Art of Underwriting - Vauxhall Corsa owner clean bowled !!!

Vauxhall Motors  is a British automotive manufacturing company headquartered in Luton, United Kingdom and a subsidiary of German Adam Opel AG.  It was founded in 1857 as a pump and marine engine manufacturer, began manufacturing cars in 1903 and was acquired by GM in 1925. It has been the second-largest selling car brand in the UK for over two decades. Coming from its stable, the Opel Corsa is a supermini sold under a variety of other brands (most notably Vauxhall, Chevrolet, and Holden).

the 3 door model Corsa

Modern day Insurers are very savvy and pick up their priority zone ~ there are risks which they would decline, risks which they would choose and cover selectively….. yet they might have to underwrite some which would fall in zones which they would like to keep away….. yet in relationships – they may have to cover the basket of risks – some of which may not be to their liking.

On the other day, an Insurance broker was suggesting that the Insurer to whom he places most of his portfolio said ‘it is fair expectation that all risks so proposed are accepted going by the relationship’ ~ yet in areas where Insurers are not so comfortable, they should still quote – but may be at a higher rate and perhaps with very high Excess….. sort of indicating that the client should run away on his own…. !!

Motor vehicle insurance – insurance of automobiles – is the large chunk of most General Insurers in India ~ and amongst that Private car is most sought after…. Till recently, we had the All India Motor Tariff, which provided the rates, terms and conditions for Motor Policies.   The Private car section covered vehicles  used for social, domestic and pleasure purposes and also for  professional purposes (excluding the carriage of  goods other than samples) of the insured or used by the insured's employees for such purposes but excluding use  for hire or reward, racing,  pace making, reliability trial, speed testing and use for any purpose in connection with  the Motor Trade.

The basis of rating was not complex – the primary components that went into the rating were : the Zone in which the vehicle was being used; Cubic capacity; age of the vehicle ~ it started at around 3.039% and went up to 3.698% - historically, the rates hovered around 5% of the sum insured.  Can you imagine what could be the ‘princely rate’ in Insurance parlance –  in other words, if the competition is not so much –  what % rate would an Insurer quote for insuring a private car ????

Don’t jump to tell a rate – thinking it to be high – sky is the limit – you can quote an astronomically high rate – but read this interesting report that appeared in Daily Mail…..

Car insurance renewal can be stressful at the best of times with the fear of rising cost. Spare a thought then for Rhys Barker who was quoted £1.2million for his £1,400 Vauxhall Corsa. The 27-year-old contacted Zenith to make sure the figure was correct and they helpfully offered him the opportunity of paying it in instalments of £104,000 a month. Here is the screengrab showing the massive quote Mr Barker was given by Zenith when he tried to insure his car online

Mr Barker, who lives in the Salford Quays area of Manchester, said: 'I went through all the questions and then the quote came up for £1,165,977.75. I was convinced it must be a mistake, so I called them up on their helpline. They didn’t even seem to be shocked by it. They checked it for me and then said it was right. He was even more shocked that they suggested he could pay in instalments if he could not afford the total upfront - with a first payment of £233,000 followed by 10 months at £104,000 per month. He said: 'I’m convinced they were just trying to price me out of buying insurance with them but it’s a ridiculous way of doing it. I’d love to know how they would have reacted if I’d just agreed to it - although with a car worth less than £1,500 it was never going to be likely.'

Mr Barker, a project analyst for Manchester United, passed his test two years ago and had been paying £2,000 to insure a Ford Fiesta before he bought the second-hand Corsa. He has a clean record with no accidents and no convictions. He claimed his quote was just one example of how young and new drivers are treated poorly by insurance firms. He added: 'I’ve got one of the cheapest cars you can get but the criteria for insurance is crazy. If I change a search from living alone to co-habiting, it goes down by £200.'

He says postcode-based quotes are also unfair. 'I’m classed as Salford because of the first three figures - why don’t they look at the whole postcode? The way they assess risk makes no sense at all.' ~ and the story does not end there…………… Mr Barker is now insured with Bell, which is owned by Admiral, and pays around £,2000. He has a Telematics box - a black box which records how he drives to lower insurance rates. He added: 'That’s not fair either really because when you go over a speed bump it counts against you, and if you have to stop suddenly because someone steps into the road it does too.'

Gary Humphreys, group underwriting director at Markerstudy Group, which runs Zenith, said: 'The price Mr Barker was quoted reflects that we have ‘declined’ to provide cover, as we would not expect a customer to pay such a high premium.  'This is not a case of pricing customers out of the market but quoting on the risks that are within our rating parameters and declining if they are outside. 'Without the detail we are unable to tell why Zenith was unable to provide cover at the time. We are aware this website has changed the way it quotes since Mr Barker used it, so that if a quote is over £10,000 it ‘declines’ rather than quotes a high premium.' A spokesman from Admiral Group plc said its premium is based on statistics. He said quotes change because of factors like marital status or postcode because they reflect the risk taken on by an insurance company.

With regards – S. Sampathkumar

6^th Aug 2013.

Coloured text – courtesy : www.dailymail.co.uk