What kind of insurance is too expensive?

[mSure]

Hi everyone,

I'm looking to start a mutual insurance company for businesses that struggle to get insurance at a reasonable price. Do you mind sharing situations where you looked for a particular type of cover and decided not to buy it because it was too expensive?

It would be super helpful for validating my project.

Thank you!

 

[JEREMY HAWKE]

The established commercial brokers already bring the lowest prices and I would struggle to understand how a new start up would bring discounts without a reduction in cover.

We don't look at cover and decided not to buy it . If insurance costs rise then this is just passed on to the end customer if you cant find the equivalent cover cheaper

 

[fisicx]

If they can’t get insured at a reasonable price it’s usually because they are high risk. Assuming you aren’t doing your own underwriting how are you going to find someone prepared to accept the risk?

 

[Mr D]

To answer your question OP - any insurance that cannot be afforded.
Take a small business, turnover say £500 a month. Owner decides to set up business insurance for the business.
For what is wanted maybe you work out its £750 a year. The business owner may say no, too expensive.

For a business with £10k a year profit the same quote may be ok great where do I sign?

 

[ImranR]

Most policies nowadays are sold as packages stacked high and sold at low prices. Most Insurers would be broke very quickly if they relied on the premiums alone to make a profit. They usually have an investment arm to make the real money.

 

[Mr D]

Most policies nowadays are sold as packages stacked high and sold at low prices. Most Insurers would be broke very quickly if they relied on the premiums alone to make a profit. They usually have an investment arm to make the real money.

So how do they get the money to have an investment arm?

 

[Scalloway]

How to start an insurance company in the UK.

https://parkinsurance.co.uk/how-to-start-an-insurance-company/

 

[mSure]

If they can’t get insured at a reasonable price it’s usually because they are high risk. Assuming you aren’t doing your own underwriting how are you going to find someone prepared to accept the risk?

I have two ways in mind:
1) A model that assesses risk more accurately.
2) Offering services to the customer that reduce its risk profile. For example, you could offer free cybersecurity assessments to make customers more aware of the most relevant attack vectors for them, which in term will make them put more protections in place for those risks.

 

[mSure]

So how do they get the money to have an investment arm?

From the premium income.

 

[mSure]

Most policies nowadays are sold as packages stacked high and sold at low prices. Most Insurers would be broke very quickly if they relied on the premiums alone to make a profit. They usually have an investment arm to make the real money.

That's the case with low-risk policies lines like personal auto or health insurance. With higher-risk ones like cyber insurance there's a lot more focus on underwriting profitability.

 

[Mark T Jones]

All insurance is too expensive

Until you need it, when you will discover you have under-paid.

 

[Mr D]

From the premium income.

So the insurers won't go broke relying on the premiums then.

 

[Noah]

So how do they get the money to have an investment arm?

Here you go.

 

[Mr D]

Here you go.

Thanks but mSure had already responded to refute ImranR's claim.

 

[lockyer]

That's the case with low-risk policies lines like personal auto or health insurance. With higher-risk ones like cyber insurance there's a lot more focus on underwriting profitability.

Erm, are you sure auto insurance is low risk? Most insurers break even or lose money on motor insurance

Have you had an actuarial or underwriting experience?

 

[mSure]

Erm, are you sure auto insurance is low risk? Most insurers break even or lose money on motor insurance

Have you had an actuarial or underwriting experience?

Used to work in a job where I analysed insurance companies and their business models.

 

[lockyer]

then you should really know motor insurance isn’t low risk

 

[ImranR]

Going back to the original post... The only mutual company I am aware of is the NFU Mutual whose premiums are typically two or three times the price of "mainstream" insurers.

I can't see another mutual being set up that can replicate their model which was ultimately derived from the National Farmers Union.