insurance - stupid business practice?

Bosun Higgs

Bosun Higgs

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Renewal time and as always I shop around. My current insurer makes a sensible offer but then a local broker makes an offer some £40 cheaper using my first insurer to underwrite. So I go back to the current insurer and ask them why their agent can save me £40 but they wont budge. So I end up changing to their agent and they lose maybe £100 ( the £40 plus their agents commission) yet keep the same customer. How can it make any business sense to force a customer to buy through an intermediary at a loss like that? How can it make business sense to encourage customer disloyalty?

I find much the same thing with my motorbike insurance but in that case I am swapping broker every year but the insurer ( Equity Red Star) stays the same. Disloyalty pays.

Its 40 years since I went to business school. Any more recent graduates like to try and give a rational business policy explanation for what seems to me like stupidity?
 
Bosun Higgs said:
Renewal time and as always I shop around. My current insurer makes a sensible offer but then a local broker makes an offer some £40 cheaper using my first insurer to underwrite. So I go back to the current insurer and ask them why their agent can save me £40 but they wont budge. So I end up changing to their agent and they lose maybe £100 ( the £40 plus their agents commission) yet keep the same customer. How can it make any business sense to force a customer to buy through an intermediary at a loss like that? How can it make business sense to encourage customer disloyalty?

I find much the same thing with my motorbike insurance but in that case I am swapping broker every year but the insurer ( Equity Red Star) stays the same. Disloyalty pays.

Its 40 years since I went to business school. Any more recent graduates like to try and give a rational business policy explanation for what seems to me like stupidity?
Click to expand...

what vehicle is the renewal for
 
Para 1 is for my boat. Para 2 is my motorbike. Funnily enough I dont have this problem with my toy car where the insurer CCI is the only one that gives me track day cover anyway.
 
It's no worse than the idiocy of electricity and gas prices. The stuff that comes out the pipes and wires comes from the same source no matter whom you pay for it, but the price can vary hugely. Like some insurance it is a business model that relies on the non-savvy and/or lazy to generate the biggest profit.

That said, I have remained with Pantaenius for the 9th year - as usual I shopped around, and as usual the level of cover allied with my experience of their customer service was the winner - it helped that they were also cheaper than the next closest who had an unacceptable 18 hour single-handed passage limitation.
 
The insurer is being rational. Most people pay the renewal without getting a competitive quote so insurers gradually increase premiums and usually get away with it. But as with most sensible business practices, managment get greedy and substantially increase the premiums triggering many customers to shop around. To regain all the customers they have lost they offer good prices to new customers and brokers. When the renewal comes there's always a big increase so you change again. For car and house insurance I change most years. Strangely for boat insurancethere is no renewal shock so I don't change.
 
Just remember it's not always about price, and true cost takes more into account than money. Although the insurance may be from the same place, do they have equal staffing in their call centres? Are the call centres both in the same country? Will they both pay out with the same ease when you need them to, or will one of them check the claim just a little bit more closely? All of these may be fine but it's always worth ckecking because in my experience a slightly more expensive insurer generally has local and well staffed call centres, or in shared ones their calls will be prioritised. This is very much like Easyjet providing you a cheap flight - it's not the same as a BA flight but both will get you where you need to go. With car insurance, we are legally obliged to have it and therefore people will scrimp on it. With a boat, it's your prized possession and you are only insuring it because you want to so it's worth getting good cover.
 
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