A continuation from previous article titled “Motor Detariffed West Side Stories” highlighting how two areas in a city are charged different premium rates.Link as follow:-
http://levelnineatwork.blogspot.com/2014/06/motor-detariffed-west-side-stories.html
BACKGROUND
In a detariffed (free market) environment, insurers may charge any amount of premium based on the drivers’ profiles, claims history and driving habits.
Therefore apart from remaining competitive in the pricing market, Insurers are also required to seek a balance between premium charged (Top Line) and profitability (Bottom Line)
Therefore apart from remaining competitive in the pricing market, Insurers are also required to seek a balance between premium charged (Top Line) and profitability (Bottom Line)
PROFILING DONE RIGHT?
As we stand up against discrimination based on gender,age and social status, are the insurers’ practice of profiling customers against various attributes appropriate?
Some insurers are pricing premiums according to the driver's address gathered from the documents submitted.
Common justification to price according to drivers' location are inherent risks such as unfavourable geographical environments combined with formula driven pricing tables based on existing data such claims history and car profiles in the area.
Some insurers would charge drivers using postal codes, and The Guardian reported that redlining is being practiced with “a specific geographic area, usually an urban or minority neighborhood, is either excluded or charged higher rates for a loan, insurance or another financial service“
Source: www.theguardian.com
MERITS VS NEIGHBOURHOOD
The Guardian added that “California passed a referendum in 1988 to ban the practice [zip code profiling], and the net result was a savings of more than $1bn for California drivers since the mid-2000s.Insurers, meanwhile, have spent nearly $100mn between lobbying, campaign contributions and ballot initiatives to undo the law and keep zip code profiling in place.“
Source: www.theguardian.com
“http://levelnineatwork.blogspot.com/2014/07/your-data-for-premium-discounts.html”
VIEWS
VIEWS
Some drivers are at an disadvantage when insurers evaluate customers using a blanket approach and lets not forget that car are required to be insureddeemed road worthy by law in some country.
What will happen when insurance premiums become unaffordable for certain vehicles when claims ratios has increased drastically. The usual alternative to high premiums are opting for Excess instead of paying premiums. Will Excess becomes too high until it destroys the purpose of getting insured?
In the event of a price war, insurers will fight to the bottom cause drastic price slashes. Will this create a time bomb in the long run exposing insurers to insolvency ?
What will happen when insurance premiums become unaffordable for certain vehicles when claims ratios has increased drastically. The usual alternative to high premiums are opting for Excess instead of paying premiums. Will Excess becomes too high until it destroys the purpose of getting insured?
In the event of a price war, insurers will fight to the bottom cause drastic price slashes. Will this create a time bomb in the long run exposing insurers to insolvency ?
Is it feasible to implement a ceiling price to protect the customers or a floor price to prevent insurers from excessive price cuts to remain competitive?
