David Prosser: Quote me happy? Not likely at NU

Norwich Union's "Quote me happy" ad campaign features a series of customers who practically keel over so delighted are they with the cost of the insurer's cover. But anyone who has asked Norwich Union for a renewal quote on their motor insurance since Wednesday will have been sent reeling for a different reason - it has raised premiums by up to 40 per cent.

NU points out that the AA's motor insurance index shows a 9 per cent increase in the value of motor claims over the past year, while average premiums across the industry as a whole did not rise at all.

Moreover, the insurer points to the increasing loss it is sustaining from its motor business - what it pays out on claims has risen from 102 to 105 per cent of premium income over the past 12 months. In particular, higher levels of personal injury claims are hitting NU and other insurers hard.

At first sight then, while no one likes the idea of higher insurance premiums, NU is not profiteering. Naturally, however - this is an insurance company, after all - the bigger picture is not so clear.

For one thing, NU is one of Britain's most profitable companies - it made £2.9bn in 2005, a 29 per cent increase on the previous year. And despite what you might think, that figure wasn't dragged down by a loss from the insurer's motor division.

That's because premium income versus claims paid is not the final word on making money from car insurance. Once you have handed over your premiums, insurers invest the money - and thanks to handsome returns from these investments, NU's motor division is keeping its head well above water.

In most businesses, putting your prices up by 40 per cent would lead to wholesale customer desertion. NU, the motor insurance market leader, hopes it won't suffer that fate for two reasons. Publicly, it is urging its rivals, which face the same market environment, to follow its lead. Privately, it knows motor insurance is an apathy business, where many policyholders renew year after year without checking whether better deals are available.

It's up to customers to prove NU wrong. There may well now be a round of premium increases from leading insurers, but most policyholders will still be able to save money by moving to a different company.

Ironically, the group of NU customers who stand to save most are those who will be least hard hit by this week's premium increases. Prices at NU for the lowest-risk drivers - based on age, geography, type of car and claims records - will only rise by 6 per cent, though this is still twice the rate of inflation.

However, it is at this end of the market where competition is fiercest. One reason why the AA's motor insurance index has barely moved over the past year is the prices charged by online operators such as eSure and Swiftcover, which offer bargain-basement cover to a cherry-picked group of customers.

If you fall into this group, it's definitely worth dumping NU in favour of a cheaper insurer. But even if you don't, cheaper cover is almost certainly available. Many insurers - More Than springs to mind - have developed much more sophisticated ways to calculate premiums for higher risk cover. Every single customer should be sure to get several quotes next time they renew.

nnn Top marks to Asda for its plan to stop asking job applicants for their date of birth. The supermarket group, which already has an excellent record on employing older workers, is making the move in the run-up to new age discrimination laws that come into effect on 1 October.

For the first time, it will be illegal for employers to discriminate against staff on the grounds of age. Asda's initiative goes further than the law requires, but it should be an example to other companies.

A crackdown on age discrimination is not just important on the grounds of natural justice. It's also crucial if we are to tackle the pensions crisis. It's no good asking people to work longer if they have no legal protection from unfair behaviour by employers when they do so.

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