Sources of insurance
You can buy motorcycle insurance from specialist motorcycle brokers, high-street brokers, price comparison websites, bike clubs, your bank, credit card, other membership clubs, retail giants, newspapers and “direct”.
Motorcycle insurance is mainly sold through intermediaries, so even so-called direct insurers, such as Churchill, actually sell it through broker Devitt.
The two main types of intermediaries are brokers and price comparisons sites – though comparisons sites have come in for such stick from the regulator that they are effectively going to have to behave more like brokers in the future.
Membership clubs, retailers and newspapers either sign up with a single insurer or a broker that provides the services under the club’s brand name. Alternatively they take a white-label service from a price comparison site and dress it up in their colours and logo. They take a cut of the intermediary’s profits.
Different label, same supplier
Choose to buy through biker newspaper MCN and you are actually buying through The Bike Insurer, a brand owned by a software company called Vast Visibility. This is the same provider for Asda or Tesco. It also runs the bike insurance side of Confused.com, Admiral.com and Elephant.co.uk and the likes of Bike Trader.
So if you buy from any of those, you’ll be getting exactly the same offer and you’ll have wasted your time shopping around.
The Bike Insurer (Vast Visibility) is not actually selling; it is just comparing premiums offered by brokers.
Vast Visibility has such a large market share that even Britain’s biggest biker broker, Carole Nash for the first time in 2012 put its Just Motorcycle Insurance brand thorough Vast Visibility’s channels too. It joins the likes of brokers Brightside, which runs the Ebike brand, the AA and Devitt.
Similarly, take up an offer from supposedly independent advice website Moneysavingexpert.com and for most lines of insurance you’ll just be pushed through to Moneysupermarket.com, which itself uses Vast Visibility for motorbike insurance. Moneysavingexpert.com also suggests a range of other comparison sites for motorbike insurance, but actually most are just Vast Visibility again.
It does say: “A couple of insurers aren’t included on comparisons and are worth checking separately for a final push. So if you have a few minutes spare, try Aviva and broker Carole Nash.” In fact, you can’t buy motorbike insurance online direct from Aviva.
Aggregator Moneysupermarket.com made so much money from its relationship with Moneysavingexpert.com that in June 2012 it bought the advice site from Martin Lewis, the journalist who had been pretending to be independent, for £87m. Brokers tell me that since selling, Martin Lewis has been heard recommending people use brokers rather than just comparison sites.
That is why The-zebra.com will never do a tie-in deal with anyone. I am never going to sell you loans or insurance but will provide only independent commentary. I’ve already had offers that I’ve turned down.
It has not been all easy riding for price comparison sites recently. Google-owned Beat-that-quote powers a lot of sites, but is coming unstuck. Argos, for example, had to close its ArgosCompare.co.uk site in early 2012 when it reviewed the new regulations and felt it couldn’t carry on with the Beat-that-quote offering.
That’s the culmination of endless criticism of comparison sites and eventual knuckle-rapping from the regulator.
Comparison sites under scrutiny
Consumer group Which? slated price comparison sites in 2009 for the way they hid differences in excesses and other variations, making their comparisons meaningless. There was an attempt to bring in decent standards for comparison sites with the launch of the Comparison Consortium (Coco) code of conduct, but too many refused to join up to the tougher standards required.
The likes of Moneysupermarket.com only started showing different excesses on motor policies in 2010 after pressure from the Association of British Insurers, which developed its own code for price comparison sites. But it took belated regulation to make them start to behave in a way that comes close to helping insurance buyers.
Part of the problem with comparison sites can be seen in this line from Comparethemarket.com: “To save you time we have assumed a small amount of information that apply to most riders. Please click to check these Assumptions.” Well, you know what they say about assumptions.
Regulator gets tough
After looking into price comparison sites the regulator, the FSA, which had officially been in charge of overseeing these sites since 2005, came out with some scathing criticism in June 2010 and tough new rules in October 2011. It wanted to stop the sites misleading customers and, using regulation jargon, not “treating customers fairly”.
It argued that they weren’t just “introducing” customers to insurers, as they claimed (needing lower levels of regulation), but by rating products and recommending certain insurers they were giving advice, which required tougher standards.
The FSA said consumers could be “misled”. They might think they were receiving quotes when actually they were just getting indicative prices. Worse, they might be refused a claim because they had not been asked all the questions needed to give the material facts necessary for accurate underwriting.
The sites were open to financial crime and could confuse consumers about which firm they had to contact in the case of a complaint. Meeting those standards has proved too tough for some.
What about the biker brokers?
Brokers are better but by no means perfect. They have been regulated to a higher standard than price comparison sites for a while. They give advice on the most “appropriate” policy for you, as an individual.
That might not be the best policy with all the bells and whistles, as that policy might be beyond your price range, but it should be “appropriate” for you based on what the regulator describes as a “fair analysis”.
That doesn’t mean the broker seeks out quotes from every insurer in the market. Each has a panel of insurers that it feels gives it access to enough of the market to offer that “fair analysis”.
Sometimes brokers choose which insurers they want to work with. Other times insurers decide they will or will not work with a particular broker. Insurers also find they get different claims experience from different brokers, so they up the price of their policies through those brokers that attract a worse clientele.
But a good broker with an attractive bunch of bikers is worth throwing some cash at and insurers will lavish money on them to try to influence the broker to pass on more of its business.
Incentives offered to brokers
Insurers might offer brokers more commission per individual policy sold, a bonus commission based on the total volume of sales or a profit share on the business. They might pay for the broker to have training, print materials for the broker, even contribute towards the broker’s IT costs.
Some insurers offer brokers cheap or interest-free loans or offer to pay the broker for doing tiny tasks – they call this a work transfer payment but really the work is automated and is just another backhander to the broker to keep them sweet.
It’s legal but is it ethical?
In the investment market, the equivalent of brokers are known as independent financial advisers (IFAs). A recent Retail Distribution Review has led to the decision to phase out commission and other payments from financial services companies and move to IFAs charging a fee to the customer for their professional advice. There’s nothing like that in the pipeline for general insurance brokers but it’s an omen of what is to come.
In September 2012 Martin Wheatley, managing director of the FSA and chief executive officer designate of the new regulator from April 2013, the Financial Conduct Authority (FCA), warned that he wanted to see an end to mis-selling created by sales incentives. Firms see customers as someone to sell to instead of someone to serve, he said, and that had to change.
Robert Balls of Bikesure insists his staff are not told of the different commissions between insures and so cannot be influenced. But the suspicion remains – among commercial and personal insurance buyers – that brokers are influenced by all these incentives. They are there to make a profit themselves.
But brokers do sometimes give insurers a hard time over poor claims service or shabby documentation. And a broker might decide not to put business with an insurer if that might damage its reputation. Brokers can also use their influence to set the policy wordings and service standards and bring the insurers up to those standards. Specialist brokers, such as Bikesure, can also find insurers – or even set up new insurers or underwriting agencies – to carry risks that mainstream players avoid.
There is a question over whether a broker is going to find the “appropriate” rather than the best policy for you, especially if you insist on the cheapest price. If you want something special, ask your broker to try to find it – though the best policy is unlikely to be the cheapest.
The recommended policy might not have all the bells and whistles, as that might put it beyond your price range, but it should be “appropriate” for you based on what the regulator describes as a “fair analysis”. That is more than a price comparison site will do for you.
Links (new windows)
- Asda Money
- Aviva (no online applications)
- Carole Nash
- Moneysaving expert.com
- Tesco Compare