I help set rates for a Major Canadian Insurance Company! Some thoughts . . .

[Addicted]

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Perhaps I'm negative towards insurance because I've had nothing but negative experiences with them ...

The reason I believe insurance CAN charge whatever they want is that there was as much as a 4000 dollar range between insurance companies when I was getting my quotes. How can company A charge 5000 dollars a year while company B charges 1,000 dollars??

In all honesty you are right ... everyone does have their own opinion .. and mine is that insurance companies are often at the top of the LARGEST profit list year over year for a reason ... because they continually RIP PEOPLE OFF ... but then why else would a company stay in business if not to make a butt load of money ... as often as possible.

You don't need to respond to these any more because obviously I'm not going to accept your explanation and will continue to raise point after point as too why insurance companies are a legal version of a well organized thief ... only insurance companies don't need a gun ...

 

[Avi Singh]

If I start the year on Nov 07 with a brand new 2007 car, but have my accident in Jan 08, why do I have to take the depreciation of a 1 year old car. I'm paying my premium for a new car. Both the insurance company and I should get to agree on what the pay out should be at the start of each year and I will happily the premium to support THAT pay out. Not some arbitrary number that the insurance company decides.

Ask for OPCF43. It is a depreciation waiver. I add it to all new vehicles automatically and so do most other brokers/agents I know. It states that for the first 2 years of the vehicle's life no depreciation will be applied in the event of a total loss.

 

[VifferFun]

Ask for OPCF43. It is a depreciation waiver. I add it to all new vehicles automatically and so do most other brokers/agents I know. It states that for the first 2 years of the vehicle's life no depreciation will be applied in the event of a total loss.

I have already explained this to him, but I think he intended for his example to extend to older cars as well. Suppose he purchased a 2002 model year vehicle this year, drove it for three years, and then got into an accident. As far as I'm aware, there is no available depreciation waiver at any Ontario insurers for older vehicles. With that being said, each year as your vehicle ages, the premium would be adjusted to reflect this anyways based on its VICC.

Cheers!

 

[harry131]

In the country I come from, the vehicle is insured not the driver. So as long as a vehicle is insured and a licensed person is driving it, its covered. People are charged more based on the owners driving history, and not on the statistics of his age group or region.

I find its a big scam here, charging multiple drivers/riders on the same bike/car. Only one can drive at a time, yet multiple need to pay for the insurance 'for the same bike/car'.

Moreover, all the statistics BS is used to extort money. If other kids 17-25 are having more accidents then why should I pay more insurance. I never had an accident, and drive carefully. I thought in a free world people who commit mistakes have to pay for them and not everyone else. Insurance should be charged more based on driving history of an individual and not others. But clearly all the rules in this industry are made for the sole benefit of big corporations and not individuals.

And guess what.... those insurance companies that charge base don individual driving history have still been around for decades, they make profits... But ofcourse they are not the most profitable organizations in the country, unlike the money-leechers here.

 

[Avi Singh]

In the country I come from, the vehicle is insured not the driver. So as long as a vehicle is insured and a licensed person is driving it, its covered. People are charged more based on the owners driving history, and not on the statistics of his age group or region.

I find its a big scam here, charging multiple drivers/riders on the same bike/car. Only one can drive at a time, yet multiple need to pay for the insurance 'for the same bike/car'.

Moreover, all the statistics BS is used to extort money. If other kids 17-25 are having more accidents then why should I pay more insurance. I never had an accident, and drive carefully. I thought in a free world people who commit mistakes have to pay for them and not everyone else. Insurance should be charged more based on driving history of an individual and not others. But clearly all the rules in this industry are made for the sole benefit of big corporations and not individuals.

And guess what.... those insurance companies that charge base don individual driving history have still been around for decades, they make profits... But ofcourse they are not the most profitable organizations in the country, unlike the money-leechers here.

The insurance companies need to take into account all angles. They rate based upon the owner and those who will be using the vehicle. Remember the vehicle can not drive itself, so the real risk comes with who is driving it.

A vehicle can only be insured once, I am not sure what you are saying when you are saying that "multiple need to pay for the insurance 'for the same bike/car."

As Viffer has already explained the rates are charged based upon "your" history, and it is taken into account which class you fall into. Different age classes are charged differently. Younger folks are higher risk, so they pay more as a whole.

The rules apply to both the consumer and the insurance industry. Insurance companies are heavily regulated and have to apply for rate increases (average auto rates have come down 10.4% in the last 5 years). The rate increase/decrease has to be approved by the Financial Services Comission of Ontario.

 

[dddd9999]

I want to clarify the Liability component.

This protects you (the insured) in case you are at fault for an accident and are subsequently sued by the third party (not at fault person).

As an example, if you were successfully sued for 100,000.00 yet you only had 15,000 or 40,000 for liability coverage (as in California or Texas), where do you think the balance of the 100,000.00 would come from? It comes from your personal assets - savings, vehicles, homes, anything that you have of value.

Now for some hard numbers, for a case to go to trial the costs rarely fall below 100,000.00 (just costs - this does not include any judgement amount nor interest). Interest on the settlement is calculated from the time the suit is served. So if it takes 5 years to get to trial and you lose 100,000.00, the final total becomes 100K + Interest + costs (their costs) + your costs. As you can see, the 15K or 40K coverage does not go very far. Now imagine you were successfully sued for 1 Million dollars + + +. Scary to think if you were under insured.

Also, keep in mind, even if the other person is partly at fault, those amounts may not be enough. For example, if you were riding and splitting a lane (riding between cars on the divider line) while a pedestrian jay-walked out between cars and you hit them, you are both considered at fault. They can still sue you!

Liability also applies to your passenger if you are at fault. For example, if you were driving and lost control and dropped the bike. Perhaps let them ride without the proper clothing and they burnt their leg on the pipe. In both of these cases, you could be sued.

And when comparing to a Province like Manitoba keep this in mind - they have lower rates for many reasons - for example lower incidence of accidents, less drivers means lower risk, etc - but they are also legally barred from suing an at fault party. So if someone killed your spouse or child you could not sue them for your loss. No need for liability.

Lastly, the number of fraudulent claims in Ontario is astronimical. In Canada, Insurance Fraud is estimated to be in excess of 3.5 Billion dollars (the lion share is here in Ontario). We all pay for insurance fraud through higher premiums. Fraud can be as simple as inflating the value of an item to staging accidents, fictitious vehicle thefts, faking disabilities, etc.

Just my two cents in all of this.

 

[dddd9999]

Of course it's not worth it... to YOUR profit margin. Talk 100,000 policy holders into paying $22 more a year and that's 2.2 million more in YOUR pocket. LOL at "if you don't understand, then just believe us", you sound like a politician... and they never lie!

Yes it is 2.2 Million more, but that whole goes to pay the claims that are made and only 7% is actual profit (150,000).

 

[johnp]

Yes it is 2.2 Million more, but that whole goes to pay the claims that are made and only 7% is actual profit (150,000).

I think that 7% 'profit' rate, from the 1st post here, is underwriting profit only and excludes total profit including from investment income - which is much higher.

So 7% probably grossly understates the total profitability.

 

[Jag_V4Ape]

Thanks for that. Very informative!

Now for some snide anger:

Can I ask someone who works at a Michigan insurance company what makes their motorcycle rates about 80% lower than in Ontario? Filip pays $260/yr for his BMW 1200 .. what's with that?

Is it the "at-fault" insurance scam, or the access to minor tickets? Or shared liability between products, rather than paying for the same thing twice .. or three times?

I'm glad that State Farm dummied their rates and made the executive decision to support (create?) the industry, rather than just profit off it.

First thing is first.. the US market is a billion times bigger than ours.

 

[Jag_V4Ape]

And hey OP, thats for all the info!

 

[rukus]

In the country I come from, the vehicle is insured not the driver. So as long as a vehicle is insured and a licensed person is driving it, its covered. People are charged more based on the owners driving history, and not on the statistics of his age group or region.

essentially the same as here, no?

 

[VifferFun]

essentially the same as here, no?

Essentially, except that we rate based on the experience of the driver *and* the demographic group they fall into. The biggest problem with rating on the experience of an individual driver is that there is a lack of data, especially when the driver does not have any experience.

Cheers!

 

[rukus]

The biggest problem with rating on the experience of an individual driver is that there is a lack of data, especially when the driver does not have any experience.

and thats why they use general demographic stats.

 

[omnivore]

This is all BS. I am 34, havent had a ticket in more than 8 yrs, have never ever made a claim in my life for any reason (not even a cracked windshield), and I have had my bike licence for 18 yrs. My insurance has NEVER EVER EVER gone down. Only up. Almost every yr, for no reason at all. This yr it went up another $80 again, even though my bike is older and my good record is getting longer and longer by the day.
Sure State Farm gives me better rates than most other companies out there, but that doesn't neccessarily mean that insurance company aren't bloodsucking vampires. All of them. Period.
There's a reason that year after year they continue to report record profits. Next year they will only prove to do even better than this year, and so on and so on.

 

[VifferFun]

This is all BS. I am 34, havent had a ticket in more than 8 yrs, have never ever made a claim in my life for any reason (not even a cracked windshield), and I have had my bike licence for 18 yrs. My insurance has NEVER EVER EVER gone down. Only up. Almost every yr, for no reason at all. This yr it went up another $80 again, even though my bike is older and my good record is getting longer and longer by the day.
Sure State Farm gives me better rates than most other companies out there, but that doesn't neccessarily mean that insurance company aren't bloodsucking vampires. All of them. Period.
There's a reason that year after year they continue to report record profits. Next year they will only prove to do even better than this year, and so on and so on.

Before you go making uninformed posts such as this, please at least take the time to read the content of the thread. As I have already explained, Insurance profitability goes in cycles of good profit to really bad profit (or loss). The Insurance Industry is just coming out of its "good cycle" of profit, and is entering into the bad cycle. Many insurance companies right now are being hammered with losses. If Insurance Companies are the blood-sucking vampires you speak of with astronomical profit margins, then why not invest your life savings in the Insurance Industry? I am sure that if the Insurance Industry is as profitable as you say it is, then the capital gains on your investment would pay for your car, home, bike insurance, and retirement fund. Why is it that Financial Consultants not recommend that everyone do this, if huge profits in the Insurance Industry are sure thing? Perhaps it is because this low-risk-high-profit insurance industry that you speak of simply doesn't exist?

In general, rates will increase over time unless there is a legislative change which caps or reduces claim payments. Why do rates increase? Well, the costs associated with the claims payouts increases year over year. How much do you think it would cost to buy a Goldwing in 1978? Now, how much do you think it would cost to buy a Goldwing in 2008? There is something called inflation, which is an increase in the cost of goods and services year over year. Since you wouldn't expect to be able to buy a brand-new Goldwing in 2008 for the same price you could have bought one in 1978, why should your insurance premium be any different? Aside from regular inflation of around 3%, many payouts actually increase at a pace faster than inflation, especially claims related to bodily injuries.

In addition, even though your company might take a rate decrease, this does not necessarily mean that *your* individual premium will go down; it is up to the company (subject to the approval of the regulators) to allocate which groups will experience the rate decrease. For example, if there is an overall rate reduction of 3%, the company may decide to reduce the rates of 50+ drivers by 10% and leave all other rates untouched, thus resulting in an overall rate decrease of 3%.

If you have any other questions, I would be more than happy to answer them; however, let's maintain a civil tone. I haven't been short with any of you, and expect the same courtesy.

Cheers!

 

[VifferFun]

This yr it went up another $80 again, even though my bike is older and my good record is getting longer and longer by the day.

By the way, when companies are determining your premium, most only look at the last six years of your claims experience (although some use ten years). For minor convictions, they only look at three years of data. For criminal convictions, I think it might stay on your record for six years.

Since you already achieved your *perfect* driving status some time ago, your driving status cannot get any better as far as your insurance company is concerned.

Cheers!

 

[Motorcycle Mike]

There are a few reasons that I think insurance is a scam, and bear in mind that I haven't read every post in this thread, so some might be repeats.

1. They punish you if you use what you paid for. You pay extra for collision insurance, but God forbid you ever use what you paid for they will up your premium. The only way to get a good rate is to never use what you pay for. Even then if you decide to use your coverage, how hard is it to collect what is owed? How many have had a vehicle written off and been given far less than the vehicle should have been worth?

2. Our rates here are much higher than some neighbouring States (and maybe provinces as well). Viffer claims that this is because we have a higher average claim. I find this hard to believe as in the States they don't have health coverage, and they love to sue - with mammoth payouts. I also don't buy that Americans won't try to suck off the benefit-tit as much as Canadians either.

Personally I think that our society as a whole has been over-sold this whole idea of insurance. I would much prefer to not have any insurance at all and just deal with problems when they arise - just like I did when I lived overseas for many years. Consider how much money you have paid into insurance, and then consider how much you have ever received. For the vast majority it will be much paid in, nothing taken out. It is like gambling - in this case betting that something will go wrong.

 

[Avi Singh]

There are a few reasons that I think insurance is a scam, and bear in mind that I haven't read every post in this thread, so some might be repeats.

1. They punish you if you use what you paid for. You pay extra for collision insurance, but God forbid you ever use what you paid for they will up your premium. The only way to get a good rate is to never use what you pay for. Even then if you decide to use your coverage, how hard is it to collect what is owed? How many have had a vehicle written off and been given far less than the vehicle should have been worth?

2. Our rates here are much higher than some neighbouring States (and maybe provinces as well). Viffer claims that this is because we have a higher average claim. I find this hard to believe as in the States they don't have health coverage, and they love to sue - with mammoth payouts. I also don't buy that Americans won't try to suck off the benefit-tit as much as Canadians either.

Personally I think that our society as a whole has been over-sold this whole idea of insurance. I would much prefer to not have any insurance at all and just deal with problems when they arise - just like I did when I lived overseas for many years. Consider how much money you have paid into insurance, and then consider how much you have ever received. For the vast majority it will be much paid in, nothing taken out. It is like gambling - in this case betting that something will go wrong.

Might I suggest reading the thread for starters. Viffer has explained most of this already (and very well).

1. Write offs are settled on an actual cash value basis. Meaning they determine what the vehicle is worth and pay it. They can't afford to lowball you, and drag a claim on for months. It's cheaper for them to pay you and close the file and move on. It's a cost of doing business. I had a vehicle written off, and they told me, find 3 vehicles for sale with similar mileage or more and take the average asking price of the 3. If it's higher, then they'll change their offer. I learned something - my car wasn't really worth what I thought.

2. Neighbouring States have several million more people than we do contributing to the premium pool. Furthermore they have little to no liability coverage 20-40,000. So the lawsuit coverage is virtually nil in the US. In Canada many provinces have gov't run insurance programs which is basically subsidized by tax dollars. It's not just claim size and fraud that inflate our costs, but we have very high coverage limits along with no one helping us to pay our premiums, the consumer shoulders the full cost.

You're right going with no insurance is like gambling, except for in this case you're not playing with $20. You're playing with your entire life's work. I have a case right now where a guy's girlfriend fell off the back of his bike and is suing him!

Can you afford to pay a lawsuit out of pocket? Can you afford it better than you could the premium to transfer the risk? I think not.

 

[Motorcycle Mike]

Are you saying that Michigan at 10 million has significantly more contributors than Ontario at 12 million people?

I'll never be one that believes in insurance. I think having insurance is pessimistic and betting that the worst will happen.

16 years now of paying insurance and not a single claim. If I didn't have insurance I probably would have between $30 to $50k more (not including interest) if I include life insurance, property insurance, car and bike insurance.

If I didn't have insurance and I got in an at-fault accident (unlikely), someone sued, what would it cost me? The answer is very little. I would sell what I have and give the money to someone I trust, then declare bankruptcy when hit with a large lawsuit. In that case it would cost me about $1k to declare bankruptcy and 7 or 8 years of not having to pay any interest to greedy banks or credit card companies. If that failed to work I would just live overseas for a few more years....

Maybe one day if I own a house out-right ... no mortgage.. and it is considered valuable, then maybe I would insure it for fire... other than that insurance is a waste of money.

 

[rukus]

If I didn't have insurance and I got in an at-fault accident (unlikely), someone sued, what would it cost me? The answer is very little. I would sell what I have and give the money to someone I trust, then declare bankruptcy when hit with a large lawsuit. In that case it would cost me about $1k to declare bankruptcy and 7 or 8 years of not having to pay any interest to greedy banks or credit card companies. If that failed to work I would just live overseas for a few more years....

they will then garnish your wages until you are dead. also go for anything you have, and then audit you. basically you are committing fraud

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