An insurance broker replies
Every day I travel to the old established and quite large Insurance Brokerage which I now own in my Triumph TR3A. I believe this might qualify me to comment about Insurance with a reasonable lack of bias (other than maintaining that the TR3 is the best sports-car ever made!).
You published two letters in May and June under the heading of the "Muddled World of Motor Insurance" and an editorial comment by you sir, offered to publish any constructive information from the Insurance world and also referred to Insurance as "legalised robbery bordering on the criminal". I do not know what sad experience you yourself have had of Insurance to cause you to form this view of the Industry which probably attracts more overseas custom than any other. There are 52,000 Insurable risks but it is clearly Motor Insurance which causes all the problems. The law at present requires the owner of a car to be Insured against any injury he may inflict on another person. With effect from next year, the other persons will have to include his passengers. To cover against this risk known as "Road Traffic Act" is really very cheap but virtually everybody quite voluntarily elects to buy a fully Comprehensive Policy including damage to their own motor car. So often people feel they are being pressurised by the law into taking out expensive cover. This is not the case.
The predicament in which Mr. G. R. Simpson found himself in your May issue, revolved around the matter of damage to his car in an accident where he was entirely innocent. He passed the matter over to the Legal Department of an Association and, at the time of writing, they had not been able to recover his damages for him. I must assume that your correspondent did not have Insurance cover on his own vehicle or else he would clearly have asked his Insurers to produce the cover he had paid for, repair his car and then encourage them (which they would certainly have done in any case) to seek recovery against the guilty party since if they were successful, he would not lose his Bonus.
We can, therefore, hardly blame your correspondent's own Insurance Company for their lack of interest in a risk against which he had not Insured. All claims for uninsured losses, whether they consist of the entire damage, as in this case, of a voluntary Excess or of incidental expenses such as hiring an alternative car, are dealt with entirely as a legal, rather than an Insurance matter and the claim is controlled by Common Law. There is absolutely no legal or moral or any other sort of claim which you can make against the other person's Insurance Company. It is the driver who caused the damage who has been negligent not his Insurance Company and it is against him that you must claim using the normal machinery of the Law.
The advice given in the second letter by A Mr. Rushbridger who claimed direct against the Third Party himself is excellent and this clearly was highly successful. It is, of course, highly probable that the person against whom one is claiming will be Insured against such claims being made on him and it is in this capacity that his Insurance Company enter into the fray acting entirely on his behalf and not unnaturally attempting to resist the claim being made on him. It is only when you are the claimant that this action becomes so irritating, the driver against whom the claim has been made is normally delighted that his Insurance Company are acting on his behalf and resisting the claim being made on him which is precisely what he paid them to do.
Your August issue contains another letter about Insurance with the provocative title, presumably again given by yourself, sir, "The Insurance Racket". This came from a motorist who wrote to six different Brokers for quotations. To his surprise five of them quoted the same Company for cover. There are 140 Member Companies of the British Insurance Association offering Motor Insurance. (There used to be approximately 24 non-Member Companies also operating but 17 have become insolvent). A Broker's job is to select which of these numerous Companies will be best for the particular needs of their Client. I would have thought the fact that five of the six Brokers came to the same conclusion and recommended the same Company was a considerable accomplishment rather than a matter of criticism! Unfortunately, the fact that the five Brokers quoted different premiums for the same Company is not such a matter for satisfaction! There are only three possible reasons:—
1. One premium was correct and the other four Brokers were misreading their Underwriting/Rating Guide for the Company concerned.
2. (Much more likely). They had insufficient information to quote correctly. There are so many factors taken into account that it is normally almost impossible to quote these days without a completed Proposal for quotation purposes. In this case it would have been better if they had said so.
3. It could be that the quotations are not as identical as they appeared—for example, one might have been with a Voluntary Excess, another with voluntary restricted driving.
Your correspondent says that he ignored all the quotations and arranged the cover with a local well-established Office and this is undoubtedly the best course of action since over a desk they could find all the relevant information. He did include in his letter the most ill-informed remark in your correspondence columns about Insurance, namely that it might be "the cut price Broker who is making all our Insurance Companies go bankrupt at his profit". It just does not work like this. The Broker is paid commission by the Insurance Company to whom he sends the business. The average commission paid is 12 1/2%. This commission figure is built into every premium and exactly the same premium would be quoted whether one went direct to an Insurance Company or through a Broker or Agent. There is only one correct rate for any particular risk from any one Company and this is to be found by correctly reading the Rating Guide. This figure cannot and never does change. So if a Broker quotes too high, the Policy will come through at the correct premium and since he must send the Policy to his Client, even if he did not send his cheque for the over payment, his Client would very properly immediately apply for the refund. If he under-quotes then the Policy will still come through at the correct higher premium and, in this case, he must pay the Company the balance out of his own pocket. There is no way in which a Broker can obtain more than the correct commission on the correct premium.
There is no such thing as a 'cut price Broker'. The Broker can only quote the selected Company's premium and cannot make any charge other than the commission included in that premium. The Broker may well help to hold premiums down since Companies know that most business is now transacted through Brokers and it is for this reason that if their own premiums are too high they know they will not get any business and must be as competitive as possible. In this respect I would suggest the Broker is unconsciously carrying out a considerable service to the motoring public.
Finally, it it a little unfair to refer to "all" Insurance Companies gong bankrupt. Seventeen non-B.I.A. Companies have become insolvent. This was entirely predictable and no reputable Broker would have been dealing with any of them. One B.I.A. Company has gone bankrupt. This was a shattering blow to the Industry which I think confidently was a quite exceptional case—the Rolls-Royce of the insurance world. I think I am unbiased when I say that the British motorist is still getting an excellent deal from the Insurance Companies compared with his overseas counterpart.
The basic premium in my own Town for a BMC 1100 is £37. In Madrid it is £138—in Brussels £186—in Rome £210—in Montreal £212—in New York £217 and in Paris £238.
Michael J. Mortimer, A.A.I.B.