Car insurance – I am confused (.com)

I saw an irritating ad from last night.  The irritation came not just from the ad (though that did make me want to never go near the site) … it came from the apparent deluge of insurance ads recently, together with what I perceive as claims about savings that are designed to mislead listeners.  The reason that that irritated me is that insurance should be pretty much a commodity item.  You may want more or less cover or service in the event of a claim, but basically its a distress purchase whose cost is defined by the same type of statistics for all players.  The pricing of course may not be limited, with price sensitivity as real opportunity to affect profit levels.  Anyway, it left me wanting to check up what claims about savings the providers say, whether I think they really are misleading, and why.  Positive selection (attracting people who are less likely to make a claim than the base statistics would show) is also a big deal here, but in the interests of slightly limiting the length of the post I wont look at that now.

Since it started me off, lets look at – “During 2008, customers saved on average £208 on car insurance through”.  The small print says – Customers who provided a best alternative price on car insurance between 1st January and 1st June 2008 saved on average £208.18″.  This one feels borderline bad – not really materially misleading, but not quite meaning what is says.  The concern I have is that I’d expect a good percentage of the users to be putting in their renewal cost, not their real ‘best alternative price’ – more so for them since they are trying to attract a group who get confused by suppliers and don’t like shopping around.  Since the renewal cost often has a price hike in the chances are that a fresh quote will be materially cheaper … but this has nothing to do with, it’s just a mechanical output from getting a series of revised quotes (or one from a broker).  Also notable that it’s ‘customers’, not ‘prospects’, and I presume that there are few customers who choose despite having a better quote elsewhere.  So, with no negative savings, the average saving is bound to be positive. don’t have a strapline version, but do have whole editorial piece on an independent survey showing that” returned the lowest premiums for nearly twice as many profiles as its nearest rival, and almost six times more than the site ranked last. …  six main comparison sites: Moneysupermarket, Compare the Market, Confused, Gocompare, Tesco Compare and Uswitch. … In 42 out of 100 tests, it delivered the best, or equal to best, quote in terms of price: this is well ahead of its nearest rival.”.  This feels like one of the better statistical claim I found, since it deals with the real prices given to a wide variety of profiles via similar price comparison sites.  However, it still means that you’d be more likely to get a better price if you used the five competitors than if you used moneysupermarket … just that no one competitor could beat them.  So, it would be nice to know what the characteristics of the groups that didn’t get the best pricing were of course since you might well be in one!  If I were to do a reverse spun version it might be “Most people can get a better price somewhere else, though not at any one site for all types of people”

Lets move to what I perceive to be the other end of the ‘misleading stats’ scale with Compare the Market – “94% of people in the country could save by using comparethemarket”, with the small print – “Based on online independent research by Consumer Intelligence during 01 June 2008 to 03 July 2008, which compared 44 direct motor insurance providers with”.  The numbers claimed as benefiting are so high that this statement screams out as being mendacious use of statistics, especially when compared against the moneysupermarket claims above, that lists comparethemarket, and clearly does better than them for the profiles tested.  Anyway, looking hard at the actual words used, my eye is drawn to the word ‘could’.  I think the way it is supposed to be read is that 94% of folks could get a lower price than any of the direct insurers if they were to go to comparethemarket.  But, it could also mean that in 94% of cases tested the comparethemarket quote was lower than at least one of the direct insurers – and that’s a radically different position that is not remotely surprising, and would be true for almost any broker.  The other issue that nags at me is that I don’t know who the 44 direct insurers are, and specifically, they could be a set that are not keen on price for the groups tested – does it include directline, esure and the like for example?  Absent a more compelling understanding of their stats (I am intrigued enough to have mailed them to ask for more details), for now I am left thinking that what they claim is designed create an inaccurate impression of outstanding price competitiveness.  Again, assuming my negative view of their claim is correct, and toying with a reverse spin version I get “You are twice as likely on average to get a better price from a direct insurer than from comparethemarket“.  That version looks sufficiently bleak that I do wonder if I have misunderstood their claim!

Moving though some others, Uswitch says “You could save up to £200 on your premium”, but has nothing to back the claim up that I can find, and I trawled around their site for a while looking.  Again, I have mailed them to ask, but right now I am underwhelmed.  Stating sources is such a basic discipline that not doing it looks just sloppy.  Looking at what they do write, my eye is again drawn to the word ‘could’. This actually feels worse than what I perceive as the comparethemarket level of lack of statistical honesty.  To be true all they need is one case where one person can get a quote that is £200 higher than their quote, and that should be easy.  To be more charitable, it’s so easy for that to be true that I think it must be a little more robust than that – indeed it might well be as good as the AA claim below, though less useful to a consumer since it doesn’t tell you anything about what your average saving might be. EDITBut, absent any more information I lump it with the comparethemarket level of statistical robustness – at the bottom.  I had a response from a uswitch representative who said :-

“The caveat that sits behind the savings claim is:  “At least 17% of people who switched car insurance provider with between 1st Jan and 31 March 2008 saved £200 or more”.  This methodology was given clearance by both the ASA ( and the BACC, who sign-off all television advertising before it airs. We will be updating the caveat in the next few weeks to include the most up to date information available to us, and will adjust all communications if a new saving message is calculated, be it higher, or lower than the existing £200.  With all things being equal we would wish that we could save everybody the advertised figure, but sometimes a customer may already be with the insurance company which offers the most competitive premium for them.”

Great to have a response, and it does show that the methodology is more robust than a single caseA bit more robust anyway, even if 17% doesn’t really sound like a compelling propertion of applicants who could save the amount, and it’s sounds like it is against the figure that they enter, not a competitor price (as it is with AA for example).  I still think that it’s poor form not put the source on the actual web page.  So, from a consumer perspective it still doesn’t sound like it provides any really useful information, even though it is clearly designed to sound like it does.

It’s joined by Quotelinedirect who say “based on an ongoing survey of new customers, we could save you up to 30%” but have no backup for the statement.  The ‘up to’ makes it effectively meaningless, though I’m sure the intention is to get a big number that is defensible, even if only very tenuously.  It’s also joined by who have a Google paid for banner that states “Get Car Insurance Online Today & Save Up To £250. Get A Quote Now!” but once again I can find no details supporting this claim on their site at all.

Looking at the AA we get “Our survey shows that 25% of people could save £200 by switching to the AA for their car insurance”.  The small print says “25% of people could save £200 by switching to the AA (survey of new business quotes based on a comparison of 24 of our competitors, June 2008)”.  This is intriguing as the claim made I initially read as again playing on renewal premiums, but the small print shows that it doesn’t.  It’s actually relatively helpful since put another way it says ‘filling in our form will earn you £50 on average’.

Finally in the list we have Norwich Union who say “Did you know that 10% of all our customers buying car insurance paid an annual premium of £212 or less?”.  The 10% is such a underwhelming claim that for my money it neuters the £212 part which is presumably designed to be the hook.  The RAC have similar with “Did you know 70% of our customers pay a premium of £350 or less? As at 31/01/2008: 70% of our customers who purchased their car insurance from RAC Direct Insurance in the previous 12 months paid £350.00 or less”.  That feels a little better since it at least includes the majority of their customers.  But, it still feels less useful than the AA claim above since it doesn’t help understand if you might on average save.  However, in both cases I can see how it might be designed to pull in folks whose premiums are slightly above that level today, so acting as a good selection method – for RAC for example, I can see that it might fit with their target membership market (mid range and newer cars – less likely to break down a long way from home), and given a £55 reduction for RAC members, the tie-in might actually be quite effective.  So, overall I think it is worded to be interpreted accurately, and might be useful for a consumer.

That was all the ones I could find who made claims about pricing.  There were however, quite a number who chose different strategies, many of which also have their dodgier elements (e.g ‘discounts’ on renewals or higher no claims bonuses … against a base price that they set!).  There’s a brief list below :-
Direct Line
(goes for renewal discounts)
esure – up to 75% no claims discount, with 70% at the start building to 75% over 5 years – compare with Churchill at max 65% … but notably exactly the same as Sheilas Wheels which is hardly surprising as SW is part of esure, even though positioning is different
More Than – “Get 10% off your car insurance in the first year and 20% off in the second year and every year after that, unless you claim” says nothing very much
Sheilas Wheels – No promises or comments at all, other than handbag cover and female friendly repairers
Tesco direct
(manufatured by RBS) – “Exclusive to Clubcard customers – £40 off shopping”
Tesco compare
– The link takes you to a page that says “The best overall motor insurance comparison site to the customer – Defaqto: Motor insurance in the UK May 2008”   I’m not buying the report to find out their view on why – I’ll be charitable for now and say that they will have spent more time on it than me!  Their actual hooks are “Who else would you trust to find you the best deal?” and “You won’t get the same policy cheaper by going direct” I’m not sure about the second of those – it sounds like one of the specious claim made above, but with no information to back it up.  It isn’t their main hook, so I’m not digging further
Quotezone – a meta-broker (they get quotes from other brokers) who seem to make no promises.  It’s like they believe that folks won’t see other meta-brokers at all!  Similarly, Q4Insure makes no promises other than they will list other brokers and direct insurers as well – basically saying that they will be at the top of the food chain.  Both are basically relying on Google inertia I guess
Churchill who promise “We guarantee to beat your car insurance renewal quote – as long as the cover is on an equivalent basis to ours and you haven’t made a claim during the last three years.”.  This one, with it’s attendant ads, does actually seem a really different proposition – not ‘you might benefit’ but ‘you will benefit’.

This all started with an irritating ad from, and a belief that at least some of the statistical claims made were designed to be misleading.  After having looked at a lot of claims, I conclude that quite a few of the pricing claims are indeed worded with huge positive spin – they imply that the statistics are relevant, but in most cases they provide no useful information to a consumer, and may leave many confused – and with a delicious irony, is in this group!

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4 Responses to Car insurance – I am confused (.com)

  1. Brian Brown says:

    An excellent bit of analysis Greg, which shows just how complex the issue of buying insurance online actually is!
    I am one of the co-authors of Defaqto’s motor aggregator reports, and we have spent a lot of time carrying out independent analysis of the various aggregators. One of the main reasons we rated Tesco as the “best overall motor insurance comparison site” was because it is the site most likely to give you a quote which is actually the same as that which you get when you click through to the insurers’ websites! NOTE – we did not say they were the cheapest, or would get you the lowest quote, just that you can believe the prices on their site.
    It is surprising how often the first price quoted on aggregator sites isn’t the actual price you see once you get through to the insurer and put all of your details into their system.
    What you need to consider in all these price comparisons though is the actual cover on offer from the insurers being quoted. If you strip out legal expenses, courtesy cars, breakdown, foreign use, add in a £500 excess, make certain assumptions about the customer (e.g. car is kept on a drive not a public road) etc. you can easily get quotes that appear cheaper than the direct writers and therefore make claims that you could save customers £100s if they used your site. The reality once you click through to buy is often very different.
    Overall customers need to accept that buying online is a bit of a minefield at the minute.

  2. Greg says:

    An interesting response, does really help identify why Tesco might do better … and yet another wrinkle. I am also reminded of the last confusion I had on insurance pricing – see here :-

  3. Pingback: repost : Car insurance – I am confused (.com) « Dodgy thinking

  4. sajjad says:

    Direct Car Insurance is the option of buying your car insurance directly from an authorized insurance company instead of going through insurance middlemen and independent more…

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