I used to work in insurance, and here’s my explanation.
Different insurers use different factors to estimate the likelihood of you making a future claim. In the case of Budget Direct, they have decided that you making a previous claim is an indicator you’re a higher risk of making future claims. Even though it was breakage of glass, their underwriting team may have decided that this could indicate a higher chance of other claim types (eg theft, accidental damage).
Not all insurers will use the same factors in deciding price. As it happens, the insurer I worked for didn’t use previous claims as a price factor at all for home products (only whether we could offer cover). Your best bet is to shop around different insurers to find those ones that will give you a fair price despite the claims.
If you do get a cheaper price, remember to read the PDS in detail to make sure you’re covered for the same things.
There is anecdotal evidence Budget Direct is not interested in any business in any insurance line where a claim has been or is likely to be made, especially auto. It would not be surprising if they used the same underwriting principles for home and contents.
As for making minor claims, many of us rightly or wrongly agree that making a claim is a short term gain (often a relatively small one) for long term pain in higher premiums. It can be ‘the underwriter’ or the underlying business model. I have a high excess and save a small amount to account for that, eg I essentially self insure up to a certain amount.
A net (and Community) search has some interesting hits about Budget Direct one can take at face value or read between the lines and make one’s own judgement. As an example note their glowing reviews on productreview.com.au are about ease of purchase and costs but if one filters by claims made they are dominated by 1-stars. More than one post about being non-renewed after making a claim. Another bit to notice is that Budget Direct’s own web site ‘owns’ the first pages of google returns. They have done well in using meta data and ad words as well as sponsored. Sometimes they will punt ‘for their price’ for a year, hence the high quote when even a minor claim is disclosed.
Thanks Peter and Phil for your feedback and insights. I’m certainly steering clear of Budget Direct.
I note that Budget Direct are underwritten by Auto & General Insurance Company Limited. I saw that Qantas is also underwritten by Auto & General so I got a quote from them. It is clear from the online process of both insurers that they use a common back-end as the questions and structure are basically identical. I tried the Qantas quote with and without declaring a prior claim and the difference in price was $270. That’s way better than the $1100 from BD, but still significant. There was no way on the Qantas website to state what sort of claim it was such as breakage of glass. (this about the only difference between the Qantas and BD websites).
I think Phil’s comment regarding the excess is the most pertinent. It’s probably better to go with say a $1500 excess on home insurance, save hundred’s of dollars each year on the premium and not risk potential claim related premium increases for minor claims (<$1500).
Although I didn’t work in underwriting, to the best of my knowledge this is true. Where multiple issuers have a single underwriter, the pricing factors are likely to be similar. The issuer writes the product and what it will cover, and the underwriter decides what it will cost and who is acceptable. For that reason they are likely to ask similar questions.
As for why there may be a difference in whether glass claims are considered differently, it could be due to one offering or including glass cover in a different way to the other.
As you are an experienced insider that may be true but from an outside layman’s view it seems more like underwriters recruiting as many retailers to flog their wares as they can coupled with the underwriters each having multiple brands of their own in competition with themselves for different demographics.
Many organisations, banks, and other companies seem to be trying to sell insurance (and lots of other things) far outside their expected purvey.
At the end of the day it seems to be artificial competition draped in unique call centres and management bonus structures. In my experience the very similar pds and premiums have been based on the underwriter, not the smiling faces, pretty web sites, and product naming enticing us to buy from them.
The only given for me is Allianz is not interested in business from Renault owners no matter who the pretty face is trying to sell me, a customer with a record of decades of no claims and no moving violations driving a sedate 4dr sedan and mid-SUV. Their premiums are over the top in comparison to the others. For house and contents although I am in a comparatively safe postcode with a B2B alarm they even decline to offer a quote because all my fairly expansive sliding windows do not have keyed deadlocks, just blocking poles. I learned to check the underwriter first and if it is Allianz I give them a miss starting from the get go.
It can be that, but also different retailers wanting to become an ‘everything’ company without the resources or need to have an underwriting department. Eg Woolworths and Coles both use insurance to try and drive increased involvement with their brand.
There are two possible reasons a given insurer would be an outlier on price for Renaults. First is that potentially their repairer network has less access to parts than others, or less experience working with them. This leads to claims costing more than they might for other insurers, and skews the price of the premium. The other possibility is that they insure very few Renaults, leading to limited data. Where an insurer doesn’t have much data on a given vehicle (average claim value/frequency), they tend to just presume high risk and quote an expensive premium.
If you are in Melbourne, have you tried RACV who offer a combined home/contents insurance quote?
I ask because locals in our area are talking about huge premium rises, or not being able to get home insurance at all, are saying that RACV are the only ones that would give them a fair deal. Other insurers have slapped a flood risk premium on them, whether real or imagined.
We have everything with RACV long-term and have only claimed on Caravan on Car insurance (pre-Covid). They didn’t gouge the next premium. My feeling is that the longer you have been with them, and the more business you do with them, the better they treat you.
I agree with you conclusion - never make a small claim on insurance and always maximise the excess.
Hi, Sorry for the delayed reply.
I currently have a couple of vehicles covered with RACV so I get their normal multi-policy discount. I have shopped around and they have continued to be competitive (for me).
In relation to home and contents insurance, I did get a quote from RACV and they were approx twice the price of the other 3 quotes I got. Not sure why, but obviously they weren’t anywhere near competitive in this case.
There can be a number of reasons why an insurer that is competitive in one area may be less so in another, including:
Their product has more inclusions/less exclusions
The insurer sells fewer policies of this type, resulting in decreased data and higher expenses
The insurer has fewer repairer/builder agreements for the area or material your home is made from
Both insurers have different ways of calculating risk. (For example: One insurer may calculate your flood risk by flood claims in your postcode, where another may calculate it from the elevation of your house.)
Like @Peterchu , I also used to work for an insurer, and a good example of this ‘not much data’ was when NRMA Insurance decided back in the 80’s that all cars with a turbocharger would henceforth be given the highest risk rating. Didn’t matter whether it was a sports car, a Saab, or a tiny Daihatsu - they were all treated the same. As one might imagine, this saw some premiums increase by huge amounts at the next renewal.
How unlike previous requirements for learner and probationary drivers, implemented significantly later than the 80’s. L and P (then P1 and P2) platers were prohibited from driving most any fuel efficient modern car because they tended to have turbos. That ridiculous rule evolved into a defined power to weight ratio that is at least somewhat saner for the intended purpose.
Some insurers seem to be purposefully avoiding ‘catchup’. If they charge ridiculous premiums because of a lack of their own data, they will have ever less data and thus are declining any but the well enough heeled where their price doesn’t matter. An ever smaller pool for data collection?
In a way, this can act against the consumer. Say for example classic cars. Insurer Shannons dominates the area of classic car insurance so heavily, that no other insurers can get enough customers to run a viable product. Because of this, insuring with anyone OTHER than Shannons is impossible or far more expensive. And so the cycle continues…
I have a renewal notice that, like most, is several hundred dollars dearer. So being the prickly customer I am I thought Id play with their quoting model to see if I could shave some of that premium off. Not a good event. The online quoting model has been very modified not in customer favour. It is (sarcastically) streamlined to stunt any chance to nuance cover for clarity or certainty. Further I visited a mall NRMA box office only to be advised that discretion to modify quotes have been removed from them as wel…Below is what I have sent to their complaints box which explains… (i hope)
I have been working my way through your online quoting system for home and contents insurance, answering each question as it occurs…
The end quote calculates a home property value and a contents value as expected.
What is of great concern is that the property and the contents values are predetermined by NRMAs associated calculators BUT do not allow for modification ie you set the value on both key values with NO ability for me to change it or self determine preferred values.
Then there is this confirmed in that very little print you provide …
“…The Cordell Sum Sure Estimate does not take into account individual design features, site specific conditions, structural conditions and materials, local planning laws or any other regulations and may not be suitable for your particular circumstances. The Cordell Sum Sure Estimate is an indicative guide only and must not be relied upon as an accurate representation of the costs associated with rebuilding your property or in lieu of appropriate professional advice.”
Okay so you have an AI or similar program/ calculator (what I think is a sneaky way for a disclaimer) and same for contents as well but the quoting system no longer , as it has in the past, allows for user manual over ride to better improve or simply choose an alternative value.
Yes you have at the very very end a small opaque ‘modify’ box, but if pressed fails to work and refers to a 133number… very poor form.
Further your self use quoting system has significantly changed for the worse - broadly limiting discretion and detail thst would make my insurance nuanced to my circumstance.
Previously you could choose cover for items inside or out of your home for general and specific items. Now the quote model seeks to insure goods twice, 1. For contents (inside home) and again if ‘portable’ (away from home) is required. The item is valued once for inside and again for outside, doubling its insurable value. Eg a ring worth $5000 is now insured at $10000, once for inside and again for outside. You may have external underwriters but this is an nrma branded product and reflects totally on your reputation
In summary can you please justify and explain the rigid, fixed quoting model on offer that while predetermining a fixed value on property and contents proceeds in the small print to discredit the accuracy of those fixed values?
Your nominal attempt to redirect quote users that fails to open up the quote for personal adjustments further discredits NRMA.
And I am a fan. Or have been.
Hi and thanks, i just read your insiders profile on risk assessing and the queries you propose should be asked, all logical/good… here it goes the BUT…
have you ever tried to get an clean reply as a consumer… i cannot even get a lay persons sensibility to do you cover this or how did you value that… its an industry that appears to love its opaqueness, specifically vague.
Some insurers have a document called a ‘Premium, Excess and Discount Guide’ or similar. The idea of this document is to outline what factors an insurer considers in price and what excesses can be chosen/are fixed.
What’s the problem? It’s not mandatory, so not all insurers provide one. Others provide a guide with vague language. For example with car insurance, an insurer may state the price is affected by ‘Where you park your car.’ Another might provide better detail by specifying ‘Your street address, and whether you park in a secure garage.’
In the second example, the consumer is better equipped to understand what may alter the price of their premium.
RACQ Insurance Limited was fined $10 million “for potentially misleading customers in its product disclosure statements (PDS) about the pricing discounts available for certain types of insurance cover”. Sounds great doesn’t it that they have been required to pay $10 million in a fine. It is the back story which puts this $10 million into the “cost of doing business” category. The $10 million was for approximately 458,746 customers missing out on approximately $86,476,339 in discounts they should have received. This “potentially misleading behaviour” occurred for 5 years between March 2017 and March 2022. The Government got $10 million so we should all be happy (sarcasm and cynicism about the outcome and penalty used here if not recognised).
There are as noted other financial penalties including court costs and restitution. Not insignificant and at a greater total cost than the gain?
I remain amused how many not for profits, exist primarily as profitable business enterprises. It’s a thin vale that delivers substantial rewards to management, statutory office holders and board members. Are daily decisions made in the best interests of members or the career outcomes of those making a living from the not for profit?
P.S.
I am a member and have in the past had bundled insurance through RACQ. Not sure if I’m in line for a refund looking at the dates covered by the disclosure.
Most not for profits/mutuals aim to make reasonable profit and reinvest it to improve products or invest in new technology. Few sell their services at cost price. The reason for this is most non-profits compete in sectors against for-profit companies. The sad reality is a flashy marketing budget and constant aggressive expansion deliver the most rewards in our economic system.
How many people continue to choose a big 4 bank that delivers worse products than many smaller/mutual competitors? How many people choose an insurance policy full of exclusions to be brought up at the time of a claim? The reality is our system is simply designed to reward this behaviour, non-profit or not.
