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What really goes on within Insurance Companies?

  • #1
    Registered Users Posts: 199 ✭✭ Brid Hegarty


    There's obviously some sort of conspiracy going on at the moment, as politicians like Pearse O'Doherty have alluded to. You hear it said time and time again, that although wipe lash pay-outs are higher in Ireland, the figures still don't add up. But you never hear a conclusion as to why? You just hear it implied that they act as a cartel. They have to be pocketing huge amounts for themselves. Insurance companies claim that 1 in 5 claims are exaggerated, yet they were only reporting 1% of cases to the guards. I also hear that there is fat too much out of court settlement between insurance companies. 

    The bottom line here is that because it's mandatory to be insured, the insurance companies can afford to charge more than what they would otherwise.

    Has anyone here worked as a call rep in insurance? If so, what sorts go on? What formula do you use to get the quote value? When do they have discretion to drop the value of the quote for fear of losing the customer? Why aren't we allowed to insure cars older than 15 years even though they're perfectly good. Why is it that any time you buy a new car the insurance goes up because it's "newer vehicle", but then (a year later) when you ask why it has gone up when you get your new quote, they say because it's "a year older"?

    What's the relationship between brokers an insurance companies? How are brokers able to get car insurance companies quotes so fast? What algorithm do they use? And what's to stop someone from ringing any broker to get a quote, and then going directly to the insurance company after having got the quote from the broker, in order to cut out their fee? I did something similar to this last year when the broker I had gave me my renewal... and it knocked off €65.

    Why is it that adding a driver can reduce the cost? With one broker's offer this made a difference of €120! What's the logic? I said "thanks for the offer" and tried the same trick with my current insurer. The first response from the call rep was to tell me that that would probably drive the price up! But then when she tried it, it brought it down too.

    Anyway, the insurance industry needs to be reformed. But that would be a tough challenge. As Machiavelli said:

    "There is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things. For the reformer has enemies in all those who profit by the old order."



Comments



  • a couple of random thoughts.

    1. they're as crooked as the road to dingle, that being said, the reason prices can be similar is likely due to maths. 6 grand car with a 21 year old driver who has a statistical chance of having an accident resulting in a certain percentage payout.
    2. Brokers are often in place where insurance companies have closed local offices, in my own town, axa and fbd have both closed offices in recent years. nothing to stop you cutting out the broker, but some people like to have the person to person option for getting a quote, or indeed, keeping house/ car/ travel insurance all under one roof, even though the actual policies may all be with different companies. you're paying a handling fee for the broker, plus the cost of their office / staff / overheads etc.
    3. adding a driver to reduce cost - an example, if an 18 year old boy racer is the sole driver, the risk is applied to that car for 100% of the time its being driven. If its split with his 60 year old granny, its now assumed that for a percentage of the time, the car will be driven by someone who is statistically lower risk - bringing the quote down. Of course, this is where people try and game the system.




  • I don't think the insurance companies have to worry about losing customers given that the government mandate the entire driving population to be insured.

    The government get a good deal out of crippling people financially too so it's not in their interests to do anything about it. They'll give some idiotic statement like "We can't interfere with a free market" (Despite interfering just fine everywhere else)

    I thought about this recently too. Remember there were Prime Time specials about insurance fraud where they would show footage from some guy hiding in the bushes at 3am at some secluded intersection getting footage of two cars rear-ending each other then 5 or 6 people jumping in the cars afterwards and all claiming whiplash. This was absolute B**ll*x! This was a clear setup by insurance companies to exaggerate the amount of spurious claims making the entire population present their rear end in acceptance of the price hikes.





  • People assume insurance companies make money as follows

    a.)Take premium

    b.)pay claims

    c.)make sure that you price your premium sufficiently high that you cover the cost of your claims, your operating costs and your profits.

    Therefore there is a direct and simple correlation between risk and premium. When risk goes down, premium should go down accordingly. EG Introduction of activities to control levels of claims (eg assessment boards, combating false/exaggerated claim) should have a direct an immediate impact on premiums.  

    HOWEVER.....AND THIS IS A BIG HOWEVER

    This is not really how insurance companies work.

    In reality what insurance companies do is they take all that money from premiums and then invest most of it in other companies, investments etc etc. This is

    where they get most of their profit, not just on the difference between premium and claims.

    So when an economy is doing well, investments do well and insurance companies make more profit. When this happens there is less of a dependence on the difference

    between premiums and claims and as an indirect result premiums tend to be lower as the insurance company is making money from investments.

    However when interest rates are low, or markets are behaving badly then the opportunity for investment profit decreases then the insurance company is much more reliant

    on just premiums to make profit. Therefore there is less opportunity to shave margins directly related to premiums.

    NOTE: All of this is very legal, very standard and very highly regulated





  • All well and good saying this but in the 8 or so years that I've been driving after achieving "5 years experience" - my premium has only gone up.





  • Having 5 years of no claim bonus should reduce your premium a good bit, sorry misread, my premium went down in the last couple of years, pays to shop around and check with a broker.

    On the conspiracy, enough companies have gone bust or left the Irish market that there is substantial risk for those remaining and we're priced accordingly, hopefully the book of quantum changes will entice more companies into the market.



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  • i just got my sister 23 that never drove on a learner permit a quote for a 1.6 petrol focus worth 3k for 1200. I paid 4000 for that at her age 20 years ago



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