What do we know about UK car ins?

My daughter is looking at buying a “first car” in the UK. She’s looking at VW Up, Ford Fiesta and the like.

The terminology is different, it seems folks just shop online, and so I’m wondering if anyone has any advice? What’s the same/different?

Anything vastly different I should know about??

Is she in London? If so, why does she need a car?

I know nothing.

She’s outside of London and going to be living and working off campus, so it’s time.

I still know nothing. Just buy insurance. What are you looking to save? $100 / month?

A couple of things I know:

  • I believe UK BI limits are unlimited, and PD limits are extremely high
  • Policy language is easier for consumers to access than in the US (e.g. https://eui-pdf-assets.s3.eu-west-1.amazonaws.com/admiral/AD-003-035-Your-Car-Insurance-Guide.pdf)
  • Shopping for lower prices at renewal seems to be a national pastime; renewal retention rates are painfully low as compared to what we’re used to in the US
  • They don’t have rate regulation the way we’re used to in the US
  • At least one insurer has used a random number generator in their pricing algorithm
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:woman_shrugging: I won’t be my money anymore and she won’t be making actuary-money :joy:

Thanks M_S, that was helpful! :heart:

I think it’s a pastime driven by necessity. Insurers will increase rates more for loyal customers because they regard them as not loyal but too lazy to shop around and hence likely to accept the higher rates.

The random number in the pricing algorithm is also broadly true. Insurers will quote different rates for exactly the same risk in order to test price sensitivity.

I also I remember reading about insurers target lower risks (women) with very feminine focused advertising.

Didn’t the UK just recently prohibit this practice?

The way I heard the shop-at-renwal phenomenon explained was that it was a consequence of some difference of online brokers more aggressively promoting the use of rate comparison tools. To do the equivalent in the US, you have to make contact with an independent agent and do your own queries at the direct writers.

While there are online rate comparison tools in the US, I don’t think they haven’t caught American mind-share (at least not to that extent), perhaps due to the expense of report-ordering causing the tools to rely on shortcuts/assumptions before customers are ready to buy, and/or because of a lack of standardization among carriers/states.

Also, I wonder if the cost implications of the differences in third-party limits (UK’s unlimited/£20m vs US where “standard” is 100k/300k or 250k/500k…and minimums in the 20/40 or 25/50 neighborhood) also play a role.

Back when I was doing pricing for a product that was moving to a new policy pricing/issuance platform, when interviewing vendors and asking about their capabilities to confirm they could handle my rating algorithm, one of them revealed that they could even support a random number generator because a UK motor insurer needed one for either price elasticity testing, or profit optimization math of a sort that is illegal in the US.

In the US, there is the risk that a personal lines customer could get quoted different rates from different quoting paths due to potential exposure to different affinity programs, or different legal entities being used for agency vs direct business…but regulators quickly sound the “unfairly discriminatory” alarm if that gets out of hand.

The last time I touched personal lines was a yacht product (it’s really ocean marine, but a few states required parts of it to be treated as personal inland marine). We had two radically different rating structures, one for most of our business, and one for an MGA program that targeted a different class of risks. The overall pricing was similar but-for expense differences, but the MGA’s system could only handle a simplified rating algorithm.

I had one DOI that was extremely difficult over that, to the point that I had to produce a report based on quote data, to prove that only a tiny proportion (a low single-digit percentage) of individuals quoted got quotes from both programs before the state grudgingly agreed that it probably wasn’t unfairly discriminatory.

Ah, yes, you are right - seems this was banned from the beginning of last year. Thanks for the correction.

They (FCA) “prohibited” it.

But definitely still going on. Direct Line just got slapped with a £30m refund.

Because of the current problems on the GI side of things, they are really pushing the boundaries with the FCA.

I would expect the behavior to continue.