A couple of blogs ago, I wrote somewhat impolitely about the world of general insurance, saying there was nothing good to be said about a business whose profitability depends on ripping off its most loyal customers until they eventually leave in a disappointed fury.
There’s nothing good about it in another way too, and again – sorry about this – it’s a little personal anecdote that gets us into the subject.
Recently my car has been damaged on two separate occasions while parked in the street. Fixing the damage seemed like a straightforward insurance claim, so I went to an authorised repairer and got an estimate. Just over Â£4,000. Complications set in, and I decided to pay for the repairs myself. Four grand seemed a bit steep, so I asked my local mechanic to recommend an alternative body shop. Guess what I’m paying? Â£850.
There are probably some good and justifiable reasons for some of the difference, but nothing like enough to explain away Â£3150’s worth. The explanation for most of the difference is that in the world of insurance claims, no-one gives a shit about how much anything costs because no matter how much it is, they’ll just pass it on to policyholders in next year’s premium.
What results is, frankly, a whole system built on corruption, in which effectively repairers and insurance companies collude to rip off the end customer. Experts in game theory say that in any game with three players, invariably two will gang up to the detriment of the third, and I must say that the world of financial services is riddled with examples.
Of course I understand that there are plenty of other examples elsewhere. The problem is endemic among service providers whose service includes buying things on behalf of their customers. There has recently been a mini-scandal about how much the NHS pays for gluten-free bread, to take a particularly obscure example. And I know that I could easily buy PCs (that’s computers, not officers of the law) for about half the price that our IT service company gets them for.
But it’s doubly endemic in the world of general insurance. And – the reason I’m going on about it here – when you look beneath the thick veneer of hundreds of millions of pounds’ worth of not-too-disagreeable advertising, it’s another big demonstration of the fact that general insurance is a lot less “normal” and consumer-friendly than many people think. Oh yes.