Motor 30% increase in motor insurance

Hi,

Just received my motor insurance renewal (Zurich/Eagle Star) and was quite surprised to see it has increased by 30%. I only have 1 yrs no claims (this was my first policy in my own name as I was previously on a company policy for about 8 yrs with one accident 1.5 years ago (settled at about €1100). It seems strange that I am now 1 year with my insurers with no claims thus in a better position than when I took out the policy, the value of my car has decreased yet I receive a 30% increase. Has anyone had a similar experience and if so how have you dealt with it. I've done a few quick online searches and it seems like Eagle star are the cheapest so I can't just tell them to stick it but I would be interested to hear people's thoughts before I ring them and ask them to explain the rationale behind the increase. Has anyone had success in getting their premium reduced?

Thanks,

Jack

Because they lost our shirts investing in bank and other shares, the insurance companies seem to be raising premiums across the board. It started for me with FBD last year and getting quotes from AXA and Allianz this year it seems to have continued. While offering 10% discount for credit union membership and 10% discount for online business respectively, they are both €100 dearer than last years QuinnDirect premium for similar cover.

123.ie (although I left them a number of years ago due to their nightmarish administration) are about 10% cheaper this year than QuinnDirect were last year.

mathepac said:

Because they lost our shirts investing in bank and other shares, the insurance companies seem to be raising premiums across the board.

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Most rated insurers have very little equity exposure, they invest, for the most part, in secure bonds and cash. In any case premiums will incorporate an assumption on expected investment return over the lifetime of a tranche of policies written today.

Some reasons why premiums are increasing:
1. 06/07/08 premiums were massively unprofitable in any case so rate increases were required. However this has been compounded by:
2. Premiums have fallen over the past number of years while expenses remained almost constant. Therefore as a % of premium expenses increased
3. Pressure from intermediaries for higher levels of commission due to lower average premiums
4. Higher cost of reinsurance (more so in household property but also a factor in motor insurance but not the main driver)
5. Lower expected investment returns (most rated insurers would incorporate government bond yields or maybe EURIBOR of an appropriate term)
6. Recessionary impacts. Increased fraud and also more genuine claimants claiming where they might not have before (e.g. to preserve no claims entitlement)
7. Higher cpaital requirements (which may increase further when Solvency II becomes the EU capital standard)
8. Unwinding of introductory discounts and discretionary discounts given by brokers/direct sales people on renewal (e.g. if a customer is given an introductory and/or discretionary discount of 20% on incepting a policy on renewal it will appear as a 25% increase in premium, and this is before any book rate increases are applied)
9. Companies finally starting to let polices go if the price is not right, which is moving away from the practise in the last few years of almost writing any risk at any price

By the way seeing as everyone seems to hate insurance companies it may cheer you all up to know that almost every general insurance company in Ireland are well on course to lose money this year.

Jethro Tull said:

... By the way seeing as everyone seems to hate insurance companies it may cheer you all up to know that almost every general insurance company in Ireland are well on course to lose money this year.

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I no longer see insurance as a "relax, you're insured / peace of mind" product, but as a necessary evil or at best, a legal requirement.

Personally I do hate them, but I cannot understand how they manage to lose money (unless they are re-insurers) - surely the under-writers are the ones carrying the risks?

Mathepac, you suprise me. You are usually a bit smarter than that. The underwriters work in the insurance company so the the risk is the insurance companies. Depending on the level of claims, reinsurers are less like to lose money from claims. It depends on the insurance companies reinsurance arrangements, whether they be claims loss ratio related or facultative.

I understand that insurance companies employ underwriters, but underwriters (as in Llloyd's names for example) are where the buck ultimately stops, with no re-insurer or safety-net having a postprandial snooze at the club in a wing-backed chair.

Essentially its all gambling with Tom, Dick and Harry laying their bets (insurance policies) with Mary, Jane and Sally, the theory being if one sneezes, they (hopefully) won't all catch cold. They can do the smoke and mirrors stuff with actuarial tables, slide-rules and computers with complex mathematical models, but at base its gambling.

The underwriters' prayer is that if the Titanic sinks, the other 93 White Star Line vessels make landfall safely.

mathepac said:

The underwriters' prayer is that if the Titanic sinks, the other 93 White Star Line vessels make landfall safely.

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Only true if the premiums for all 94 vessels were sufficient. Over the last few years this has not been the case, prior year run off profits have kept insurers in the black while their most recent business burned cash

Buried in the article above is the following nugget - "Investment income of €134m brought the overall operating result to €228m."

So despite the misleading Independent headline and all their whinging, they still made an operating profit of €228m. It seems there is little justification for the astronomical rise in premiums, some people are seeing IMHO.

mathepac said:

Buried in the article above is the following nugget - "Investment income of €134m brought the overall operating result to €228m."

So despite the misleading Independent headline and all their whinging, they still made an operating profit of €228m. It seems there is little justification for the astronomical rise in premiums, some people are seeing IMHO.

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Motor premiums fell again in 2008 (which will be mostly earned in 09) so expect results to get worse. Also under writing losses were made despite the fact that there would have been substantial prior year releases, these have almost dried up now. Add in the fact that investment returns have fallen off a cliff and the picture becomes even bleaker.

In any case companies cannot continuously price an underwriting loss and hope that investment returns make up the difference

Btw I have seen the 2009 Q2 results for 2 major insurers in Ireland. The current year loss ratios on personal lines motor (claims divided by premiums) are both over 90%.

In times of recession it appears that ALL necessary services increase in price - insurance being one of them. Working for an insurer, whilst it's understandable doesn't make it any more palatable!!

When money is tight some unscrupulous people see insurance, (of any type), as a way to line the family coffers. Increased pay-outs for personal injury and dubious thefts/burnings abound!! Unfortunately what happens then is the insurer HAS to try and recoup some of their outlay by increasing premiums for everyone.