good for the gander" where they operate similarly. Attitudes have been that if someone is going to get these fees it might as well be their insurance Co. This has led to increased claims cost, premiums themselves, as far as I've seen, are not suggested to be themselves at excessive profit levels.

    The issue is partly that people are more likely to get their full legal entitlement from the other side, add to that dodgy claims and that sends the costs through the roof.

    As I said, I think it's of interest to note that the premiums themselves are seen by the OFT to be high because of these claims factors not excessive fat being built in (legal expenses insurance aside). Kickbacks do help insurance cos, but probably a lot less than the cost of the outgoings from other parties' claims and it is in these unregulated industries the problem stems.

    Question is, how does it get fixed. Anyone have any sensible suggestions?
  • Arg
    Ignore insurance altogether and rely on your basic right to travel.
    • Spiderham
    • By Spiderham 14th Dec 11, 2:41 PM
    • 323 Posts
    • 92 Thanks
    Spiderham
    Ignore insurance altogether and rely on your basic right to travel.
    Originally posted by Arg
    But obviously ignore both your liabilities in case of an accident per law of tort and indeed your obligation under the Road Traffic Act to have cover in case of "injury" to a third party?

    I refer you to the penultimate word of my post.

    Of course you can opt out of insurance by depositing £500,000 with the government for each vehicle http://www.legislation.gov.uk/ukpga/1991/40/section/20
    • vaio
    • By vaio 14th Dec 11, 4:01 PM
    • 11,895 Posts
    • 8,840 Thanks
    vaio
    http://www.telegraph.co.uk/finance/yourbusiness/8955539/Car-premiums-artificially-high-admits-insurer.html
    • chanz4
    • By chanz4 14th Dec 11, 4:20 PM
    • 10,045 Posts
    • 2,988 Thanks
    chanz4
    Simple way of getting cheaper insurance, stop using credit hire and go back to the old days of using local hire car firms. £160 a week for a corsa. PI most people milk it, it was not even heard of 10 years ago.
    Don't put your trust into an Experian score - it is not a number any bank will ever use & it is generally a waste of money to purchase it. They are also selling you insurance you dont need.
    • vaio
    • By vaio 14th Dec 11, 9:24 PM
    • 11,895 Posts
    • 8,840 Thanks
    vaio
    which is fine if you can afford it, a better idea would be for at fault companies to pro-actively supply replacement cars or even every policy automatically provides a replacement car regardless of fault
  • Arg
    But obviously ignore both your liabilities in case of an accident per law of tort and indeed your obligation under the Road Traffic Act to have cover in case of "injury" to a third party?

    I refer you to the penultimate word of my post.

    Of course you can opt out of insurance by depositing £500,000 with the government for each vehicle http://www.legislation.gov.uk/ukpga/1991/40/section/20
    Originally posted by Spiderham
    What liabilities under tort would that be,should I be worried about getting shoe insurance incase I run over someone while dashing for the train?
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