UK proposing to ban insurers charging existing clients more than new clients

Brendan Burgess

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Britain’s Financial Conduct Authority said on Tuesday it was proposing to stop insurers from charging repeat car and home insurance customers more than new clients.


This is the point I have been making for years in relation to mortgages. Lenders should not be allowed to charge existing customers more than new customers. Or they should be obliged to allow existing customers to avail of the deals on offer to new customers.
 

AlbacoreA

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Virgin are past master of this.

They should be banned from asking for the car reg also. As this is so they don't give you a lower quote with the same details.
 

NoRegretsCoyote

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This can be found in so many retail markets.

Willingness to pay is not identical across all customers. Some customers are sticky and this often cross-subsidizes products to people who are more value-conscious. Consumer welfare is the difference between what you pay and what you are willing to pay. Total consumer welfare may actually be higher with differential pricing! Especially as if you ban it firms will just withdraw offers targetted at more price-conscious customers.

This is undergrad economics and is well worth learning about.
 

AlbacoreA

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I would argue what they are doing is very different.

Price differentiation essentially relies on the variation in the customers' willingness to pay.
Price discrimination, very differently, relies on monopoly power.

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets.[1][2][3] Price discrimination is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy.[3] Price differentiation essentially relies on the variation in the customers' willingness to pay[2][3][4] and in the elasticity of their demand. Price discrimination, very differently, relies on monopoly power, including market share, product uniqueness, sole pricing power, etc.[5] Monopoly power held by sellers does not benefit consumers. All prices under price discrimination are higher than the equilibrium price, which is the uniform price paid by everyone in a perfectly-competitive market
 

NoRegretsCoyote

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Price discrimination, very differently, relies on monopoly power.
Indeed, but it can also be welfare enhancing.

Dublin Zoo is the only zoo in Ireland. It has a lot of monopoly power over people in Ireland who want to look at elephants.

Do you think overall welfare would be higher if they had a single ticket price adults and kids of any age? Or the schedule below?


Gate Prices
Online Prices
Adult€20.00
Child under 3FREE
Children aged 3 - 15 years€14.50
Senior Citizens (over 65's)€15.00
Child with Special Needs*€7.50
Adult with Special Needs*€11.50
Student (with valid ID)€15.00
 

AlbacoreA

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The Zoo doesn't give you a different price every time you ask them.
The Zoo doesn't change me more if I didn't go last year.
I can't haggle with the Zoo and the price will change.
If I go to Belfast zoo this year, then go to Dublin Zoo next year the price won't change.
If I go away for work for a couple of years, when I come back the Zoo won't charge me 2k for the ticket.
 

NoRegretsCoyote

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@AlbacoreA

You are moving the goalposts.

Price discrimination is common in many markets.

Insurance is pretty competitive.

Every year I have the same merry dance with my house insurance where I ask for a 5% reduction and they hum and haw and then give it to me.
 

tallpaul

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Insurance system is broken in this country. Literally renewed my house insurance with KBC (Zurich) yesterday and with whom we have been with for several years. The renewal amount was significantly up on last year. Went on to the KBC website and put in the usual details and the quote was c. €80 cheaper. Contacted KBC who could see the quote but could not match it on our existing policy!! I had to formally not renew the current policy and sign up for the new one online!!

What sort of way is this to run a business?
 

Pmc365

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I am with Axa, and I always look for a new quote each year for house insurance from them which works out cheaper than their renewal quote but at least Axa will match the new quote you obtain online from them. I always shop around.
 
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