Monday, 1 February 2010
Motor insurance premiums have apparently risen by 18%.
Is this a fact or merely the industry's wishful thinking?
It's easy to see why they need a rise in premiums. Although this is a massive business worth £13 billion, it remains only marginally profitable. Claims, some fraudulent have increased and there are now a large number of uninsured drivers. However intense competition, particularly in the shape of advertising, £109 million's worth last year, has surely put a dampener on price rises.
Price comparison sites are now the new breed of broker and they spend a lot of money on the box. Some of them produce memorable advertising too. Can you forget the Russian meercat Alexandr and his catchphrase "Simples"?
All this activity suggests that there is very little loyalty in the market. According to an IPSOS/MORI study, three quarters of policy holders shop around when it is renewal time. And they get three quotes before committing. In this scenario, a renewal notice, from the insurer which has not been prior checked on a price comparison site is inviting defection.
Clearly price and price increases are key influencing factors. Past experience is also important. Disgruntled motorists complain about difficulties in sorting out claims. This is important because one in six policies are claimed against.
Like other business sectors, establishing trust is vital and especially so in the finance industry. Trust helps keep customers. And it is more expensive to acquire new ones.
Finally, do you know who writes the most motor policies?
It's the Royal Bank of Scotland. They own Churchill and a few others. And we own the RBS.