New regulation on car insurance (good news?)

[BUDFORCE]

I got an email from my ensurer today.

Apparently from 1st Jan 2022 you insurance company will need to provide you the best renewal they can regardless on whether you are a new customer or not.

This is good news if this is true and same for all insurers.

It always seems pointless to ring them up to every year to see if you can get it cheaper. I've been with LVE last few years on my car, and each year I ring them up, they dont even give me any hassle or anything and within about 30 seconds of me asking they give me a discount.

 

[Janesy B]

They just won't incentivise new customers with reduced rates, so the ones that shop around will probably end up paying more.

 

[Doobedoo]

Yep welcomed by me. It always stank of we’ll see what we can get away with rather than we value you as a customer.

 

[Hades]

Mixed views on this. It sounds great and will prevent some people having to change. But the cynical person in me thinks they will just increase new insurance wather than decrease existing insurance. CHnaging to a new provider only took a few minutes so didn't bother me too much.

 

[Jez]

This will only serve to push up premiums - bad news imo.

 

[Fluffybob]

Saved just under 100 squids this year and was only offered a discount by my insurer after my 2nd "are you sure you want to cancel" page, so bye bye

 

[HangTime]

"Good news", lol.

It's only good news for lazy people that don't shop around. Average premiums for savvy punters that seek out the best NB quotes will inevitably go up, because they will no longer be subsidised by expensive renewals.
Additionally, it will cost money for the insurers to update their rating algorithms, systems, staff training, legal review etc etc and these costs will need to be passed on to consumers.

All else being equal, I'd expect at least a 5-10% hike in premiums next year.

 

[teenwolf]

i dont think i have stayed with the same insurer for 2 years consecutive, always shopped around and gone elsewhere.

 

[Temujin]

Agree with most of the above, this is probably bad news for many who shop around regularly.

 

[b0rn2sk8]

My last couple of direct line renewal quotes have been difficult to beat, they have always been very competitive for me.

That said I always ring up and get that extra few £ off. There isn’t much haggling room when your renewal quote is already under £200 and your still in your early mid 30s.

 

[Kenai]

Superficially sounds like good news but when you think it through, once the lazy people are no longer subsidising the rest of the industry a bit, the end result will just be slightly more expensive for everyone else.

 

[Doobedoo]

It’s got nothing to do with being lazy Jesus Christ people. I don’t want to waste my time ringing around just to get my insurance company to inevitably give me the price they should’ve in the first place.

It’s not exactly some great feat of endurance and effort in getting an insurance quote anymore that it is to turn a plug socket on, yet people want smart plugs and devices because it’s easier.

 

[lordrobs]

Will this be the same as when insurance was normalised across genders? So, everyone now pays the same (higher) rate? Whatever the case I can't see the insurance companies coming out of any major regulated change like this without leveraging a net gain overall in the process.

I do wonder if external new business promotions (Quidco, TCB, Cinema tickets, Retail vouchers etc.) will rise or fall because of this?

 

[HangTime]

It’s got nothing to do with being lazy Jesus Christ people. I don’t want to waste my time ringing around just to get my insurance company to inevitably give me the price they should’ve in the first place.

It’s not exactly some great feat of endurance and effort in getting an insurance quote anymore that it is to turn a plug socket on, yet people want smart plugs and devices because it’s easier.

Exactly, it is not a massive effort which is why it is worth doing and anyone who doesn't is labelled as 'lazy' (perhaps a slightly too emotive term).

The point is due to this regulation the insurance company will no longer "give you the price they should've in the first place" in the sense of being a lot lower. Currently, you can get better deals by shopping around and then either taking a better offer elsewhere or by pushing your current insurer to be more competitive. In the future, there will no longer be these big discounted 'loss leader' NB deals meaning less competition and less drive for your current insurer to cut a chunk off the price. Let's say you currently save £80 by phoning up to haggle your renewal. In future, maybe you only save £40, because of this artificial constraint on the market. Example

2021:
Renewal Quote: £300
Shop around NB Quote: £215
Haggle on renewal quote: £220. Stay with them as happy with service.

2022:
Renewal Quote: £300
Shop around NB Quote: £250
Haggle on renewal quote: £260. Stay with them as happy with service.

Made up numbers, the margins might be smaller, but I expect them to be there.

Now, you could argue that in 2022 you could eliminate the 2nd step - don't bother shopping around because there will be slimmer pickings. But whatever way you cut it, you end up paying more than the year before.

 

[HangTime]

Will this be the same as when insurance was normalised across genders? So, everyone now pays the same (higher) rate? Whatever the case I can't see the insurance companies coming out of any major regulated change like this without leveraging a net gain overall in the process.

Pretty much - there might be a slight reduction in RN prices because NB should be relatively more profitable (much less competitive market) but overall I'd expect the main change to be a hike in NB prices. Anyone thinking the majority of insurers are suddenly going to chop their renewal price down to that of the most competitive offers on the current NB market is living in cloud cuckoo land.

I do wonder if external new business promotions (Quidco, TCB, Cinema tickets, Retail vouchers etc.) will rise or fall because of this?

Good question. You'd imagine this will become a key differentiator, they have to charge higher premiums for NB but will try to win custom with perks that aren't counted as part of the premium. Maybe even some cheeky cashback if no claims are made if that's even allowed [not counted as premium]?

 

[Doobedoo]

That’s all entirely hypothetical not that I have any faith in the industry not to take advantage of any and every situation in order to boost profits.

Honestly I’ve got better things to do than speak to insurance companies. If my previous supplier doesn’t give me a price I’m happy with I’m still able to shop around, their should still be enough of an incentive for another supplier to give me a price worth switching for.

 

[HangTime]

It's not even just about boosting profit - new regulation invariably carries an implementation cost. If all else remains the same, they will have to charge customers more just to maintain current combined ratios.

The reason there will be less incentive for other suppliers to make you a good offer is because this regulation will reduce their ability to bait and switch i.e. offer you a very cheap NB deal to get you on the hook and then just ramp up your renewals in future years in the hope you don't switch away. They won't be able to get away with that anymore meaning that winning new business is less profitable in the long term than it has been traditionally because expected profits from renewals in future underwriting years will be reduced. And how do they offset this reduced future profitability from renewals? By raising new business premiums, obviously.

 

[BUDFORCE]

I dont see how it will make any difference to wheter you shop around or not.

I said I ring my insurer and they just put it cheaper no questions ask (which is completely pointless) so this will stop that.

I still shop around every year, and still will, just happens my current insurer for the last few years has been the cheapest. This will then save my pointlessly ringing them up.

It will also mean (should mean) that you renewal will be the best quoted so, when you shop around, and you see one cheaper, you know it will be cheaper, you wont have to go back to you existing insurer for them to try to beat it, because in theory they've already given you your best quote?

I do agree though, there is a potential for price hiking as the lazy people who just pay their renewall are maybe subsidising those who shop around.

 

[HangTime]

Your renewal might not be the best they could possibly quote. They won't be allowed to charge you more for a renewal than equivalent new business, but their default price might not necessarily be their best price in every instance (admittedly, you'd expect it to be a lot closer than it is today). It could be that the underwriter has a appetite to renew more business and would in some cases even undercut the equivalent NB premium if pressed on it for a given profile of customer. They just might not offer that up front.

 

[lordrobs]

I dont see how it will make any difference to wheter you shop around or not.

It may not but it probably will mean that in doing so you won't be able to take advantage of insurance company X offering a big tempting discount for drivers who match your demographic / risk profile / whatever because they want to drive new business in that area. Instead the changes will be more subtle as insurers adjust their customer portfolio as any reduction in price (to drive new business) will also have to be applied to their existing customers.

This is purely hypothetical but... it is also worth remembering that car insurance isn't as simple as third party or fully comp. There are a whole shed load of options and variables (excesses) which make "like for like" quite a challenging concept. "Oh, no Sir, that new business policy isn't comparable to yours because you are on the Nov 2020 V2 cover. That quote was for the Nov 2021 V4 cover which has a £210 compulsory excess, not the £200 as stated on your policy..."