Those bastard insurers!

Charges include up to £30 for minor amendments including change of address, updating personal details or transferring to other vehicles, the research showed.
….
Which? chief executive, Peter Vicary-Smith, said: \”It\’s a disgrace that insurers charge exorbitant fees to make basic changes to a policy.

\”These charges should reflect the real cost to the company and not a way of making easy money from consumers who are already struggling with high and rising insurance premiums.

Well, OK, how much does it cost to make such basic changes to a policy?

An old rule of thumb is that it costs a business £25 to send a letter. You do want a letter confirming the change, don\’t you? Giving that new surname, new address?

22 comments on “Those bastard insurers!

  1. £25 for a person to type a few keys to update the record and press the button to send the letter? Might have been an old rule of thumb but now? With technology?

  2. So why not use electronic means to send such details, transferring the costs of printing to the customer by using PDF files, thereby saving money on labour and office space and sharing the savings with the customer?

  3. GOM,

    And then people will be able to pay less and have spare money. Which is fortunate because they will need to be taxed more to pay and increased subsidy to Royal Mail to cover the lost business.

  4. @ Simon F
    The Royal Mail gets paid 46p to deliver a first class letter. I think that there should be a little left out of the £30 after giving 46p to Royal Mail to compensate for their loss of business.

  5. I’d be happy to get a £20 discount (let the insurer keep the other £10 of the supposed cost) on my annual insurance premium and an automated, computer generated acknowledgement of change of address.

  6. Assume an hourly cost to a business of a telesales operative of £30, which includes wages, light/heating, all taxes, pension contributions, NI, etc.

    Time taken to read an email/take a phone call giving instructions from the customer to change the address, and add that to the time taken to amend the details on the database and issue an email to the customer confirming the changes: 5-10 mins (cost: £2.08 – £4.17)

    Where’s the rest of the charge coming from?

  7. This is just “Ryanairing”.

    Ryanair (vt); (1) to split a service formerly provided to the consumer as a single unit into several separate streams, some optional which are generally charged at slightly above cost, others which are effectively mandatory (but not realised by the consumer until it is too late) that can subsequently be used to gouge the naive consumer. (2) The process by which competitors mimic aspects (and ultimately copy entirely) this business model such that within a short period of time there are no competitors left providing the unified service to the substantial pool of customers who would still like to have it and are prepared to pay for it.

  8. James V – some services are “generally charged at slightly above cost.” Solvent businesses do generally charge slightly above cost for their services.

    Matthew I, how long did your post, Excel calculation and subsequent correction take? More than 2 mins I suggest.

  9. It clearly costs nowhere near £25 to process an individual request.. but we do need to consider the cost of having the infrastructure in place.

    So, say it takes 5 minutes of staff time… we still have to pay so that we’re ensuring that a member of staff is available at the appropriate five minutes. That might mean, say, paying someone to sit by a phone for 30 minutes.

    We don’t agree a timeslot in advance. Compare this to rail fares… If you book a month ahead then you get a cheap fare. If you walk up on the day then you don’t… and the train company is charging extra because they’ve made that service available even though they didn’t know how many people would use it.

    I’m sure the insurance companies are doing just dandy on this deal… but it’s more complicated than some here are making out.

  10. Thought Gang has a point, but the whole “varying an insurance policy” beeswax is definitely more on the “thing that can be emailed, dealt with by someone in India, and emailed back” list than the “actually need a staff of coherent Anglophones waiting at the phone” list. Tim’s a small business type, as am I: AFAICS, 25 quid to send a letter is something that couldn’t possibly even be achieved ever, even assuming I do everything and my time is classed at client consultancy billing rate.

  11. I’d agree with John B. Sending an email to a customer who has changed who I need to send the invoices to because of merger / demerger / arbitrary reorganisation / simple staff turnover is a matter of, max 2 minutes.

    Even at my highest current client rate that is no more than a fiver. Add another £ if they want it printed, enveloped and stamped. I’ll do the walk up the road to the post box pro-bono.

  12. john b

    Indeed, you are right. But, of course, the Anglophone sitting there isn’t just waiting for a call that someone can get charged £25 for.. he’s doing other things too, for which his employer cannot charge £25.

    So the charge, really, is subsidising the rest of the Anglophone customer service operation.. and if the chargeable activities are moved to the lowest-cost model then, it follows, that the non-chargeable ones might have to go that way too. Then the people who complain about the £25 charge complain because they can’t possibly discuss their car insurance with someone who doesn’t know where Kettering is.

  13. @ The Thought Gang
    I know where Kettering is; so do lots of other people – but paying them Tony Blair’s National Minimum Wage to sit around for an hour between calls instead of asking someone in Madras to answer a call every ten/fifteen minutes 90+% of which refer to London or Birmingham or Glasgow or Leeds or Manchester or Edinburgh or Bristol or Bradford or Hull or Cardiff or Swansea or Dundee or Aberdeen or Leicester or Nottingham or .. doesn’t help a company survive.

  14. Might this not be just about cost of bureaucracy?
    Could it be about claims experience?
    Like, people who move house have more accidents? If so, they’d be higher risks, and you’d want to find a way to charge for the added risk without rewriting the whole contract.

  15. The Thought Gang (#11) said “5 minutes of staff time … might mean, say, paying someone to sit by a phone for 30 minutes. We don’t agree a timeslot in advance.”

    Unlikely. Whenever I telephone an insurance company, I have to wait in a telephone queue for them to answer. That suggests that their staff are not doing much sitting around waiting.

  16. Would not the cost of alterations be mentioned or be built into the original purchase in some way.

  17. Richard (17)

    They’re not sitting around waiting when you call, evidently. And trains to London are always busy when I travel on them.

    Maybe you call your insurers regularly, and at a variety of different times of the day. Or maybe you call them once or twice a year, at the same time as lots of other people call them. Or, at least, when there is some degree of resource constraint.

    I don’t know. It’s not really the point. The point is that it’s far more complicated than just saying ‘processing my request will only take five minutes and therefore it’s unfair to charge £25 for it’.

    john maplas (18)

    I’m sure it used to be. I think these charges are a relatively new thing. I guess that the insurers know that the way most people choose an insurer (comparison websites) means that a cold, hard quote is the only tool they have to win business. If they have a ‘we don’t charge for policy alterations’ policy then most people won’t see that or take it into account.

    Like someone mentioned above… Ryannair! Get the headline price as low as possible, and lump the extras in later. The consumers of the UK have decided that they like this model.. we know this, because whilst Ryanair might be the most hated companies around, they’re also one of the most successful.

  18. Yeah it’s more complicated, the complexity boils down to this thing we call “overheads”. An organisation the size of an insurance company has the resources to determine when and where it needs most, er, resources, and manages that way to not have too many staff sitting around getting paid to do nothing.

    @Luke, congratulations at entirely missing the point of my comment. Of course I expect any service I buy to be priced higher than the cost of provision. I am merely, like many people, bemoaning the fact that one effect of the low-cost (actually they are often not all that low-cost) operators is that everyone else is following suit and carving up a once unified service provision into lots of microtransactions, which is neither transparent nor convenient.

    I accept the economics of the situation, but that doesn’t mean I have to agree it’s such a great development, or to think that charging people, what is it nowadays, €40, for the temerity to request a boarding card at the airport rather than printing it “at home” (where, by definition, you are not for at least one leg of your journey). This charge for example is obviously wildly above cost and done simply to advertise lower headline fares. Ryanair are big enough to predict (and learn from experience) what proportion of travellers will require the “service” and budget accordingly.

  19. > The consumers of the UK have decided that they like this model.. we know this, because whilst Ryanair might be the most hated companies around, they’re also one of the most successful.

    For consumers read captive customers who use Ryanair because they have a monopoly on the route they wish to fly.

  20. Ian

    Ryanair came from, pretty much, nowhere. They had a model that consumers wanted, and they are no so successful that one could, on occasion, accuse them of exploiting a captive market. But the established airlines used to do that… until the low-cost carriers came in and shook everything up.

    So if you think that Ryanair are successful in spite of what consumers want, rather than because of it.. then go and make your fortune the same way Michael O’Leary did.

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