Just renewed the car insurance for wife & daughter, both cars on a multiple policy
Reasonable quote, bit more than last year but nothing else changed, same cars, same circumstances, already on "full" NCD.
So I did a bit of searching for daughter & could get 50+ pounds cheaper.
Called the insurance company, explained & after about 5-10 minutes checking details hadn't changed....
new price about 15% cheaper for both
No trickery, no cancel & try again as a new customer, just "I can get a bit cheaper elsewhere, what can you do"
Job done.
But why? Why not quote the lower price or even a lower price from the start.
After all I did the same routine last year and got the same result.
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>>Why not quote the lower price or even a lower price from the start.
Because most people just renew without checking.
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I have exactly the same fun and games with household insurance. Seems to be pretty much the norm in the insurance industry, reward the butterflies and penalise the barnacles.
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>> >>Why not quote the lower price or even a lower price from the start.
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>> Because most people just renew without checking.
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But that's not the model used in other industries. Often when I buy things I mentally have a reasonable price in mind, I am initially quoted a list price which is consistent with that, and then am quite gratuitously offered a discount, on the lines of "So with a discount of 15%, that makes £314.97, I can do it for you for £300".
I haven't had to ask anything or haggle, they just offer it because they value a satisfied customer and their reputation for honest dealing. Insurance companies don't seem to care about that, so in consequence they have a poor reputation and customers have no compunction in telling little white lies to get their own back.
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>> But why? Why not quote the lower price or even a lower price from the start.
Because they want to maximize their profit. Because of inertia, most people wouldn't bother about comparing price.
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Fair to say I think that they do it because it optimises profit and that the key reason is customer inertia, which can be increased by auto-renewal, carefully timed renewal reminders, and just the right level of "tuning" which is a term I have heard used for nudging the price up.
However - they pretty well have to do it if they want to stay in business, because it is a competitive market and any mainstream company that doesn't will lose out to its competitors. Some will do it more, some less, depending on the effectiveness and efficiency of other parts of their marketing mix.
One consequence of the model is that new business pricing, to be competitive, is almost certainly unprofitable on a one year view. So the pricing model will include some "customer lifetime value" to reflect the expected retention levels when renewals are offered and other opportunities such as add-ons (e.g. breakdown, legal cover, guaranteed courtesy car) and cross selling other general insurance products such as house and pet cover.
As with most things, the more alert customers are subsidised by the people who don't mind paying more - either because they value convenience over price, can't be bothered, place too much trust in a brand, or whatever.
Looking down the insurer's end of the telescope of course, it is the customers, or at least some of them, who are the crooks - fronting, not disclosing risk factors, and making fraudulent claims.
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On the subject of renewal quotes, I got my AA membership for half price three years running just by asking, no quibble. Then Money Supermarket or some such site publicised how easy they were and they suddenly got tougher, giving only a minimal reduction despite my threats of going elsewhere.
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Why do they always do it ? - No FM2R
