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The Car Insurance Tariff – 1930
In practical terms this was a cartel, with the insurance companies
subscribing to the 'tariff' agreement pooling their statistics
and setting minimum rates for the various classes of car insurance.
The 'tariff' insurance companies undertook not
to 'undercut' these minimum rates in any circumstances, although
an individual company was permitted to charge more than the
set rate for
a particular risk if the underwriting factors involved demanded
it. Nor did the influence of the 'tariff' agreement end with
the setting of rates; the car insurance companies subscribing
to the agreement adopted standard policy wordings and conditions
and here also the insurance companies were bound not to alter
their conditions unless the remaining insurance companies
subscribing to the agreement did likewise.
Other features of the 'Tariff' agreement which
still exist today were the setting of agreed rates of discount
for, say, a driving restriction or voluntary excess; and maximum
rates of commission
payable to agents and brokers.
Car Insurance: 1935 - 1940
The Car Insurance 'tariff' agreement may give the impression
of creating a monopoly and in certain ways it did; it has
to be remembered that the car insurance companies subscribing
to the agreement were mainly large composite insurance companies
and if an insured had already placed his household and life
insurances with a particular company, it was almost to be
expected that he would place his car insurance with the same
Insurance Company.
Thus it was that by the mid-1930's some 60%
-70% of all car insurance business in the U.K. was in the
hands of the 'tariff offices’.
Even in the 'early' days of the 1930's this still left sizeable
amount of business in the control of car insurer's who did
not, for some reason or other, subscribe to the 'tariff' agreement.
These car insurance companies may have been
'composites' which simply did not agree with, or wish to subscribe
to, the 'tariff' rules; or they may have been smaller specialist
car insurers who had decided that they should go their own,
independent, way, setting their own rates and conditions accordingly.
Whatever the case, it is evident that there was in the years
immediately before World War II, a certain amount of competition
between 'tariff' and 'non-tariff' offices.
Whilst the 'tariff' car insurance companies comfortably outnumbered
the 'non-tariff' offices the company, which was largest individual
insurer of cars in the U.K. never subscribed to the 'tariff'
agreement.
Lacking any central statistic-collecting and
regulatory body of their own, the smaller non-tariff insurance
companies tended to draw upon the premium rates set, and policy
conditions used, by tariff offices.
The non-tariff insurance companies would generally pitch their
car insurance rates a little lower than those set by the 'tariff',
but not so low as to jeopardize underwriting profitability.
At the same time they would improve their car insurance policy
conditions sufficiently to attract business.
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