Daily Mail, and others, don't understand free markets?

Daily Mail headline today expresses astonishment that the Bank of England says that "We Can't Control Mortgage Rates!".

Which bit of a free market economy does the Mail not understand? Do they really think that the huge range of mortgage deals, carefully tabulated on their own finance pages, are all individually controlled by the Bank of England? That the Bank of England says to, say, Bristol and West that their 5yr, 0.5% discount tracker deal, with £2k cashback and a £100 M&S voucher is fine; but that they'd prefer that the Woolwich shaved a couple of basis points off their 1yr-fixed, first-time-buyer- only offer?

The article at one point reminds us of the problem of sub-prime defaults in the US and says that "as a result, High Street lenders here are lookng to make more money from borrowers".

So, if it wasn't for the situation in the US, UK banks would be happy making less money from borrowers? That's just silly. Any bank will always try to make as much money as possible from their customers, but they are restrained by the fact that they operate in a competitive market. This is obvious stuff, everyone knows this really, don't they? They know that prices are controlled not by the State, but by competition from other companies?

But, you know, I think that while everyone sort of knows this, lots of people don't really believe it. They think that companies are generally out to get them, and if something is expensive that is nothing to do with the price the market will stand, but because the company is ripping them off.

I had a conversation with my brother (a scientist) recently about his car insurance, and he was utterly convinced that all insurance companies operate in a cartel, and that there is no competition for his business. He really believed this to be the case. Maybe it is, but it seems it would be a very, very complex cartel to manage. It seems to me much more likely that the market for car insurance in the UK is highly competitive, and if you are unmarried, drive a Lotus which you sometimes take to track days, and park it on the street in Bloomsbury, your premium is probably going to be quite high however competitive the market is.

Why are insurance claims handlers so bad at handling claims?

For the first time (as far as I can recall) in our 6yr history we have recently had cause to claim on our public liability insurance. We fitted a ball valve to a storage tank, the valve subsequently failed, the overflow couldn't cope and water flooded into the customer's property, damaging paintwork and carpets.

No huge drama, but large enough cost (well into four figures) to warrant claiming on the insurance. How long would you think it might take, from notifying the insurance company to them authorising the repairs (bearing in mind this is water damage, so pretty unpleasant to live with for any length of time)? A week? Two weeks?

Six weeks on, and we still haven't had any decision from the insurers (AXA, who have subcontracted the claims handling to Cunningham Lindsey). In the meantime, we've just gone ahead and repaired everything that we can do ourselves, but customer is still left with old carpets. We don't want to tell him to just get new carpets and send us the bill, because the insurers might want to inspect the old carpets.

Why does it take so long? Why can't it work like this:

Day 1: Notify insurance company of potential claim
Day 1: Insurance company contacts customer and arranges to inspect damage (in, say, 5 days time)
Day 2: Customer gets estimates to repair damage
Day 6: Insurance co inspects damage, reviews estimates
Day 7: Insurance co authorises repairs

Why does it take weeks and weeks? And why do we have to manage the process (i.e. we only see any progress at all if we badger the insurance company)?

Although this is the first time we've had to claim on our own insurance, we've often had to claim on other peoples for road traffic prangs, and the process is always extremely painful even when there is no dispute about liablity.

Public Liability Insurance

We have just renewed our Public Liability insurance. Our existing insurer, predictably, offered a premium slightly higher than last year. Our broker went to one other provider and got a much better quote. Then we went back to the original firm, and they bettered their original offer by fully 50%! You'd like to think that the insurance market is pretty competitive and efficient and that a premium quoted is going to be pretty much the best rate available (especially if quoted by a company who has full and detailed information about our claims history as they have been insuring us for years). Clearly not so, it could be out by 50%. Amazing.

Anyway, we have now saved ourselves many thousands of pounds in insurance costs for the coming year. Well done to our broker, Kerry London.

(Note: I'd understand if two different providers offered wildly different premiums as we might fit one's preferred risk profile better than another's. But for the same firm to change their price by 50% within 24hrs is pretty astonishing).