AA Blames 'Accident Management Specialists'

[grober]

AA Blames 'Accident Management Specialists' For Huge Rise in Car Insurance Premiums.
Some rather damning speculation from HJ on this topic.
AA Blames 'Accident Management Specialists' For Huge Rise in Car Insurance Premiums | Motoring News | Honest John

 

[st4]

I heard this on the radio, as the legal costs of "sore" necks etc shoots up.

What a world we live in

 

[davidjpowell]

HJ makes a good point.. Just how many bites of the cherry are the Insurance Company owners getting....

 

[st13phil]

The "£123 paid out for every £100 paid in premiums" statement makes my heart bleed. The thing that most people don't appreciate about the insurance industry is that there is normally significant income gained from investing premium receipts so, as an underwriter, if no claim is made against a policy you have the premium and the investment income at the end of the insured period. Quite a nice little earner, and one that means comparison of claims payments vs premium income are largely meaningless. It doesn't stop the industry trotting it out every now and then as a smokescreen to "justify" (more like "excuse") massive premium hikes though. HJ also makes a valid point about the revenue opportunities if the person writing the business also owns the broker and the accident management company.

However, what is always sidestepped in discussions about how much extra cost these nasty AM co.'s rack up is that they exist because motor insurers have traditionally wriggled, squirmed, and done their utmost to avoid paying an honest settlement for an honest claim. If their policy was to make a reasonable payment without resort to external pressure then the vacuum that allowed AM's to build their business just wouldn't have existed. It is also a sad fact of life that as premiums rise then so does the temptation to inflate what would otherwise be a genuine claim.

Were the industry to offer honest products that paid out honest sums in an honest timescale in return for a reasonable premium then claimants would be less likely to use AM companies, and would be less likely to succumb to the temptation to "add a bit on" to pay for the future loading on their premium that having the audacity to make a claim causes.

 

[Charles Morgan]

That's one way of looking at things Phil, but the return on cash balances is really going something to get close to 2 % at present, let alone 23%. Out of that they also have to meet expenses of running the business, so traditionally if claims to premium income exceed about 1.06 then those insurance businesses would be better off withdrawing form underwriting (which a lot do if losses are sustained over a 5 year period). The only thing holding off substantial premium increases of 20% + is the amount of capacity in the motor market (in the short term it is cheaper to make a loss than close down, in the long term definitely not).

Insurance companies no doubt have contributed to their own bad fortune, but recession, bad weather, rising fraud, low returns and low risk appetite will invariably whack premiums up hugely.

 

[st13phil]

You're absolutely right about the poor returns on cash at the moment, Charles. I also agree that a claims ratio of 6% or more over premium revenue is unsustainable in the medium to long term. I'm not saying that premiums don't have to rise to keep the industry sustainable, but huge and rapid rises are acompanied by unintended consequences in a market where the product is compulsory.

To say that motor insurers are the architect of their own misfortune is patently wrong, but to whinge when your shoddy practices have bitten you on the rear end is a bit rich, imo.