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Last summer many of you filled in a questionnaire about motorcycle insurance which was sent out with Open House. I would like to thank all those who took the time to fill it in and return it to the office.
This questionnaire was the last part of a long term research project into the motorcycle insurance industry, and along with a huge amount of other data it proved that the present system of motorcycle insurance is unjust and indefensible. We now need to move on to the next stage, that of an all out campaign to force the insurance industry to stop this blatant profiteering. This Campaign is to be spearheaded by the Motorcycle Action Group (MAG) and the NABD.
Details of the campaign and how you can all do your bit will be featured in the next issue of Open House and on the NABD web site, in the meantime I would ask that you read this article written by Neil Liversidge of MAG which explains the real need for this campaign and gives basic details the objectives.
Motor Insurance - It’s Time to Break the Mould and Put an End to the Protection Racket
Very few forms of insurance are compulsory.
Three that are compulsory are Employer’s Liability Insurance - for all employers, Professional Indemnity Insurance - for financial advisers, and Third Party motor insurance - for all of us who ride and drive.
Employer’s Liability Insurance and Professional Indemnity Insurance premiums have increased massively in recent years. The net result has been the closure of businesses the loss of jobs and the cutting of living standards. If the noises being made by motor insurers are anything to go by we should all expect big premium increases in the next year. Will you be able to afford to insure your bike? If you can’t, how will you get to work? Will you be able to work? And what exactly are you paying for anyway?
When insurance is compulsory, insurers have consumers over a barrel. It’s a protection racket in the true sense. Why is it that people who sell non-compulsory life insurance are regulated up to the eyeballs whilst the purveyors of motor insurance face almost no regulation at all? In my working life outside MAG I am an Independent Financial Adviser. If I advise you to take out a life policy or an investment then I have to tell you, up front, what commission I will earn on the deal. It’s called hard disclosure. But when did your motor insurance broker last tell you what profit they would make on the deal? When did the insurance company last disclose the profit margin on your policy?
It’s time to break the mould and put an end to end the gravy train for insurers. How do we do it? Reform number one - by campaigning for better regulation of motor insurance. Specifically we need transparency. Brokers must be compelled to disclose their commissions. Insurance companies must be compelled by law to disclose the profit margin they make on individual policies at the point of sale. They must be compelled to publicly disclose premium income and claim costs and to provide a detailed breakdown of what those costs relate to. We should be told how much relates to third party personal injuries, how much to third-party property damage and how much to own vehicle damage under fully comprehensive policies. We should also be told how much is being paid out to personal injury lawyers in legal fees since ambulance chasing was made a national institution. We don’t have a choice about buying third party cover so we have a right to know what we are paying for.
Which brings me nicely to the issue of Third Party Only (TPO) cover. Research suggests that in many cases there is little difference between TPO cover and Third Party Fire & Theft (TPFT). Why is this? If insurance industry propaganda is to be believed then theft is a major factor in premium increases. If that is true then TPO should be substantially cheaper. It should be but it isn’t. Any many insurers apparently refuse point blank to quote for it. Reform number two then - insurers should be compelled by law to offer TPO. Couple this to hard disclosure of profit margins and we should get realistic TPO costs in short order.
But what about all the people, I hear you say, who don’t want TPO? What about all those with twelve grand Harleys? Reform number three - it should be possible to buy theft cover and own-bike damage cover as separate items. Consumers could then shop around for the cheapest TPO policy and buy theft cover or own-bike damage cover elsewhere if they could find it cheaper. Sure comprehensive cover should still be available. But why should you not be able to buy the different component parts from different companies if you can get it cheaper?
I can hear now all the bleating from insurers who will say that it won’t work and can’t be done. It’s tough luck for them then that the financial services industry has already shown that it can be done. It is perfectly possible to buy Life Assurance from one company, Critical Illness Cover from another and Income protection Insurance from a third. You can go on to buy Unemployment Cover from a fourth and so on. The sophistication of modern computerised quotation systems can easily cope with disclosure of profit margins.
Right now the Government in effect says, “We will make you buy this product. If you don’t buy it then you can’t drive. If you do drive without buying this product then we will fine you, endorse your license, ban you from driving or even send you to prison. But we will in no way regulate the profits of those selling the product we are compelling you to buy.”
This is a patently unsafe and unfair arrangement. In the interests of a free and fair market in insurance it is time it was changed!
It is time to fight!
Neil F. Liversidge
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