It is to giggle at the plans of bureaucrats and planners

We’re not holding out the Mail On Sunday as wholly and entirely accurate readers of the complexities of the insurance markets but:

New rules requiring insurance companies to stop discriminating against loyal policyholders have unleashed a wave of industry-wide price increases, The Mail on Sunday can reveal.

Customers are being hit by inflation-busting 20 per cent-plus premium hikes on home and motor policies renewing this month. The dramatic increases make a mockery of boasts made by the City watchdog that its rules would save loyal customers more than £4billion in premiums over the next ten years.

Evidence collected by the MoS shows the price hikes are being imposed on those who have a longstanding policy with their insurer – the very people that the regulator says its rules are designed to protect. The Financial Conduct Authority had said the so-called loyalty penalty – where longstanding insurance customers are charged more than new ones – would be banned on January 1.

We can certainly imagine this as being the actual outcome. Ban cut price offers to new customers on the grounds of that being unfair to old ones and the effect is prices to old customers rise.

It’s easy enough to sketch out how this might happen. Assume that companies are profit maximising - not the normative claim that shareholder primacy should be true, but the positive one that by and large it is - and add in that we all satisfact. Sure, we can and do model that we all rigorously maximise our utility, that we’re rational calculating machines that will do anything for a quid.

Except that rationality, calculating and utility should also include that many things are a faff to do. So, we need to see clear benefits before doing something like changing the car insurance (and perhaps moving from AA to RAC cover, having to change the emergency number of the phone and whatever else, even if comparison shopping is pretty easy).

The way that insurance companies did get people to switch was to offer those bargain rates for the first year, two. OK, those are now not allowed. What’s next? Well, apparently, given the lightening of the pressure to not raise rates as folk might switch, the insurance companies see that they can raise rates on their current customer base.

That is, competition didn’t used to be just about the effect on new contract rates. Removing that competition on new contract rates alleviated some of the competition on old contract rates - it was less likely that people would be offered a price differently large enough to overcome the faff of changing insurers.

Those discount bargains on new contracts served as a limitation on how much the profit maximising insurance companies could gouge the extant customer base.

So, the regulators ban the discounts to new customers in order to lower price to old. The effect is to increase prices to old consumers by removing some of the competition. Well done there, vry well done those men.

As we say, we’d not take an MoS article as being absolute proof that this is what is actually happening out there, nor that even if it is that this will be the final and stable outcome. But we certainly think that it’s a possible one.

At which point, isn’t it so glorious that we have such bureaucrats and regulators to make life better for us? For it clearly is a better world where insurance companies make more profit from us. Well, we assume that’s what the regulator was thinking, the idea that they might have messed things up just doesn't bear thinking about, does it?