Insurance covers almost everything these days and the internet has helped fashion a highly transparent and competitive market place for domestic and global insurers. Some insurance is required by law such as car insurance or medical insurance in many countries. Other insurance although not legally required is seen by most as a ‘must have’ such as travel insurance or insurance for corporate property and business assets. Then there is a third class of insurance aimed mainly at consumers that is highly specialised such as pet insurance, wedding insurance or insurance for extreme sports such as skiing. Either in the high street or on the internet, companies offer varying rates and excesses dependent on many different things. A secondary market also exists where insurance brokers sell their services who trawl the market for products at the behest of their corporate or consumer clients. Another agency service in the insurance industry is underwriting.
Underwriting is basically where the risk to the insurer and other risks are calculated and the underwriter determines the premium and cost of the insurance or whether to insure at all. An example from car insurance would be to assess in detail the driving history of the customer. In medical insurance, another example might be where the patient’s sickness record is examined. The mass take-up of the internet definitely helps the insurance market maintain its competitiveness and transparency but many customers are still finding themselves uninsured in times of emergency. Extreme winter sports insurance demonstrates this well. The industry believes that over half of travelers to ski resorts are uninsured and although the other half do, only a quarter of them are actually covered for skiing and snowboarding which are classed by most insurers as ‘extreme sports’ and not included in their basic cover. In the main, European travellers also think that their E111 is adequate to get them treatment but this is untrue at most resorts. A very recent example of how the market is changing is the relentless price war between rival auto insurance firms that has been in the main facilitated by the introduction of price comparison sites. Car insurance is required by law so everyone must purchase it. This makes price the primary competitive factor.
An example of negative activity in the sector was when payment protection insurance policies (PPI’s) were discovered by the FSA to be either useless or having been missold to many customers. This has generated a storm of legal claims against insurers or certain banks and firms being created for the single purpose of acting as legal assistants so that customers can claim back any PPI that is covered by the FSA’s investigations. Compare insurance on the net to give the greatest deal. A further dubious insurance product is identity theft insurance that promises to reimburse the customer for losses on account of cyber fraud or identity theft. However many people are unaware that the bank is more than likely liable for such acts.
