January 23, 2014

So confusing is the UK motor market that even the FT is confused. Specifically what appears to be confusing the nation’s pinkest financial paper is its curious willingness to take seriously the seemingly random findings of indices like the Confusing-Towels What’s On Up-Down Index and the Alcoholics Anonymous Premium Price Plotter Thingy.

Nor is it just the FT. Investors got all excited a few days back when Confusing-Towels’ figures appeared to suggest that price competition might be cooling off – only to slump back deflatedly into the proverbial slough of despond when the AA released figures suggesting precisely the opposite. Only more so.

The AA reckon insurance prices fell almost 5% during the last quarter of 2013, contributing to a 14% drop over the year as a whole, the steepest rate of descent since the very dawn of recorded time (see Figure B) when primitive tribes herded musk ox and mammoths over cliffs. Regrettably, it now appears such indices may soon face competition in response to of mounting doubts over their impartiality/reliability/making any sense whatsoever.

“The Association of British Insurers,” the FT predicts, “ will unveil plans next week to publish a new Quarterly Motor Premium Tracker, amid concerns that those compiled by third parties overstate the costs.The ABI said it was responding to mounting ‘political and consumer interest in the cost of motor insurance’. Unlike other indices, the ABI’s price monitor will capture premiums for consumers who stick with their existing insurer.”

Who knows whether such a whimsical methodology will ever catch on in practice.

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Figure B


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