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The Mystery to the Process Behind Deciding your Insurance Premium?

  • 20-02-2022 12:48pm
    #1
    Registered Users, Registered Users 2 Posts: 1,244 ✭✭✭


    One thing I've always been fascinated by is what really goes on behind the scenes with insurance companies when they decide your premiums. I only have experience with car insurance, and in a lot of radio talk shows it's not really clear whether they're talking about just car insurance or all types of of insurance.

    Of course the insurance companies will never disclose such information, but what's to stop the call reps spilling the beans once they've moved on from that company? After all, they surely are being told exactly what to do and say, and will question why! So they must know a thing or two. The insurance issue in Ireland is something that we often hear about every know and then, but it's strange that the story never progresses. You always hears someone say "oh but whiplash claims are higher" and then some else points out that the figures still don't add up. Obviously the latest news was how they pocketed most of the extra cash they made from the fewer road casualties during Covid, for themselves. And the personal injuries guidelines have changed, meaning they're now going to pocket even even more money for themselves.

    I'm not necessarily interested in who's letting them get away with this, but more so how the how they go about it. Does one guy work up the courage to say to another guy "hey I was wondering if we could just figure out a way to take that money for ourselves? I won't say anything if you don't?". How come there's no whistle blowers? We know they're creaming off money for themselves but no one knows how much exactly, and we're not sure who else within the industry knows. Isn't it safe to say that it's the one thing nobody knows anything about? The industry says the reason prices haven't yet gone down is because there will be a lag in the market for premiums to fall in line with pay-outs falling, which might sound okay but then you think "shouldn't they be calculating the pay outs by reference to future claims costs?". Isn't that the way it's done? So I'd like to know if anyone here perhaps knows of any book on this subject matter? Maybe something where somebody interviews ex call reps, or something like that?

    I recently listened to a somewhat messy interview where Eoin McCambridge of insurance alliance reform, and Stuart Gilhooly of the law society were interviewed by Claire Byrne. In spite of them both agreeing that there is a corruption element, they had strongly different views. McCambridge claims that the legal industry and the insurance industry blame each other for the high prices while they milk the system for themselves. However, Gilhooly says that premium costs are not related to claim costs, and that claims costs are set by an outside independent body. He says insurance companies often choose to go to court, and after all, people who risk looking for too much will be punished with their award if the gamble does not pay off. Their disagreements only added to my confusion; again leaving me wondering "does anyone really know anything?".

    If anyone does care to give a few explanations, please try and explain it to me as if I were a twelve year old. Thank you.

    Post edited by Brid Hegarty on


Comments

  • Registered Users, Registered Users 2 Posts: 1,113 ✭✭✭freddyuk


    Algorithms set by graduates which takes the human element out of the equation. If computer says no then it's a no. That is what happened in Lloyds of London market. No point in broking to an algorithm.



  • Moderators, Regional Midwest Moderators Posts: 11,183 Mod ✭✭✭✭MarkR


    The people you talk to are just entering your data into a system, no personal analysis. An employee might be able to make observations like if this data goes down, the premium usually goes up etc.



  • Registered Users, Registered Users 2 Posts: 29,095 ✭✭✭✭looksee


    If you add a named driver onto your insurance I have the impression (I am not 100% sure) that the insurance goes up. I do know for certain that if you take a named driver off your car insurance the premium goes up, and I have not been convinced by the arguments they offer to support this.



  • Registered Users, Registered Users 2 Posts: 10,177 ✭✭✭✭Caranica


    In my experience adding a named driver brings the premium down.



  • Registered Users, Registered Users 2 Posts: 29,095 ✭✭✭✭looksee


    Fair enough. I had been doing a fair bit of shuffling various people, moving counties etc and couldn't keep up with the way the premium was going. I don't see the logic of being able to reduce risk by adding a named driver - who presumably is not used to the car, maybe drives less frequently etc.



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  • Registered Users, Registered Users 2 Posts: 2,613 ✭✭✭tscul32


    When my husband added me to his policy, his premium came down. When I added him to mine it went up. This was when we were both in early mid 20s. Doesn't make much difference now. Back then young men were the highest risk so mine went up when he was added. Adding me to his meant he wasn't going to be doing all the driving of the car so that reduced the risk.



  • Registered Users, Registered Users 2 Posts: 3,395 ✭✭✭phormium


    Any time I have tried adding someone to my policy the cost went up, was adding a female over 25 so not a male risk reason thing!



  • Registered Users, Registered Users 2 Posts: 6,128 ✭✭✭kirving


    There are way too many factors to list, but as an example a friend of mine has a totally identical car to me, same age within a month, likes 2 km away in a similar Dublin postcode, I do much more milage, both professional but different careers, same insurance company.

    I ran a load of different comparisons.

    My 3 points brought my insurance up by €30 despite many people say 3 don't matter, adding my partner brought it back down by €30, job accounted for about €20 difference, postcode accounted for about €20, milage didn't seem to affect it.



  • Registered Users, Registered Users 2 Posts: 1,617 ✭✭✭Uncle Pierre


    As regards adding a named driver - I've been adding "the other half" to my insurance each year around my mid-30s (am close to 50 now). Before we were married, it put the premium up each year. Soon as we were tied the knot, it brought the premium down instead. Have always assumed it's because the algorithms assume that a married man is likely to be more responsible and careful than a single fella.



  • Posts: 2,827 ✭✭✭ [Deleted User]


    http://dieversicherer.de region and model type classes decide it in Germany.

    they are published each September and determine what the Insurers charge based on your region and model of car.

    After that you work up your No Claims bonus over 20 years.

    It is completely transparent and all insurers adhere to it.

    if your model of car was in production from 2002 to 2012 then it will have the same code and there will be no age loading for the car from 2002.

    Irish Insurance market is captured by the Insurers. It is a small market of just over 2 million cars. To make profit the insurers have to push up premiums by fair means or foul.

    A porsche 911 would have a low premium in Germany because even though they are a fast sporty car they are statistically not making high insurance claims because their owners generally don't claim on their policies. A car earns its reputation rather than being tarred with a brush.



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  • Registered Users, Registered Users 2 Posts: 6,548 ✭✭✭Claw Hammer


    Insurance in Germany and most continental countries is on the car and not on the individual driver. In ireland it is the driver who is insured to drive a particular car and the premium is based on the perceived risk of that driver making a claim. The result is younger drivers are pretty much forced to drive lower powered cars. The insurers in Ireland don't want the continental system to be established.



  • Posts: 0 [Deleted User]



    If the compensation systems/quantums awarded were similar in both countries then it would probably be easier to establish a similar premium calculating methodology. However, I assume that they're not.



  • Registered Users, Registered Users 2 Posts: 2,345 ✭✭✭NUTLEY BOY


    There used to be human entities called underwriters.

    Underwriters could follow established ratings from guides but also have the capacity to take a view on the risk as a whole. They had the ability to exercise judgment. When is the last time that you got a decision from an insurance company as distinct from their computer ?

    Enter the era of the algorithms - as per freddyuk's observation - and out went flexibility. There is virtually no underwriting discretion now it seems.

    Prudent underwriters still exist conceptually. You will find them upstairs on the Clapham Omnibus sitting beside the equally proverbial reasonable man😀.



  • Registered Users, Registered Users 2 Posts: 1,244 ✭✭✭Brid Hegarty


    I don't think you read the thread. If that's really the reason then the prices should have come down. Because the personal injuries guidelines have changed. They're now making even even more money.

    But that was exactly what the insurance industry wanted you to think anyway. You didn't need to be a mathematician... just think about about it. Compare the difference between what we pay for insurance compared Germans. Now think about how big the average claim in Ireland is, and how often is such a claim made? 1 out of 50 people? 1 out out of 100? Lets says 1 out of 50. So multiply 50 by that difference I refer to. Do you really think the claimant gets all of that?



  • Registered Users, Registered Users 2 Posts: 1,244 ✭✭✭Brid Hegarty


    That sounds interesting, but I'm afraid I don't follow? I looked up man on the Clapham omnibus and am equally as confused.



  • Posts: 0 [Deleted User]



    Nowhere did I claim that that was the sole reason. I merely pointed out, politely, that comparing apples and oranges isn't, generally speaking, a particularly useful activity. And I'm not foolish enough to imagine that insurance premia will come down magically, the day after a reduction in the recommended quanta is announced.

    Incidentally, as someone who was involved in a relatively minor accident 40 years ago - for which I was wholly responsible - I suspect that my motor insurance company still hasn't made a cent's profit from me over all of the years that I have been paying my motor insurance! But maybe they will if I live to age 90 and am still driving.



  • Registered Users, Registered Users 2 Posts: 3,053 ✭✭✭Eggs For Dinner


    Premiums are coming down and insurer's profits are increasing. That is the ideal scenario for the consumer. If we have a profitable environment, more insurers will enter the market and increase competition.



  • Registered Users, Registered Users 2 Posts: 1,244 ✭✭✭Brid Hegarty


    What did you do? Send a brand new triaxle off the road?



  • Registered Users, Registered Users 2 Posts: 7,033 ✭✭✭zg3409


    Firstly there is the real risk profile.

    Certain cars, certain years have higher or lower claims.

    Certain individuals age, occupation, married, number of years driving history have a certain risk profile. They are not supposed to take into account gender but they always ask.


    Then there is the likely hood of you renewing with the same insurer. They may use " big data" to guess if you might shop around, if they think you won't they give you a high renewal which they may drop if you ring the. If you ring them on the last day the computer says no deal, as they know the likelihood of you jumping is lower.

    Then they also try to screw you, driving an older car which many insurers won't quote, if they do the premiums are inflated.

    If they think they can get away with it they will creep up policy every year or even remove benefits.


    Lastly there is a bit of black magic where some quotes are just crazy, they don't want you. Asking a good broker they can sometimes guide you to best occupation to use or add an additional driver or don't buy a car over 10/15 years etc. Brokers can also screw you and pocket the difference.

    Typically I shop around make up fake quotes they try to match, haggle and I often get insurance for their minimum price such as around 300 euro. If you move address or change details mid year they will also screw you. It's just business.



  • Posts: 0 [Deleted User]


    Lost control on loose chippings, wrote off the car and put my wife through the windscreen. May I suggest that you write out your next "witty" remark on a scrap of sandpaper and shove it where the sun doesn't shine.



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