To think this is just stealing.

[Parrotmore]

A couple I know have be redecorating their front room and have been looking at new furniture so the husband purposely knocked paint off the top of his ladder splashing over the sofa, the tv, carpet and some oft he units.
They have claimed and been given Harvey's vouchers to use to replace it all.
Plus the company replaced the tv but as theirs wasn't like for like (old model) they got the newer model.
This is just fraud right??
I'm really disgusted by this and now my opinion of them is that they are just liars.
They think everybody does it and I'm sensitive but I don't think I am.
So Ainu to feel this way. I now wouldn't trust them at all.

[Roussette]

I am sure lots of people have been caught out repeatedly making false claims because of data sharing. You can't make a claim, your policy ends, take out a new one with another company, make a claim and on and on

It's different now and so it should be.

[TheChocolateDidIt]

but, my dad claimed when he spilt paint over the landing and stairs carpet. It was a hilarious conversation of crossed wires with the insurance company who ran an overseas call centre. Turns out whatever country the call centre was in, 'landing' was not a word one used for the upstairs area of the hall and the lady on the phone thought my dad had a jetty and could not understand a. why he could not simply scrub the paint off and b. why the jetty was carpeted.

[MrsHathaway]

Never mind buckin.

As a colleague once said, actuaries are people who found accountancy too racy ....

Sounds about right. Mind you, the stories I've heard about the pension crisis to come when actuaries switch over from the 1970s life expectancy table to the up-to-date ones ...

[Buckinbronco]

Never mind what? What are you on about?!

[StatisticallyChallenged]

There shouldn't be if they've been doing their jobs properly - there's much more recent tables and they should be adjusting to reflect improvements and specifics for their own scheme too.

[wasonthelist]

Given that being involved in a minor bump has a statistically proven affect on the chances of being involved in another one

That's a big "given" - insurers always claim this but they could be lying or exagerating.

[MrsHathaway]

A lot of pension pots are invested in US life insurance, the premiums of which are based on old tables, or were at the point where the pensions invested in the life policies.

[LurkingHusband]

That's a big "given" - insurers always claim this but they could be lying or exagerating.

Insurers use publicly available data, and have to justify their premium differentials to ensure they aren't discriminating. The bottom line is it can be proven someone who has had an accident is statistically likely to have another.

Drivers who speed are more likely to have an accident.

And we all know the stories about someones Nan who smoked till the day she died at the age of 101 ....

[GarlicShake]

Just in case anyone's interested ...

People seem to be focused on premium vs. claims; however, this is most definitely NOT how insurance companies make money. Most insurers try to price their policies such that the total premiums collected each year are equal to the total amount of claims paid + expenses (we call this the combined ratio - claims+expenses:premium). The goal of a combined ratio of 1 is seen as ideal.

When an insurer collects premiums they put that money into an investment pool. They use the premiums collected to fund investments (generally in guarenteed or low risk securities). When a claim is made money is then taken from that pool and put into a cash account to pay the claim once the adjustment of it is completed. Where insurers make their money is on the interest and return on investment earned from those premium dollars while they are in the investment pool. The ideal is to have enough premium coming in to keep the investment pool fully funded but the profit itself comes from the return on investment rather than a surplus in the premiums charged.

www.quora.com/How-do-insurance-companies-make-money

From another reply on the same page ...

In fact, insurance companies can sometimes, knowingly charge too little for insurance policies and plan for an underwriting loss if they believe they can make a profit from investing the money they receive before having to pay claims.
On the flip side, insurance rates may be raised to make up for stock market losses.

[Buckinbronco]

That's interesting garlic

[HazelBite]

My exBIL did this, he pretended all his fishing gear had been stolen from his garage and claimed in excess of £4000, my SIL(his ex wife) has done the paint on sofa trick.

I wouldn't have the brass neck I felt guilty claiming for a new lounge ceiling and carpet when pipes burst under the floor above.

[wasonthelist]

Insurers use publicly available data, and have to justify their premium differentials to ensure they aren't discriminating. The bottom line is it can be proven someone who has had an accident is statistically likely to have another.

I'd love to see a source that I trust (like R4 More or Less) investigate the truth of this. Statistics can be bent to show almost anything.

[GarlicShake]

Going further up the chain, underwriters are the insurers' insurers. They are the people/companies whose assets supposedly cover every possible loss, should the need arise. In the same way, they make money by [a] receiving premiums and [b] continuing to use their assets for as long as the disaster never happens.

When asbestosis came to light in the early '90s, many Lloyds underwriters went bust. They had been quite happily reaping profits from their land, etc, while also receiving hefty premiums for the paper promise of selling the assets if the unthinkable happened. Well, it did. Many of the underwriters felt they'd been conned by Lloyds - years later, a final court ruled they had not. They'd set their property against a certain risk and enjoyed a double income from it. As things turned out, they had to make good on their paper promise. Sad for them, but nothing to do with the premium/payout ratio. They'd invested in a risk and been duly rewarded for it.

Telegraph

A 'Name's story

[StatisticallyChallenged]

Just to point out that website looks to be talking about American insurance companies - there are some pretty significant differences between UK and US insurers,not least because of the different regulations. But you originally said that false claims impacting premiums was a fallacy, and it's not - if insurers expect to have to pay out more then they change their premiums to reflect this. The low interest rate environment also doesn't suit insurers well at all and they can't just invest the money in whatever they fancy to try and make more money. It's far, far more complex than that.

Investing funds from pensions in life insurance policies is actually very sensible - at the time they were invested they may well have been based on older tables (the initial comment suggested you were saying that the tables pensions actuaries use are out of date), but that's because it was the most up to date info. It's basically a form of hedging longevity risk - if life expectancy increases then the amount pension companies have to pay out will increase, but so too will the profits on the life insurance policies as fewer people will die/they'll die later. They aren't only invested in this type of asset though, and the investments are bought and sold as necessary to make sure they remain appropriate.

[GarlicShake]

The low interest rate environment also doesn't suit insurers well at all

No - as the second quote says, they raise premiums when their investments aren't going too well.

Again, this is about background financial performance. They're not raising premiums because too many smartarses spilt paint on their sofas.

When financial instruments are performing very well & interest rates are high, insurers are far more likely to operate a cost/premium ratio of more than 1 - and to pay out more readily.

[GarlicShake]

Life expectancy's a whole other interesting topic Most people fail to realise that when the news says life expectancy has risen to 205 or whatever, they mean this is a forecast for babies born today.

And the forecast can never be right, because we don't know what's going to happen during those babies' lifetime and, more importantly, we cannot even know the correct expectancy of people alive today. The only reliable data is more than 100 years old - the age of death for everyone who's died! All the rest is projection; it is constantly re-adjusted as more people die, live longer than expected, and things change more generally.

[StatisticallyChallenged]

I'm not sure why you seem convinced that it's one or the other. Investment plays a part in pricing but so does claims experience/expectations. So at a base level yes, if too many smart arses spill paint on their sofa then when they're setting pricing they will anticipate a higher volume of claims, and possibly a different cost per claim, which will impact premiums. At a more significant level things like the floods last year drive future pricing - the companies are always conducting experience analysis so that they learn from what happened previously and account for that in their pricing.

When investment returns are lower everything gets squeezed - they try to cut expenses, claims, look at different and more imaginative investments...subject to what they can get past the regulators of course.

[wasonthelist]

Thanks Tiggy I know what insurers say. I don't necessarily believe them. I worked as a Commercial Insurance Broker from 1983-87 at that time a lot of public statements by insurers didn't align with the true experiences of customers and off the record practises, so forgive me being more than a little sceptical.

[StatisticallyChallenged]

Absolutely re life expectancy - but that's why a pension investing in life insurance is actually quite sensible as (so long as the underlying populations are exposed to similar risks) they should match up relatively well.

[GarlicShake]

Of course it's not one or the other I've been trying to show the relationship all along.

[StatisticallyChallenged]

No need for your - I can assure you I know how insurance companies work . But in your initial post you said "Their success has bugger all to do with what they pay out in domestic claims" which simply isn't true. An insurance company who pays out more than they expected to when setting their premiums will make less profit (or lose money), and fraud is a part of the reason they can end up paying out more especially if there's some sort of 'trend' towards it (like the gangs that have been operating in a few places running car crash scams.)

[Pipbin]

It's part and parcel of their business and they accept that. Don't get too worked up

Just like large shops include the cost of shoplifting into their businesses and pricing. Doesn't make shoplifting ok though does it.

[Dragongirl10]

If l was sure it was intentional l would report them , it is lying and costs everyone else higher premiums.