We asked a cross-section of industry players for their comments about personal lines motor
Gareth Kloet, head of car insurance, Confused.com
“Telematics is becoming more prevalent as a solution, and we’ve a number of telematics brands on our website. However, a couple of months ago we introduced a question on the website asking: ‘Would you be prepared to have a black box installed in your car if it could reduce your premiums?’ It was a yes or no answer, and the vast majority of users said no.
“When we’ve gone out to focus groups, pretty much across the board, people were not that keen on being monitored closely.
“The biggest problem, and something that we’ve been quite vocal about, has been that the cost of car insurance has continued to rise for a number of years, and it’s particularly high for 17- to 20-year-olds. It’s extortionately high for young males and still very high for females.
“We do a quarterly price index based on the cheapest five prices that we get back from the millions of quotes that we do every month, and the last one showed that for a 17 to 20-year-old male the cost of car insurance is more than £3,500. For women it’s less, but still more than £2,000.”
The direct writer
Gus Parks, commercial director for motor insurance, Direct Line
“We’re doing a telematics pilot. It has vast potential for the motor market. At the moment it’s very much a niche thing and as a mass market provider we need a product that’s efficiently delivered. So the interesting questions for us are: How will the market evolve? How will the technology evolve? Will installation and management get much cheaper?
“There’s a lot going on in the market at the moment and it is competitive, but not unhealthily so. It’s perfectly possible to deliver decent returns if you do the right things, your pricing capability is strong, you underwrite well and your claims management is good. Those are the areas that we’ve invested in during the last two or three years. It’s a tough market, but with the right discipline you can get good results.
“Personal injury claims have been a major problem for the market. If the government succeeds in what it’s trying to do, then it could have a significant effect, but there are a lot of other things that need to fall into place to deliver a material change - for example, the legal fees.”
The telematics provider
Penny Searles, managing director, Wunelli
“The cost of collecting the driver behaviour data from a vehicle has reduced dramatically in the last 12 months and, with gender becoming a rating factor that can’t be used, we need to find something else that can inform insurers’ pricing.
“We find that insurers are often hung up on boxes, and the cost of a box, what it delivers and how much data it collects. They’re not really thinking about what they need to know, which is how the vehicle is being driven, and speaking to the people who can tell them how it’s being driven. It’s about the data. What does it tell me? And what can I do with it?
“When you begin collecting driving data, you find it backs up everything you know traditionally and want to prove. So, for example, we can see in correlation to claims that anybody who regularly drives late at night might be a bit of an issue - the risk of accidents increases dramatically. I don’t think Joe Public is aware of that. If they were, then they would be much more hesitant about going out at night; the risks do increase dramatically.
“There are lots of companies out there saying: ‘What is this? We need to be in telematics; everyone’s doing it.’ But they don’t really understand what it means.”
The national broker
Carl Shuker, chief executive, A Plan Insurance
“At the moment we’re not offering telematics, because as a whole the telematics industry is fragmented. There are many different players. It’s a bit like the old Betamax/VHS debate and wondering which standard will be the one that the industry ultimately adopts. There are too many competing systems out there. It’s just too early and there are still a lot of questions to be asked.
“The public has to get used to it, and there are all sorts of privacy issues that need to be ironed out. It hasn’t been tested much in terms of public opinion.
“Personal lines motor has always been intensely competitive, and there’s a new intensity to that now. We’re seeing rates soften even further, and even drop by as much as 3% or 4% as insurers go for market share. We’re on the high street, so we are affected very much by the competitive environment, but we are also in a position to try and add better value to the insurance product through service and responsiveness.
“We have 65 branches and aim to serve the local communities. We don’t compete just on price, though of course we have to have a competitive proposition. But we aim to compete on overall value, and that’s about policy cover, service and the client experience.”
The independent broker
Keith Miller, managing director, Keith Miller Insurance Services
“Unfortunately, because customers are so premium-driven, competitive rates are the biggest challenge in the market at the moment, and nobody gives a damn about the cover until they claim.
“It manifests itself all the time within your business. All of your efficiency and competitiveness within the market is judged on your motor insurance. You can have a huge commercial account, but if the boss’s Jag at the bottom is expensive, then you are an expensive broker, and they will re-market the whole of the risk.
“We probably spend 90% of our time dealing with personal lines motor, but only derive about 20% of our income from it, so it’s not really a good return on time investment. Vast amounts of paperwork have to be generated for each tiny change. But if you don’t do it and let somebody else into that client, then they’re after all the rest of that business, so you have to keep on top of things.
“The government crackdown on dodgy personal injury claims is certainly a good thing, because hopefully it’ll bring the premiums down. I rarely see any fraud here in Petersfield. It’s partly because I know my clients and have known many of them for years - they almost apologise to me if they make a claim.”
- The first quarter of 2012 has seen a fall in the average premium quoted for a typical comprehensive car insurance policy, according to the AA’s motor insurance premium index, which is available on the AA’s website at theaa.com/newsroom/bipi/201204-BIPI.pdf
- The Ministry of Justice provides up-to-date information about the changes to claims management regulation, including guidance on what effect the Jackson Review will have on no-win, no-fee companies and personal injury claims. justice.gov.uk/claims-regulation
- The Office of Fair Trading has decided to refer the private motor insurance market to the Competition Commission after it found evidence of dysfunctional relationships between insurers, car hire companies and repair garages. Its analysis can be found at oft.gov.uk/news-and-updates/press/2012/44-12
- The European gender directive comes into force in December 2012. The BBC has set out the implications in its article ‘Insurance Gender Ruling and You’, which can be found in its business news section at bbc.co.uk/news/business-12608777