Insurance company rip-offs

Most folk think that motoring insurance is a rip-off. The widespread belief is that all insurance firms are run by crooks operating cosy commercial cartels bent on fleecing the innocent motorist, motorcyclist, home owner, traveller, etc. But although there are frequent incidences of "sharp" or illegal practice, the industry generally plays a straight hand.

It has to, and that’s down to insurance regulators and market forces. The regulators closely monitor the industry and set some pretty tight ropes. There are numerous interested parties here including the Association of British Insurers (ABI), the Financial Ombudsman, the Financial Conduct Authority (FCA), the Prudential Regulation Authority and the Chartered Insurance Institute. There’s plenty of cross-interest with these bodies. But broadly speaking, they’ve got the insurance industry surrounded.

And if there is outright fraud, there's always the police and the Crown Prosecution Service (CPS).

Market forces largely speaks for themselves. If one firm hikes its premiums too much and gets greedy, other players will move in, undercut, and take away the business. So all insurance companies check the market carefully and pitch their offers accordingly.

However, that doesn’t mean that there aren’t some wide variances. One firm might charge £200 for a given policy whereby a rival firm charges three, four or five times that amount. Why? Well it largely comes down to where the firm places itself in the market. If the majority of its business is in car insurance with little experience of bikes, that company might have less competitive quotes than another firm which dedicates its business to two-wheelers. It’s as simple as that. Therefore, "dedicated" firms tend to be cheaper than "non-dedicated" firms. But that ain’t always the case.

So that means that the boutique motorcycle insurers have it all their own way? No. There are still market forces even in a smaller, more dedicated market. But yes, a group of companies could try price fixing (and many industries have done, and continue to do, exactly that). But sooner or later, and probably sooner, the truth will leak out and the ringleaders (or scapegoat) will be up before the beak.

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