So how do insurers work?

[Spuff]

I think it's fairly well established and has been discussed on here that many insurers have put an annual premium up for an existing customer whereas a new customer can get the same policy for much less.

It happened to me this week - a renewal for Home insurance with Bradford and Bingley comes through at £480 (up 30% on previous year). A quick comparison site search and the same policy is available from B&B for £175 less!!

Is this business model in the insurance industry just one of simple maths i.e. enough people will stick at the £480 rate to compensate for losing those customers that shop around? And looking at the bigger picture, assuming there are a relatively constant number of insurers, they all lose and acquire customers at a similar rate?

I just find it puzzling that they would spend so much on advertising/marketing to acquire customers in the first place but then are not bothered if they lose them.

 

[zeugma]

I guess they regard the "introductory rate" as a loss leader to be recouped on renewals, hoping that the many will swallow it rather than "provider surfing".

 

[Willid1]

I shopped around for my car insurance this year as I was un happy with my renewal quote and found quite a few cheaper quotes.

I then called my existing insurer with the figures I had (having been careful to compare like with like) and surprise surprise they were able to give me a discount which took the renewal pretty much to the cost I had been quoted elsewhere for new business.

Pleased I got the deal, but why should I have to do that every year - which I will do.

I think I saved about £130, enough for a weekend away

David

 

[trencheel303]

Its a ridiculous business practise, can't stand it myself. Admiral were on watchdog for this very thing, and when they called the boss in he basically ummed and arred and avoided every question Anne asked him. Capitalist pigs!

 

[Ragwort]

I guess they regard the "introductory rate" as a loss leader to be recouped on renewals, hoping that the many will swallow it rather than "provider surfing".

My home insurer offered an introductory rate that was well below what they wanted as a renewal. It was for new customers only, and only if applied for on-line.
I cancelled my insurance just hours before renewal, and then started a new policy with them.

Saved myself a few hundred pounds.

 

[v8moneypit]

It is, as suggested, a case of fishing..... once hooked, many customers won't bother looking around at renewal time. It's simple business. One company offers a start up deal, so others have to do similar to compete. Before you know it, it becomes standard practice.

Ultimately, it exists because consumers can't be bothered to shop around. If everyone did so, the premiums would all find a natural, competitive, level.

 

[hglossop]

You don't even have to shop around to get a better deal, if you wanted to stay with the same insurer you can usually get a quote from their website, call them up and ask for that price for renewal.

they just bump up their renewal prices because some people don't bother looking and just let it auto renew - making them money.

 

[Spuff]

Pleased I got the deal, but why should I have to do that every year - which I will do.

And that's pretty much the point - why should you have to do this almost every year. Multiply it by a couple of cars and home insurance, renewing at different times and it's a PITA.

With my recent Bradford & Bingley renewal, the letter said "the best price from our panel of insurers is £480". So there's no way I'm going to stick with them when they turn round and offer £305 via one of the comparison sites.

And then there's the comparison sites....

Go Compare 49% owned by eSure (which also owns Sheila's Wheels etc)
Confused.com owned by Admiral Group (elephant, Bell, Diamond etc)
Comparethemarket owned by BISL Ltd - Budget insurance, Bennets etc

All comparing their own and each others made up products!

Oh, and BISL Ltd is the intermediary for....Bradford & Bingley (amongst a million and one others).

I sometimes wonder whether there is in fact just one insurer....a little man in a one room office somewhere with a big computer and hundreds of different logos.

Wasn't it easier in the old days when you just went through a broker and the price went up by 5% each year but that was OK and you they knew you by first name and remembered your car and you spoke to Bob who'd worked there for 30 years and you didn't have to listen to a recorded message about fraud or the FSA and how you might be recorded for training porpoises (how dolphins can benefit I don't know).....I'm getting old

 

[gstanley]

Some Insurers most of the time expect people to be lazy and not shop around hence not finding the cheaper price from them.

It is ridiculous that a lot of insurers do not respect loyalty

And I work in home/motor insurance

(the company I work for actually do respect loyalty by the way)