Controversial opinion: premium reduction for car insurance

Hi everyone,

I hope you’re all safe and nicely tucked in at home?

I wanted to share my personal thought following an article I read on “UFC Que Choisir” about asking for a premium reduction to your car insurer because the risk has been lowered due to the lock down.

Before I share my extended view on this I would like to start by warning how dangerous that kind of logic is… if you follow that logic you should also ask for a refund on your home insurance if the winter has been warmer than usual or ask for a refund with your Mutuelle if you ended-up being healthy all year long, etc. This is not the idea behind mutualisation and if we were to think like that premium would simply skyrocket and the ones that really need the insurance would not be able to get it so it’s a very slippy road they are advocating.

I’d also like to share another personal opinion about being a “penny picker”… look how well we’re doing now that we’re relying on all those cheap China manufactured product? My grandma used to say: cheap always end up being expensive over time!

Most insurers do not get the credits they deserve and you should be aware of the following:

Quick takeaways:

  • Insurers have paid an extra 2 billions since the start of the crisis (medical expenses, sick leave, etc.)
  • Insurers only saved 300 millions so far on car claims (it’s not including mutuelles and banks - just insurers)
  • Estimated savings are 1.8 billions over the year BUT this also includes banks & mutuelles (MAIF and GMF mutuelles have already saved 0.4 billion for example so the market share is not linear)
  • Only the private insurers have paid toward the solidarity fund that Macron created (375 millions so far)
  • Mutuelles AND banks have injected their “solidarity” money directly to their customers instead of the solidarity fund in a purely selfish marketing stunt, yet they’ll get to be popular as everyone like to get some cash back!
  • The stock market crash is also adding up to the insurer’s losses and yet they are bond by EU laws to be profitable (SOLVA 2).
  • The Mutuelles that are doing the cash back are IN NET PROFITS as they are not insuring “big risks” (loss of income is super costly for example and they aren’t doing it). Also MAIF has a very big share of public workers so none of their clientele had to endure some loss of income which means they’ve collected all the premium and made a huge saving without any other claim to counter balance the savings like other insurers have to assume.
  • FRAUD ALERT: CM-CIC may be trying to dodge a silver bullet as they are paying a flat rate for the loss of income (no one is paying) but it seems like if their terms and conditions were badly written and would have allowed their customers to ask for a full compensation not just a flat rate… The regulator is on the case and a trial has already started so we will see but they basically tried to cheat the system + transform the move into a commercial stunt… I’m disappointed would be an understatement here.
  • The Mutuelles and Bank that are giving some cash back have a very unbalanced portfolio, mostly car & home insurance which means that they almost didn’t get it by the claims others had to pay (medical & sick leave for the most part)… the spirit in France is supposed to be “Mutualistic” (we stick together) but somehow that crisis turned it into greed :frowning:
  • Some local bank agents ran a set a cold calling campaign to inform the prospective customers that “if you were with us you would have gotten something back”… the action speaks for itself I think!
  • Final note: the insurance business is not weighting on risks “on the fly”, for example, if you have a limited mileage policy (say 12k per year => 1k per month) would you call you insurer after a couple months if you only drove 800km? This doesn’t mean that you won’t end-up near to 8k at the end of the year and even if you are under 8k you can always review your policy the next year… this is how things are supposed to work. Calmly and dully thought through not done in the heat of a sanitary crisis :stuck_out_tongue:

Thanks for reading me so far, happy to engage in the conversation as I know this won’t be popular but it’s important to understand how things work if we want to keep things the way they are for “tomorrow” :wink:

Love to you all! :smiling_face_with_three_hearts:

11 Likes

So should we take it that this is a firm “Non” then @fabien?!

Good posts thanks.

2 Likes

Thanks :wink: Actually it’s not necessarily a firm no but it is a “wait a bit” kind of no. Again the goal of an insurance company is to mutualize risks over a set period of time and for car insurance that period is a year so I’d say be patient and wait for the end of the year. My personal opinion is that I’m certain that insurers who did make some savings will “compensate” on the following year’s premium at the very least.

Good things come to those who wait :wink:

Thanks for the insight Fabien. I had seen the trend and wondered if I should claim as we’ve four cars with MAAF but three are on limited milage. I decided against it because MAAF have been fair with me over the years.

1 Like

Someone once told me that motor insurance was a tough business and any profit came from investing premiums until the money had to be paid out in claims.
With current interest rates, that doesn’t sound so good. . . .

1 Like

Really great mindset John. I’d upvote 3 times if I could :wink:

It’s partially true… it is indeed the most crowed market but they are still making a profit out of it (although very small hence with they count on investing the premiums as well) but it’s also the key policy to “conquer” new customers as most of the time if you get a customer with the car insurance then odds are high that you’ll get other (more profitable) contracts… We kind of get back to the mutualism spirit… on some policies the customer is benefiting from this but not on others so that the whole lot remains balanced :wink:

I know MAIF have given their motor insurance customers the options of a small refund or a donation to good causes, bit surprised other companies haven’t done the same. From a personal point of view unless the government bans the use of your vehicle (which they haven’t) then you shouldn’t really expect money back as these are exceptional times, our vehicle usage hasn’t changed that much with perhaps only a 25% drop in journeys.

1 Like

100% agree view your view… actually we’ve offered our customers the option to amend the policy for free (no amendment fee) to set a limited mileage if they think the usage of the vehicle (and therefore the risk) will be lowered through the year.

In regard to MAIF, I’m really not a huge fan of their behaviour. Again, what they did make them look good from the general public’s perspective but Macron created a “charity fund” already and I wonder why no Mutuelle (like MAIF) or bank has donated a single euro to that fund instead of promoting their own business through that kind of action? This is a bit annoying for me but hopefully some people will understand that the “bad guys” (private insurers) played along and donated (on top of also doing some commercial gesture too as AXA offer 2 months premium for free for businesses financially hit by the COVID - even with existing customers not only on new policies) :wink:

I would expect that your 25% drop in mileage is not typical. I have only driven a handful of kilometres since the lockdown began, probably less than I would do each day on average.

1 Like

Exactly, I have used my car only twice since lockdown began and that was for food shopping.

Thats my everyday car. I have other vehicles that I would have used a fair bit during the warm sunny weather as well. The insurance risk on them is already spread over about eight months not twelve as they are tucked up for most of the winter. I’m not feeling too sorry for my insurance company.

I take the view that we are all in this together, and what goes around comes around.

Ok I have no great love for insurance firms, but they are staffed by real people who need real jobs, with real families who need to eat real food. So I have budgeted for my car insurance, and have no argument about paying it in full exactly as the contract I signed. Despite the fact that in the last 7 weeks the car has been driven 4 times to the nearest shop, so maybe 40km in total.

Who knows, perhaps during the rest of the year we’ll drive twice as far as usual as we’ll be so excited to be able to get out! And I wouldn’t expect insurer then to charge me more.

4 Likes

Again Mutualization is all about considering a risk over a fixed period of time. Sure you’ve used your vehicle less during these 2 months but for example in Belgium the claims after the lock down increased 40% because people where driving much much more than usual (as they were afraid to go on public transports). So it’s highly likely that the overall risk over the year will turn out to be roughly identical despite a lower usage in March/April.

And again, don’t forget that mutualisation means it’s not only about your usage. You may have used your car less but others may be using it more (referring to people using their car after the lock down instead of the public transport for example)…

As a note of hope let’s also not forget that the insurance code is pretty clear, if the claim rate is higher than last year they have to increase the premium BUT if the claim rate is lower they also have to compensate the year after so if they are really making savings on this you will all get some compensation on the renewal notice. AND if you’re with a company that didn’t make savings whereas others did made some savings you will also be able to switch to these providers so I’m quite confident that good things will come to those who wait :wink:

I’ve answered Matthews… there is hope to get some discount but the year is not over and I don’t expect anything to happen before the insurance company can assess the risk globally (over the course of the year) although it’s also highly likely that they will offer a discount if the claim rate turns to be lower than last year. Until then, stay safe :wink:

:pray:

I understand the theory but I actually saw the negative side of my insurers when they did not support me one of my cars was badly damaged when stopped. They are very quick and I am a good customer insuring three cars, a motorcycle and a car trailer through them for many years without a claim. They obviously weren’t prepared to consider me as an individual so I consider them to be a faceless business who will be happy to take my money for nothing. Goodwill goes both ways.

1 Like

Fabien, you have misunderstood my post. Like Jane I have no wish for a refund, I am on a "petit rouleur assurance” as it is, so already benefit from a reduced premium.
As far as I’m concerned Insurance cover is there as a protection whether it is used or not, albeit car, home, travel or whatever.
All businesses need our support at the moment.

4 Likes

Sorry, probably got lost in translation :wink: Your support is really appreciated Tracey, feels good in these hard times indeed and your logic is flawless :+1:

1 Like

Now that the kids have gone most of our driving is work related and we have not really stopped since the restrictions began, the 25% drop is social use of the car which has barely been driven.

1 Like