I love my new espresso machine (thanks CHOICE testing!). But for all the convenience of enjoying a long black over breakfast, I miss the ritual of a daily coffee run to the local café.
I miss the loyalty cards, swapping nine stamps for a tenth free cuppa at the end of the pay cycle when the bank balance is looking dire. But I’ve got a bold new deal to shake up the system. Why not take away the free drink, and instead mark the price of every tenth coffee up by a third. What are you going to do –go elsewhere?
You’re right, no café worth its salt would hold its loyal customers in that much contempt. That’s more of an insurance industry thing. Don’t believe me? Believe the NSW Emergency Services Levy Monitor. Customers who stay with the same insurer pay 34% more on average than a new customer, according to their 2019 findings.
The monitor was hired to make sure insurers were passing on price cuts after the axing of a state insurance tax, and the industry didn’t like this diversion into loyalty penalties. Stay in your lane, boffin. How dare you use our own data against us.
Weaponising data is more of an insurance thing, too. Insurers invest heavily in researching their rivals’ pricing. If a competitor who has better risk modelling begins charging higher premiums in a flood zone, an insurer might decide to follow suit. Sometimes they simply decide to jack up the price and figure out the reason later on.
A recent ACCC report quoted the gleeful internal messaging at one home insurer after learning that their competitors had raised prices: “This makes me happy. I didn’t realise we had so much opportunity.”
“We need to be able to justify any increases,” the senior manager continued. “I can see regulators being
interested and ‘profiteering’ allegations downstream… I’m not saying don’t do it, far from it, I’m just saying let’s have some good reasons including rising costs … of reinsurance, changing claims patterns and costs, reducing portfolio subsidisation blah blah.”
Blah blah. You’re not supposed to say the quiet part out loud! I wonder if they regret those words now, or simply regret their publication. Insurance is a secretive business. Lots of complex analytics, lots of valuable data they aren’t interested in sharing – even with customers who might be better able to protect their property if they knew. They tell us we need protection against all sorts of perils, but next to nothing about our individual risk, or how they arrive at our premium. We certainly don’t know what analysis goes into the price hikes that cause so much teeth-grinding at renewal time.
I get plenty of emails from people at their wits’ end trying to get their insurer to convincingly justify increases, sometimes as much as 25% in a year. But now we’ve had a peek behind the curtain. For every big data innovation, there’s another cynical cash grab. I’m ready to start taking insurers at their word, especially when the mask slips and they tell us what they really think about us, their loyal customers: blah blah.