End of the road for shopping around?

December 20, 2018

Unsure whether or not it should take a dim view of insurance providers charging loyal customers more than disloyal ones, regulator the Fanatical Crackdown Authority (FCA) decided to ask the audience.

Exploitation

An exhaustive survey of sentiment among purchasers of insurance products has now revealed that roughly half such persons consider the practice (jewel pricing, as it is known, for some obscure reason) ‘exploitative’.

Indeed, almost four out of five insurance buying persons (so not just the ones who think jewel pricing is exploitative) believe the practice should be outlawed.

But a ban might not please everyone. Slightly worryingly, 38% of survey respondents said they actually ‘enjoy’ shopping around for their insurance – while fewer than one in five said they couldn’t be arsed comparing prices.

Sneaking admiration

But it’s a devious and cynical world we live in these days, Readers. Around 40% of respondents said that, whilst it might be ‘sneaky’ ripping off loyal customers, they view it with a certain grudging respect.

Maybe ‘ripping off’ is the wrong way of looking at it. Ian Huge, CEO of survey-mongers Consumer Intelligence, believes that – far from being the villains of the piece – insurers deserve our sympathy.

Vicious circle

Jewel pricing, he suggests, is “not a deliberate and calculated attempt to rip off loyal customers.” It’s more of a technical thing – what you might call “a by-product of having introductory rates in a market with high customer turnover.”

Insurers, Mr Huge argues, are stuck on a sort of a “merry-go-round”. They’d love to get off, he says. But if they started charging everyone the same price, they’d lose business to insurers who had yet to dismount from the merry-go-round.

December 20, 2018

Disruption is all the rage these days. Trump does it. Putin does it. We’re even dipping a hesitant toe in it ourselves here in Blighty, with this Brexit thingy we’re supposed to be doing at some point.

Not to be left out, big yellow insurance firm Uvavu is planning to disrupt the insurance market. Its chosen methodology is the offering of ‘subscription-style’ insurance products.

Uvavu claims its disruptive new insurance product UvavuPlus anticipates the forthcoming crack-down on so-called duel pricing (see separate story) with some kind of promise not to put the price up when you renew your subscription.

It also banishes other soon-to-be-stamped out shenanigans like charging people shedloads to cancel or amend their policy. Miraculously, UvavuPlus is also reportedly immune from Insane Punishment Tax (IPT). It can even jumble up your home and motor insurance in one convenient parcel.

But if you, like Bankstone News, were thinking something like ‘Golly, that sounds great. I think I’ll pop along and ask my friendly insurance broker about hooking me up with some UvavuPlus!’, I’m afraid there’s bad news.

You see, UvavuPlus is what’s known as a ‘direct’ product (the kind pioneered by legendary disruptor of yore Pete Wood). That means it’s great for people who don’t like buying annual insurance policies or being ripped off in any of the ways noted above. Rather less so for insurance brokers, who for some reason have always seemed to quite like being involved in the buying and selling of such annual insurance policies.

With the best will in the world, Uvavu man Phil Boils admits reluctantly, it’s going to be awfully hard to find a way of involving his friends in the broking community in the sale of UvavuPlus. Obviously, they’re happy to give it a go and everything. But, the thing is, what with it being a bit complicated and, you know, having to work with software houses and everything, it’s hard to see how middlemen, or brokers as we prefer to call them, wouldn’t just get in the way.

And, let’s be honest, finding some way of cutting brokers in on the deal is one challenge UvavuPlus can probably do without. Seeing as Uvavu are planning to sell it to new and old customers at the same price (whilst still, presumably, competing with products more inclined to the old loss-leading-in-year-one approach) and seeing also as they won’t be making money every time this intentionally flexible policy gets updated or unsubscribed from, it’s hard to see how they’ll make any money at all.

Or maybe they’re aiming for market share.

In any case, as far as Bankstone News is concerned, you can simply never have too much disruption.

Because, let’s face it, things have been the same way basically for ever. Nobody likes the old way. Old ways are bad ways! We want a new and better way. And, if it turns out there are problems with the new way, then at least the old ways have been well and truly cleared away and there’s plenty of room for more new ways, one of which is bound, eventually, to be better than the old one. It can hardly be worse, really, can it!

Things… can only get better, as that weird little grinning chap with the sweaty ears used to say.

December 20, 2018

The insurance industry’s hopes of earning so much as the meagrest of crusts from all its diligent endeavours receded still further this week as grim tidings broke that do-gooders’ whinge-forum The Competitors and Meerkats Authority (CMA) is egging on regulatory body the Final Countdown Authority (FCA) to ‘consider pricing intervention’ to prevent a variety of supposed injustices meted out to ‘poor long-suffering’ customers by ‘evil, scheming’ insurance firms.

You’re right, of course, Dear Reader: it’s snowflakey salty-teared political correctness gone mad in spades to the nth degree. Companies have the right to treat their customers any goddam way they choose. Customers have the right to take their business elsewhere. That’s as far as consumer rights have any right going. Anyone who tries to tell you different is no better than a rotten stinking communist.

It’s all the EU’s fault, if you ask Bankstone News. If it wasn’t for unelected Brussels bureaucrats (bureau-rats, we call them!), people like so-called Citizens Advice would soon be driven back into the fetid depths of whatever filthy liberal cave-world they crawled out off. It was their so-called Super Complaint about insurance providers (quite rightly) penalising customers too stupid to switch (see separate story) that got the CMA – and hence the FCA – involved in the first place. Now the whole thing’s gotten completely out of hand.

Doubtless you’ll recall, the horrible hand-wringing fuss Citizens Advice made recently about twelve million supposedly vulnerable non-switching policyholders getting stung by ‘shady’ practices like YoY price cranking, over-rolling and egress-fleecing. Basically, it’s a whole lot of fuss about nothing.

And of course, no sooner had Citizens Advice kicked off and set the ball rolling than, in a scene reminiscent of that famously ludigenerative incident on the playing fields of Rugby College back in days of yore, the CMA picked up that ball and began running, with both it and alacrity. CMA chief exec Andrex Cushelley claims to have “uncovered a range of problems which leave people feeling ripped off, let down and frustrated.”

Awww, it’s enough to make a faint-heart bleed!

Andrex thinks people shouldn’t have to be “constantly on guard” or spend hours “searching for a good deal”.

So, what, they should have some super-competitive zero-profit-margin bargain handed to them on a gilded platter every year? Insurers are supposed to get behind some busybodied crusade aimed at stopping them ‘exploiting’ their own customers? Never going to happen. And never should it, for that matter!

If the FCA has any sense at all, it will take a stand against such pernicious and corrosive nonsense.

Much more of this anti-competitive intervention from on high and we’ll be driven back to the bad old days of mutual societies and communal risk pooling.

Ugh.

December 20, 2018

It’s a little known fact that – along with answering telephones under other people’s names and sorting things out when people drive their vehicles into stuff, Bankstone also has a specialist consulting division providing next-level counsel on bafflingly complicated issues to discerning consumers of Jedi-class insight.

In a world grown weary of experts, of course, Bankstone Consulting Group occasionally has some time on its hands. In one such recent idle moment, the BCG team ran some numbers to test the validity of HMG’s repeated insistence that the Civil Liability Act will save motorists an average £35 per head per annum – always assuming, as we surely can, that insurers pass on the savings they’ll make from the abolition of whiplash, trifling insurance claims etc.

BCG’s disturbing conclusion is that the net effect of the CLA may not be precisely as your government has represented it. Far be it from Bankstone News to question the word of Mrs May and her team (assuming it’s still her when you read this). We’re simply reporting what we’ve been told by BCG chief consultant Diphthong Python. And, frankly, he’ll question anything. Or anyone, for that matter. Mad Dog Python, they call him.

From what we could make of the bewildering blather of stats he recently sprayed us with, the flaw in HMG’s assumptions is as follows. Only around 30% of motoring individuals in the UK currently purchase legal expenses policies, for which they typically pay around thirty quid. This modest level of take-up stems from most motorists’ expectation that if they get pranged up and need a lawyer, they can hire one on a no-win-no-fee basis.

But that won’t happen once we’re into the brave new world of CLA. Why? Because 95% of personal injury claims won’t top the £5k small claims limit, so there’ll be no fee there to be had. So, unless you’re planning to pay your own legal fees or represent yourself, or some such nonsense, you’ll need a legal expenses policy from now on. In future, in other words, we’ll all need leg-ex policies.

If you’re already one of those prudent belt-and-braces types who likes to purchase a legal expenses policy – or routinely gets talked into it by some persuasive person with a commission to earn – you’ll be staring down the barrel of a £15 price hike.

Why? (Must you keep asking that?) Because the price of legal expenses policies is currently subsidised by income from personal injury claims – income that won’t be there in a post-CLA universe in which small PI claims will magically transform into uninsured loss claims by dint of their failing to clear the £5k limit.

The net effect will be as follows:

Current leg-ex customers (30% of motorists) will pay £15 more per annum
New leg-ex customers (70% of motorists) will pay £45 (more) per annum

You do the maths – or use one of those new-fangled difference engine thingies to do it for you – and that means the average motorist will be paying £36 pounds more a year.

Ergo, the net impact of CLA will be a £1 increase in motorists’ insurance costs. It’s almost as though our government a) hasn’t thought things through, or b) isn’t really enacting CLA for the benefit of decent ordinary law-abiding UK motorists.

Surely that can’t be right, you’re probably thinking. Coincidentally, that’s what most BCG clients say when presented with one of their so-called ‘reports’. But what if – on the analogy of the famous stopped clock – just this once, the BGC boffins were actually on to something.

Steep in that, Folks.

What sort of a world would that mean we were living in?!

 

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