New regulation on car insurance (good news?)

[Rids]

So I'll talk in generic terms here from widely available industry information and not anything relating to the insurer I work for, but yeah, I wouldn't expect GIPP to be good news for the most part.

If you regularly shop around for your insurance then I'd be expecting your prices to go up. The hook for most of the big insurers has always been a cheap new business quote to get you on board, and then slowly price walk you up at renewal. Its a proven technique that has worked for decades.

GIPP means that insurers are no longer able to do this, and that NB / RN prices need to be aligned. New Business is (for the most part) priced an unsustainable level so its not possible for insurers to bring the RN prices in line with NB and stay in business.

The market expectation is between a 6% to 12% uplift in NB prices to be able to support the new trading environment

There are some weird trends in the market at the moment, prices have softened significantly in Q3/Q4 as insurers look to fill their boots and buy as many policies as they can as cheaply as they can. We're expecting a hard stop on this once GIPP lands, and while some insurers are likely to have significant war chest as a result of the pandemic that might allow them to sustain this into Q1 / early Q2, prices are going to need to significantly correct next year.

On top of this, prices have fallen sharply in the last couple of years as a result of the pandemic and the market wide COR is looking like its creeping north of 110% next year as claims frequencies normalise following pandemic related reductions. Again this isn't particularly sustainable long term, the industry is expecting at least an 8% hardening to correct, timing of this uncertain but if I were a betting man I'd say you'll start to see it Q3 next year.

All in all, I think if you're somebody that shops around for cars insurance at every renewal you're in for price hikes next year across the board, there will of course be outliers to this but my personal expectation is double digit price hikes for the majority of the market in the next 2 years.

 

[lordrobs]

Car hire and not like for like repair.

Car hire is, or at least was, a big one. When I wiped out the side of a colleagues car in the car park (not my finest bit of driving...) he was directed to an accident management company by his insurer who deemed a suitable temporary replacement for his 14 year old IS200 was a brand new 540i. They then dragged their heels to determine that it was a write off and offer him £1400 for the car during which time the hire charge (as set by the accident management company) far exceeded that amount. My employers insurer (I was in a company car) told them they were taking the mick and it took years to resolve.

Who knows what the total cost for what amounted to two IS200 doors and a Passat front bumper and wing came to but I'd guess at many times the cost of the repair alone would have been.

I seem to recall that these excessive hire car charges have now been reigned in though?

 

[Doobedoo]

It generally isn't for a like for like repair.

Get a quote with the same body centre and usually it will be higher than your insurer would pay. Insurance companies have negotiated rates as you'd expect for a firm that essentially bulk buys a product.

I’m surprised at that. It was my understanding that the price was inflated for insurance related claims. But like I previously said this is not new. Since the inception of price comparison sites they have lost a lot of revenue from those that wouldn’t have phoned around. It has never been easier and more accessible to obtain easy quotes.

 

[[TW]Fox]

he was directed to an accident management company by his insurer who deemed a suitable temporary replacement for his 14 year old IS200 was a brand new 540i

The problem with this, like all insurance stories, is it's difficult to know the facts and the stories always sound outrageous. On paper a brand new 540i for an old IS200 sounds awful and a massive waste of money, BUT...

You can't hire a 10-15 year old Lexus. Hire cars are typically sourced through rental firms and therefore it will be something from the fleet they offer. This means it'll be between 0 and 2 years old. So, thats why the replacement car was brand new. A car rental firm charges no more for a 2 month old car than they do for an 18 month old car.

So it's an old Lexus. Where do we draw the line as to where you do and don't get a similar quality car? If the Lexus was a year old, you'd obviously expect something similar, right? What about 4? 7? 10? Then when you have drawn the line what do you offer instead? Is it it even that much cheaper? How much does it cost to fight the arguments? Or is it just easier to group cars up regardless of age?

Next the 540i - manufacturers provide hire car companies with vehicles and its often the manufacturer which choses the model and spec. Some of this will be down to what they want back in order to retail as a used car after the hire company has finished. So, in this respect, in the UK a 5 Series is a 5 Series and its largely pot luck what engine it has. Why a 5 Series? I'd imagine a 3 Series was booked - which is the same class as the Lexus - but there just wasn't any around so the next class up was supplied. In cases like this the originally booked category will be billed, not the supplied category.

So it's highly likely that the new 540i story is nothing like as outrageous as it sounds.

Don't forget there is a defined price list and replacement car list agreed with the Association of British Insurers for credit hire systems. I'm not saying it isn't expensive - it is - but like all OMG INSURANCE IS AWFUL stories, context is important here.

 

[[TW]Fox]

I’m surprised at that. It was my understanding that the price was inflated for insurance related claims.

This is what popular opinion thinks, but take a step back and ask yourself why it would be the case.

You are a major insurance company. You repair thousands of cars every single week using a network of body centres.

Why are you going to accept being charged more than Joe who walks in off the street? At the very minimum you'd pay the body shops standard rate - but it's far more likely you'd negotiate a far better rate. After all, most body centres rely on insurance work - they WANT the contracts with the insurers and part of this means offering to complete work at a price that suits the insurer.

It makes absolutely no sense that it's £50 an hour for Joe but £65 an hour for ABC Insurance Limited. Why would it be?

The reason why repair bills often sound higher through insurance is the reason someone else mentions - it's a far more complete job. They've got to stand behind it for years and any slight imperfection will have the customer complaining anyway...

 

[b0rn2sk8]

I’m surprised at that. It was my understanding that the price was inflated for insurance related claims. But like I previously said this is not new. Since the inception of price comparison sites they have lost a lot of revenue from those that wouldn’t have phoned around. It has never been easier and more accessible to obtain easy quotes.

I don’t think it’s fair to say they have lost money, the market has changed yes but the players have also evolved.

Price comparison sites offer new significant opportunities. They enable them to get new business very cheaply, much cheaper and more effective than traditional advertising.

Likewise they can offer other add on services through the site like legal cover or home emergency cover that isn’t as easy to do via the phone or face to face without coming across as a hard sell.

 

[adolf hamster]

Get a quote with the same body centre and usually it will be higher than your insurer would pay. Insurance companies have negotiated rates as you'd expect for a firm that essentially bulk buys a product.

i believe the premise is that the insurance approved body centre's are generally more expensive than getting [random independent garage] to grab some bodywork from a scrapyard, spray it up the right colour and fit, which from the customers point of view might be a perfectly acceptable repair (for cosmetic damage at least), and what they'd be doing if they had to pay for the work themselves.

 

[[TW]Fox]

i believe the premise is that the insurance approved body centre's are generally more expensive than getting [random independent garage] to grab some bodywork from a scrapyard, spray it up the right colour and fit, which from the customers point of view might be a perfectly acceptable repair (for cosmetic damage at least), and what they'd be doing if they had to pay for the work themselves.

I agree.

But no insurance firm is going to do that and no customer would accept that. So, comparisons like that cast the insurance industry in an unfairly unfavourable light. There won't be any difference in the quality of a job for a no fault versus a fault claim either, so the standards are the same. And if somebody has just run into your car whilst you were minding your own business sat at the lights why are you going to accept anything other than an absolutely excellent job?

 

[Rroff]

cheap new business quote to get you on board, and then slowly price walk you up at renewal. Its a proven technique that has worked for decades.

This happens to most of my family/friends but for whatever reason I've not so far had it myself.

Both of my last two vehicles the first year was 10-11% higher than any year since and it has stayed around the same amount +/- 2-3% for subsequent years and my latest renewal surprisingly was £50 cheaper.

 

[[TW]Fox]

This happens to most of my family/friends but for whatever reason I've not so far had it myself.

Both of my last two vehicles the first year was 10-11% higher than any year since and it has stayed around the same amount +/- 2-3% for subsequent years and my latest renewal surprisingly was £50 cheaper.

It is less common now than it was - much of this is because the first stage of this legislation was to make insurers publish the previous years premium alongside the renewal quote, highlighting to people how much extra they'd be paying.

 

[lordrobs]

The problem with this, like all insurance stories, is it's difficult to know the facts and the stories always sound outrageous. On paper a brand new 540i for an old IS200 sounds awful and a massive waste of money, BUT...

You can't hire a 10-15 year old Lexus. Hire cars are typically sourced through rental firms and therefore it will be something from the fleet they offer. This means it'll be between 0 and 2 years old. So, thats why the replacement car was brand new. A car rental firm charges no more for a 2 month old car than they do for an 18 month old car.

So it's an old Lexus. Where do we draw the line as to where you do and don't get a similar quality car? If the Lexus was a year old, you'd obviously expect something similar, right? What about 4? 7? 10? Then when you have drawn the line what do you offer instead? Is it it even that much cheaper? How much does it cost to fight the arguments? Or is it just easier to group cars up regardless of age?

Next the 540i - manufacturers provide hire car companies with vehicles and its often the manufacturer which choses the model and spec. Some of this will be down to what they want back in order to retail as a used car after the hire company has finished. So, in this respect, in the UK a 5 Series is a 5 Series and its largely pot luck what engine it has. Why a 5 Series? I'd imagine a 3 Series was booked - which is the same class as the Lexus - but there just wasn't any around so the next class up was supplied. In cases like this the originally booked category will be billed, not the supplied category.

So it's highly likely that the new 540i story is nothing like as outrageous as it sounds.

Don't forget there is a defined price list and replacement car list agreed with the Association of British Insurers for credit hire systems. I'm not saying it isn't expensive - it is - but like all OMG INSURANCE IS AWFUL stories, context is important here.

True. Also, it wasn't his fault that someone tried to drive through his car so why should he be left driving a Citroen C1.

As it went through the company insurance I never found out the hire costs but I was led to believe they were on the upper end of excessive. Only reason I knew it was still outstanding was when my colleague was contacted about being a witness when the matter went to court... nearly three years after the initial incident!

 

[HangTime]

I’m surprised at that. It was my understanding that the price was inflated for insurance related claims. But like I previously said this is not new. Since the inception of price comparison sites they have lost a lot of revenue from those that wouldn’t have phoned around. It has never been easier and more accessible to obtain easy quotes.

This is what happens. In fact dozens of UK insurers outsource their vehicle repair handling to third parties who have large economies of scale and manage networks of hundreds of repairers. There are specified discounts across multiple elements (paint, labour etc) and performance metrics used to track their performance (they will get downgraded if they underperform). A repairer won't care too much if they are a bit late returning a vehicle to an individual customer, or if their actual cost of repair comes in significantly different to their estimate. But they will care if it impacts their SLA with an organisation that is sending them hundreds of repairs a year.

 

[Rids]

This is what popular opinion thinks, but take a step back and ask yourself why it would be the case.

You are a major insurance company. You repair thousands of cars every single week using a network of body centres.

Why are you going to accept being charged more than Joe who walks in off the street? At the very minimum you'd pay the body shops standard rate - but it's far more likely you'd negotiate a far better rate. After all, most body centres rely on insurance work - they WANT the contracts with the insurers and part of this means offering to complete work at a price that suits the insurer.

It makes absolutely no sense that it's £50 an hour for Joe but £65 an hour for ABC Insurance Limited. Why would it be?

The reason why repair bills often sound higher through insurance is the reason someone else mentions - it's a far more complete job. They've got to stand behind it for years and any slight imperfection will have the customer complaining anyway...

Fox is of course correct, every decent sized UK repairer has a wide network of authorised repairers who give them a substaintial discount compared to what you would get if you walked in off the street.

This has actually lead to a rather interesting situation, where an insurer makes money from non-fault claims. Well, I think its interesting, but I'm sad.

Anyway:

I'm you're insurer, and your car has been hit in a clear non-fault collision.

I arrange for your vehicle to be repaired using one of our approved network repair providers.

The garage charges me for the repair at our agreed discounted rate.

I then invoice the third party insurer for the full, non discounted, repair cost.

This gets paid, I make money.

This is all legal, and has survived a high court challenge, because the insurer is only obliged to charge the third party a 'fair' rate for the repair, not necessarily the price they have paid.

 

[HangTime]

So how many more people now shop around, that didn’t before the rise of search comparison sites and websites like Martin Lewis?

Its fair to say that the 17 million in 2020 would’ve been far, far higher in the early 2000’s. So the whole insurance industry has weathered that considerable loos of income just fine

Don't forget that the emergence of tech has not only introduced comparison sites (more competition) but also driven cost savings via automation. So they might have less auto-renewals but equally the basic admin processes of insurance are much, much more streamlined than they used to be. I'd wager the cost of providing quotes and binds is much lower now than it used to be, so whilst they might not be able to get away with as many high renewal premiums as 20 years ago, the cost of selling insurance is also a lot lower. Nowadays you can literally get an insurance quote, heck buy a policy in minutes without even picking up the phone.

 

[Mercenary Keyboard Warrior]

Now I have an idea. It’s common knowledge nowadays that the cost of an insurance repair is far higher that the cost to repair privately.

Having worked in the industry some years ago, the rates approved shops got were pretty darn low, but they were guaranteed work.
Also, there was a parts list for just about every known vehicle, so the claims handler would see the cost of the parts, the time expected to fit them etc

I think this thread just goes to highlight how the general public have no real concept of whats going on in insurance companies.
I beggars belief that people think businesses that give work to other businesses in the hundreds of millions of pounds or more a year (talking big ins cos here) would somehow have worse pricing than a punter off the street.

 

[Jez]

<Good stuff>

This guy has posted some useful info. Hopefully will educate some

 

[Resident]

Is it?

Insurance company negotiated labour rates at many body shops are much lower than those you'll pay as a private customer.

Local accident repair company charges 30% MORE on insurance jobs than private. I have a couple of mates that have worked there before.

They would have cars in, on private jobs, after they've already quoted the insurer for it & the insurer has written the car off as economic loss. Owner has bought it back and had the work done much lower than the insurance was quoted. Turned them a large amount of business.

 

[Housey]

When my E Class was smashed up after a 3 Series tried to bum it, I took it to a high end bodyshop at the expense of the 3rd party. When a tired Housey decided to drive to OCUK to take a PSU back (true this) but decided to stop for coffee, half asleep and wondering why his phone beeped and then drove into the solid arch of steel in front of the petrol pump....he again took it to his chosen high end bodyshop.

Both were with insurers who had approved bodyshops and said you must use ours. I said no and they said..... fine.

I'll never understand insurers.

 

[HangTime]

BBC published an article on this yesterday https://www.bbc.co.uk/news/business-59741141

That means prices for those who switch regularly will go up

The way this is worded, they are reporting it as fact not opinion.

If your renewal is due in January, get a quote locked in today.

 

[wolfie138]

how will you know they are?