The Financial Conduct Authority (‘FCA’) are investigating car insurers for ripping motorists off amid concerns that motorists are being fleeced by unclear and unfair pricing premiums.
Some of the issues raised include marital status and job titles creating spikes in premiums, young drivers being quoted premiums far in excess of their vehicle’s value and innocent parties involved in claims being penalised on future quotes.
Automatic renewal quotes by car insurers are seldom lower than the previous year’s quote, meaning consumers have to go through the whole rigmarole of using price comparison websites to try and get a competitive quote.
The issue here is that motorists are faced with increasingly vague and opaque pricing by car insurers in an industry-led cartel that is questionable and unfair, with no clear rationale for the decisions being made.
No-fault claims result in motorists being charged more simply due to bad luck and being in the wrong place at the wrong time, as algorithms suggest that they are more likely to submit another claim.
I have had 3 such claims in less than 6 years so whilst that may be true, it’s hardly my fault that careless and reckless drivers have pranged my car and admitted liability with their insurers paying out for all costs incurred. I am paying higher premiums now and I have over 30 years protected No Claims Discount (‘NCD’).
That leads me on to another con, which is the No Claims Discount alluding to up to 70% discount on premiums whereas in reality it can be as little as 10% if you didn’t have it.
Some of these pricing policies are discriminatory, which is evidenced by divorced and single individuals being quoted more than married people. There are various assumptions as to why this may be the case, although the insurance industry will not openly discuss it for fear of discriminatory action being taken.
Young drivers are being forced to install ‘black boxes’ which monitor their driving habits and style with future premiums being adjusted to reflect that.
Timing of renewing your car insurance also affects the premiums quoted, and industry sources suggest that 21 days before renewal is the cheapest time to get your car insurance.
If you buy it on the day it expires, you can expect to pay double the amount and premium quotes can be higher on a Saturday as more people are looking for quotes on that day.
Those that choose to seek quotes extremely early may end up paying more as they could be perceived as being overly cautious or a nervous driver, so anyone who renews their policy the moment they receive a renewal reminder will pay a higher premium.
BUDGET AIRLINE MODEL
These tactics are aligned to the budget airline model, although Churchill has data to evidence that a motorist is less likely to claim if they renew a policy well in advance. Nevertheless, it cannot be said that this is a fair and reasonable pricing policy.
A job title can also radically affect your premium, even though you may be doing the same job. This is illustrated by barbers being quoted about 30% more than hairdressers.
Quotes used to be based on a driver’s age, experience behind the wheel, no claims bonus, where they live and the type of car they drive. However, insurers are finding increasingly more sophisticated and opaque methods that require closer scrutiny.
Loyalty doesn’t pay and insurers have flexibility the same as any utility provider in offering discounts and waiving administration fees and other add-on cons that are used to extract as much money as possible from motorists.
I have spoken about how to encourage customer loyalty.
The nub of this is to shop around and use various price comparison sites 3 weeks before your premium expires, seek price matching quotes from other providers, be careful what occupation you state without lying and don’t look for quotes on a Saturday or late evening as the quotes will be higher regardless of your perceived risk.
What are your thoughts on car insurers being under investigation? Do you agree with the concerns raised? What else do you think the regulators should be looking at?