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

[de Jager]

Forum Sponsor

No problem . . . I'm glad to be of service. You seem to know a thing or two about the industry yourself

Cheers!

Was married for 10yrs to a broker so I've learned a lot. Both the good and the bad.

 

[noobinacan]

Hey Guys,

I just thought it was interesting how people are bashing the insurance companies for jacking up rates, and I can certainly sympathize since I am a rider too!

I am an Actuarial Analyst in the Pricing Department of a major Canadian insurer, and my job is to help set the overall rates within the company (i.e. rate increases or rate decreases). I'm sure people are wondering how they are getting some ridiculous quotes from some insurance companies, so allow me to explain in very basic Layman's terms the pricing methodology used within the insurance industry.

First, we look at historical claims data from the past 10 years or so, and determine trends to try and predict the claims experience for the upcoming year. I can assure you that the average cost per claim is increasing year over year at an exponential rate, not only for Motorcycles but cars as well.

Next, we determine the necessary rate increase/decrease such that the following equation holds true:

PREMIUMS = CLAIMS (~65%) + EXPENSES (~28%) + PROFIT (~7%)

It is a common misconception that Insurance Companies reap HUGE profits, which is simply not true. The overall profit of a company is usually within the range of -10% to 10%, depending on the performance of the specific insurance company's book of business. In fact, the government completely oversees the ratemaking process such that we are not even allowed to increase rates unless we ask for permission with supporting statistics.

So far I have only briefly described the process of determining rate increases/decreases, but thorough analysis is also performed to determine which classes of drivers should pay more/less premium. The experience of different groups distinguished by different variables (such as Age, Gender, Marital Status, Bike Class, Bike Displacement, etc.) are closely analyzed. Historical data would show that a 17-year-old rider with two convictions and an M2 riding a Gixxer is statistically MUCH MUCH MUCH more likely to get in an accident and cause damage than a 53-year-old driver with a clean record and full M riding a Goldwing. It doesn't take a background in Statistics to understand this.

So, why are the rates going up? The reason is the increasing cost of claims. Yeah, it certainly sucks, but no company in their right mind would charge you $500/yr to insure a bike with expected losses $1200/yr.

I frequently hear people complain by saying that the cost of a few years of insurance is equal to the cost of their bike. I can understand that this would upset you, but you need to ask yourself what the insurance is really covering. Only a small portion of the premium covers the motorcycle itself. The majority of the premium goes towards paying out claims where injuries are involved, which can easily run upwards of $2,000,000.



So, what can you do to lower you insurance premium? Here are a few suggestions:

1.) If you aren't an experienced rider, DON'T BUY A SUPERSPORT. Even if insurance were completely free, I still wouldn't suggest that a new rider purchase a sport bike. Buy a nice starter bike like a Ninja 250, Ninja 500, GS500, etc. instead, which is much easier on the wallet as far as insurance is concerned. Most companies surcharge sport bikes because of their nasty claims experience. Some companies even refuse to write them (aka blacklists).

2.) Be responsible. Don't do stupid things that would cause you to get tickets or accidents, since these will drastically increase your premiums.

3.) If your bike isn't worth that much and it wouldn't kill you financially if you had to write it off, opt out of Collision coverage. As long as the accident is not your fault, your bike will be repaired by insurance even if you don't have Collision (this is commonly misunderstood). Property Damage (a mandatory coverage with $0 deductible) covers your bike in accidents that ARE NOT your fault, and Collision covers your bike in accidents that ARE your fault. Just be sure that you don't cause any accidents!

4.) Shop around! Every company has its own niche market that it is targeting, and you may not fall within that specification. Some companies really do not want to write motorcycle insurance, but they offer it just so that they do not lose their existing Auto/Home policies. Some companies will offer bike insurance, but at a high rate to deter people. Don't get ****** off, but simply take your business elsewhere to a company that actually targets riders such as yourself.

5.) Bundle other insurance products to get a multi-line discount. Some companies will not write a standalone motorcycle unless you have a car or house with them as well. As much as you may not like this, it is completely the insurance company's decision and there is nothing illegal about it.

6.) Take a certified motorcycle training course if you are a new rider.



Some things that are not really in your control that can affect your insurance premium, depending on your company:

1.) Gender: Some companies rate females cheaper when under 25yo

2.) Age: Your rates generally decrease at either age 25 or 30

3.) Location: Rural Areas may pay lower premiums than Metro Toronto

4.) Marital Status: Married people may pay lower premium than single people




That's about all I can think of right now. If you are going to respond, please keep civil; I'm a fellow rider and I'm not an evil person. I'm trying to educate everyone here about insurance, and I welcome any questions that you might have.

Cheers!

people typically pay $200/ year - YES -READ "per YEAR" for liability only here in the US.

and, so, maybe its time that you open your eyes...and notice how Insurance companies are there to do one thing - make money-

 

[VifferFun]

people typically pay $200/ year - YES -READ "per YEAR" for liability only here in the US.

and, so, maybe its time that you open your eyes...and notice how Insurance companies are there to do one thing - make money-

I've explained the difference between the Canadian and the American insurance industries multiple times in this thread. You tell me to "READ" but you don't take your own advice. Please take the time to actually read what I wrote, quote my explanation, and then make a second attempt at your comment.

Of course, it is the goal of an insurance company to make money as we are not charitable organizations; however, do you really think that the insurance companies in the USA are any less interested in profit than the companies in Canada?

Cheers!

 

[Twilldous]

Those are some good questions guys! I will let you know first off that I am not trying to defend the insurance industry in any way. If it were an evil money-grabbing corporation that I worked for, I would quit because that doesn’t coincide with my values. I will be the first person to let you know if something the Insurance Industry is doing is unfair. I may work for insurance, but I am a policyholder just like you! I decided to post so that you guys can ask these pressing questions that you always wanted to know the answer to, and I promise I am giving the most honest answer I possibly can to each one. I have nothing to gain by defending the insurance industry on a GTA motorcycling forum . . . I’m just trying to do the community a service. I will address each of your questions below:


TWO BIKES AND ONE RIDER

First, I will address the question of two bikes and one rider. I can understand where you are coming from, and personally I wouldn’t mind doing the same thing myself if it were possible. It would be pretty nice to have two cars, such as a sporty two-seater convertible and a family sedan, and pay only half the premium. Likewise, it would be nice to have two bikes for whatever reason and pay half the premium.

You already explained the main reason yourself; it is quite likely that a person with two cars or two bikes would simply be trying to hide a second principle driver. You could try contacting your insurance company to see if they would allow you to be the one and only person insured to drive either of the two bikes, with all other people being excluded (meaning, anyone else riding your bikes would be dong so uninsured and illegally). I doubt that an insurance company would allow this though, because it isn’t a common practice. In order to allow you such a hefty discount on the liability and accident benefits portions, the insurance company would have to conduct an Actuarial Analysis and also file the change in rating methodology with the Financial Services Commission of Ontario for approval. To be completely honest with you, it just isn’t worth the headache as far as the insurance company is concerned. I agree with you that it isn’t totally fair, but this is the status quo.

With all that being said, if you were to insure two bikes, you could possibly get a multi-vehicle discount in the range of 10% to 20% on both bikes, depending on the insurance company’s rating rules.



EARLY CANCELLATION IN THE WINTER MONTHS

Next, I will explain the early cancellation in the Winter months. Although you pay insurance for a full year and are covered for a full year, the insurance company understands that the majority of your riding (and the exposure to the company) will take place in the months of April to September. You can consider the premium you pay is more like a 6-month policy that covers you during the riding months, with the added benefit that you are also covered in the Winter months just in case we get a random nice riding day in December (which has happened before). You are allowed to cancel the policy during the winter months, but by that time you have pretty much “used up” all of your six riding months, so most of the premium has already been earned by the company and you won’t receive much premium back. An insurance company earns a motorcycle policy according to a schedule similar to the one below (which is based on when the motorcycle accidents actually occur):

Jan - 0%
Feb – 0%
Mar – 5%
Apr – 10%
May – 10%
Jun – 20%
Jul – 20%
Aug – 20%
Sep – 10%
Oct – 5%
Nov – 0%
Dec – 0%

If you were allowed to cancel in October and get a full 50% of your premium back (rather than only 5%), then EVERYBODY would be doing this and the insurance companies wouldn’t be receiving enough premium in the riding months to cover losses in the riding months. It comes back to the equation I explained in my first post:

Premium(100%) = Incurred Losses (~65%) + Expenses (~28%) + Profit (~7%)

Suppose we allowed people to cancel as you said, then we would only be receiving 50% of the premiums. Since our losses and expenses remain constant, the only way we can balance the equation is by either doubling the premiums, or taking a corporate loss of 43%:

A.)2 * (0.5 * Premium) = Incurred Losses (~65%) + Expenses (~28%) + Profit (~7%)
B.)0.5 * Premium = Incurred Losses (~65%) + Expenses (~28%) + LOSS (~43%)

Since insurance companies aren’t in the business of giving money away (because they would go bankrupt VERY quickly!), they would be forced to double premiums with the understanding that people would cancel in the winter months. Financially, you would be in the exact same position that you are right now, because paying double the premium for six months and cancelling is the same as paying the regular premium for 12 months:

$200 * 6 months = $100 * 12 Months = $1200

Really, you shouldn’t be complaining, because by using the existing method of paying over all 12 months, you are paying the same amount of money but have the added benefits of:

a.) being able to ride on a warm December afternoon, and
b.) not having to worry about cancelling and re-opening your policy every year


RECORD PROFITS 2005 - 2008

Next, I will address the record profits for 2005 to 2008. You are correct, the Property and Casualty Insurance Industry as a whole has had an excellent run for the last few years, but this is an exception to the norm. You may have noticed that the insurance rates have been decreasing over the same time period (not necessarily for motorcycles) and you can see the rate increases/decreases by company by visiting the Financial Services Commission of Ontario website: http://www.fsco.gov.on.ca/english/insurance/auto/rates/default.asp

In general, the rates were declining in 2005 to 2006, and then slightly increasing (at maybe 0.5%) in 2007. Even though the rates are increasing a bit, it is still much lower than the rate of inflation which is around 3%.

It comes down to the fact that we just got lucky in these years. Insurance is very difficult to price because it is one of the only products that you sell BEFORE knowing the costs associated with the product. It just so happened that the weather has been favourable in the last few years and the accident frequency has been lower, thus causing profits to increase. The insurance industry tends to fluctuate in cycles where there are periods of good profit and periods of poor profit (or loss). The last few years we were in a period of good profit, but this year we are once again heading into a period of poor profit. If you were to look at the financial results at this time next year, you will be looking at a much different picture.

One other thing that needs to be mentioned: these huge profits that you see are NOT pure profit from policyholders! Most of the insurance company’s profit actually comes from investment income. Insurance companies frequently operate at an underwriting loss, but are able to be profitable because of wise investing of premium dollars.

I never said that insurance doesn’t make money . . . if it didn’t make money, then insurance would cease to exist. If you really want to complain about profits, I would look to the banks . . . they KNOW how much their products cost and they keep charging more and more . . . but I don’t want to bash banks in this thread either.


INSURANCE IN CANADA ISN’T REGULATED?!

Someone mentioned that insurance in Canada isn’t regulated, and that insurers can gouge and charge whatever they want. This is completely false! In fact, the Canadian insurance industry is HIGHLY regulated! We can hardly sneeze without explaining it to the Financial Services Commission of Ontario. Every time we want to increase rates, decrease rates, change underwriting criteria, blacklist a vehicle, etc. we must first ask permission from the Financial Services Commission of Ontario (or similar for another province) and it is completely up to them whether or not they accept our proposal.

Certain provincial governments have also made it illegal for us to rate based on Gender, Age, etc. (particularly in the maritimes). This doesn’t really affect our bottom line, but it does mean that in order for the profit equation to hold true, we would have to collect more premium from the good drivers to compensate for the bad drivers. If you are in a poor insurance category you will think this is GREAT, but if you are 55, married, with a clean record, you will be pretty ****** off.



YOU WORK FOR INSURANCE SO YOU GET REALLY CHEAP BIKE RATES, RIGHT?

Chintoe wanted to know what I drive and how much I pay for my bike insurance, and I have nothing to hide. I am 25, male, riding since I was 19, full M license, and riding a 1996 Honda VFR750F (sport touring). I am covered for $2M liability, have Comprehensive coverage with a $500 deductible, and opted out of Collision coverage. My policy is bundled with my car and life insurance (but not home), so I get multi-vehicle and multi-line discounts. I am paying roughly $850/yr for this coverage through State Farm. It’s a great rate!

So, do I work for State Farm? Would I get a discount if I were insured through my own company? Yes, I would receive about a 10% discount. . . a small employee “perk”, but still State Farm is much cheaper. I am not in my company’s target market, so I purchase my insurance elsewhere, which is no big deal.


I welcome any other questions you might have.

Cheers!

You can try and justify why those slime eating gut sucking sh!# faced
rip off, liars crooks and thieves called insurance companies
are allowed to do as they please especially when it comes to claims.
I know of an example where an elderly couple lost their car in an accident
not their fault and the basterds paid them about half what their car was worth and this elderly couple knowing no better accepted the offer.
That slimebag got away with it.
stick that in your files or where the sun doesn't shine.
You'e all a bunch of liars crooks and thieves.
I'm one of those people with more then one motorcycle, only one other person lives with me and she does not have a licence, I have to have three different insurance policies what a load of crap. Let me assure you nobody else drives my bikes only me so why am I being ripped off by you thieves. How do you feel being tangled up with a bunch that do such injustices on elderly folks.
That's my rant and I will never change my mind about insurance companies. You're all a bunch of crooks.

 

[de Jager]

Wow...don't hold back at all. Tell the world how you really feel!

 

[Twilldous]

Wow...don't hold back at all. Tell the world how you really feel!

Why should anybody suppress their opinions they are just that, opinions
and weather you like it or not the average joe such as ourselves are financing the whole country, eg by the time the banks,oil companies,
insurance companies,and lets not forget the 3 levels of government get their grubby hands on their share of our hard earned dollars there's not much left for you and I. Wow that felt great I must go do something a little crazy like head up to the range and burn some powder in my 50 cal.
Perhaps I'll go on my scooter so the government won't make a lot of money off me through gas tax. Ha Ha !!!

 

[VifferFun]

You can try and justify why those slime eating gut sucking sh!# faced
rip off, liars crooks and thieves called insurance companies
are allowed to do as they please especially when it comes to claims.
I know of an example where an elderly couple lost their car in an accident
not their fault and the basterds paid them about half what their car was worth and this elderly couple knowing no better accepted the offer.
That slimebag got away with it.
stick that in your files or where the sun doesn't shine.
You'e all a bunch of liars crooks and thieves.
I'm one of those people with more then one motorcycle, only one other person lives with me and she does not have a licence, I have to have three different insurance policies what a load of crap. Let me assure you nobody else drives my bikes only me so why am I being ripped off by you thieves. How do you feel being tangled up with a bunch that do such injustices on elderly folks.
That's my rant and I will never change my mind about insurance companies. You're all a bunch of crooks.

First off, just a pointer: your "argument" would have more credibility if you didn't use so many negative adjectives, but instead added more substance.

I'm not going to argue with you about the situation with the elderly couple; if you said this happened, then I'm not going to doubt it. I never said that all insurance companies are the same, nor did I even say that every claims adjuster within an individual insurance company behave the same. I don't know what happened in this situation, but I can assure you that this is an exception to the norm. In general, I would say that the payments for vehicle write-offs are more than generous. Who determined the real cash "value" of the car? If the elderly couple purchased the car for $30,000 but it now sells in the market (with the same features, mileage, etc.) for $14,000 then don't expect to get $30,000 for the vehicle. It is now worth $14,000 but the insurance company will likely settle a bit higher to make sure that they are happy. In the rare situation where you are not pleased with the settlement (and can show examples of a similar vehicle selling for a higher value), the insurance company will work with you to be certain that you are satisfied.

Regarding the one-rider-with-many-bikes situation, I have already explained this somewhat and I am still looking into it. Soo far no one has been able to find any statistics for me.

Cheers!

 

[VifferFun]

You can try and justify why those slime eating gut sucking sh!# faced
rip off, liars crooks and thieves called insurance companies
are allowed to do as they please especially when it comes to claims.

I wonder why we would result to eating slime if we made so much money . . . I would think that steak would be more appropriate. Let's keep the thread civil.

Cheers!

 

[Twilldous]

I wonder why we would result to eating slime if we made so much money . . . I would think that steak would be more appropriate. Let's keep the thread civil.

Cheers!

Ok lets do just that, try and keep the thread civil.
Here's a few simple questions and I hope you can answer them at the end because I already know the answer.
1) Why not simply insure the driver and not the vehicle with public liability? I can understand insuring the vehicle if the owner wants collision and glass etc but WTF does vehicle type and value have to do with public liability? I'm talking about the person who has liability only and nothing else why are they so interested in the type of vehicle I own? its not covered anyway.
We have two cars and three motorcycles, each vehicle has to have a separate policy my wife drives her own car and I drive my car and the 3 bikes and obviously I can't drive all five at once wouldn't it make more sense to insure the drivers and they can drive anything on their licence.
Now I'm gonna answer the question(GREED my dear boy)
It boils down to more money.
Here in this province we even pay 12 dollars extra on each policy for the uninsured driver, now that's rubbing salt in the wound.
We have 5 different policies that's 60 dollars more, for what?
I had better stop about here because if I don't I will soon be ****** and
that ain't good when you're heading out for a ride on the Wing.
Lets see the justifiable reason why insurance companies can't insure drivers only and not the vehicle for public liability,& accident benefit,
Can't wait to see the answer and no BS please.

 

[VifferFun]

Ok lets do just that, try and keep the thread civil.
Here's a few simple questions and I hope you can answer them at the end because I already know the answer.
1) Why not simply insure the driver and not the vehicle with public liability? I can understand insuring the vehicle if the owner wants collision and glass etc but WTF does vehicle type and value have to do with public liability? I'm talking about the person who has liability only and nothing else why are they so interested in the type of vehicle I own? its not covered anyway.
We have two cars and three motorcycles, each vehicle has to have a separate policy my wife drives her own car and I drive my car and the 3 bikes and obviously I can't drive all five at once wouldn't it make more sense to insure the drivers and they can drive anything on their licence.
Now I'm gonna answer the question(GREED my dear boy)
It boils down to more money.
Here in this province we even pay 12 dollars extra on each policy for the uninsured driver, now that's rubbing salt in the wound.
We have 5 different policies that's 60 dollars more, for what?
I had better stop about here because if I don't I will soon be ****** and
that ain't good when you're heading out for a ride on the Wing.
Lets see the justifiable reason why insurance companies can't insure drivers only and not the vehicle for public liability,& accident benefit,
Can't wait to see the answer and no BS please.

First off, I would like to thank you for improving the tone of your response . . . much appreciated.

What you are asking is a very good question. Personally, I would love to own two bikes myself if it weren't for the fact that I had to have two insurance policies. I have already tried to explain this situation as best as I can (i.e. one driver with many vehicles), and I am still investigating it myself.

First off, one thing you said is incorrect; the car/vehicle you drive really does matter for insurance purposes, even if you are not insuring for Collision or other physical damages. Which bike do you think has the greater potential for losses: your Honda Goldwing, or a Suzuki GSXR-1000? Or, how about a car example: a Volvo or a Lambourghini? Every vehicle has what we call "rate groups" for both physical damages AND bodily injury. Industry statistics are used to compute factors which describe how "safe" a vehicle is to be driving, based on historical claims experience. These factors in part help determine the rate that you pay for Accident Benefits . . . the safer the car (or alternatively, the better the claims experience), the cheaper the rate.

With that being said, how could we insure a driver without any knowledge of the vehicles they are driving? Perhaps we could charge you the worst-case-scenario rate (such a Ferrari and a GSXR-1000) which would then allow you to ride any car or bike you please (but not allow anyone else to ride your cars or bikes)? I'm not trying to defend the insurance industry here . . . if you can help me out and come up with a good solution, I will certainly raise the questions with my superiors

Cheers!

 

[omnivore]

Of course, it is the goal of an insurance company to make money as we are not charitable organizations; however, do you really think that the insurance companies in the USA are any less interested in profit than the companies in Canada?

Cheers!

Of course CDN insurance and US insurance companies both are in the business of making $$. FUnny how US insurers can still turn enough profit to stay in business while charging 1/5th of what their CDN counterparts charge. And lawsuits are certainly more rampant in the USA than here, and our OHIP coverage would also alleviate some of the finacial burden on insurance companies when paying out liablity claims to injured parties, whereas in the USA, no one has free health care, so any trips to Dr and Hospital would all be costly, so the inju7red parties would go after insurers even harder.....so shouldn't our rates be even lower than those in the USA?

 

[VifferFun]

Of course CDN insurance and US insurance companies both are in the business of making $$. FUnny how US insurers can still turn enough profit to stay in business while charging 1/5th of what their CDN counterparts charge. And lawsuits are certainly more rampant in the USA than here, and our OHIP coverage would also alleviate some of the finacial burden on insurance companies when paying out liablity claims to injured parties, whereas in the USA, no one has free health care, so any trips to Dr and Hospital would all be costly, so the inju7red parties would go after insurers even harder.....so shouldn't our rates be even lower than those in the USA?

Sorry, I have already explained the difference between the US and Canadian Insurance Industries in detail. If you are interested, please read my replies earlier in this thread.

Cheers!

 

[Twilldous]

First off, I would like to thank you for improving the tone of your response . . . much appreciated.

What you are asking is a very good question. Personally, I would love to own two bikes myself if it weren't for the fact that I had to have two insurance policies. I have already tried to explain this situation as best as I can (i.e. one driver with many vehicles), and I am still investigating it myself.

First off, one thing you said is incorrect; the car/vehicle you drive really does matter for insurance purposes, even if you are not insuring for Collision or other physical damages. Which bike do you think has the greater potential for losses: your Honda Goldwing, or a Suzuki GSXR-1000? Or, how about a car example: a Volvo or a Lambourghini? Every vehicle has what we call "rate groups" for both physical damages AND bodily injury. Industry statistics are used to compute factors which describe how "safe" a vehicle is to be driving, based on historical claims experience. These factors in part help determine the rate that you pay for Accident Benefits . . . the safer the car (or alternatively, the better the claims experience), the cheaper the rate.

With that being said, how could we insure a driver without any knowledge of the vehicles they are driving? Perhaps we could charge you the worst-case-scenario rate (such a Ferrari and a GSXR-1000) which would then allow you to ride any car or bike you please (but not allow anyone else to ride your cars or bikes)? I'm not trying to defend the insurance industry here . . . if you can help me out and come up with a good solution, I will certainly raise the questions with my superiors

Cheers!

First of all a vehicle does not drive itself there has to be a driver, correct!
So why should I pay more for my CB 900 then I pay for my 650 Triumph and even less for my Goldwing with the biggest engine I am still the same driver. If I shag up on either I will be just as dead.
This can and should be looked at by insurance companies "solution"
start every driver when they get their licence with a clean slate and a reasonable price policy and lets say for example 12 points on their drivers licence. Forget about what they drive and only slap them with a penalty
when they F up. If little junior or little Mary get caught lets say speeding for an example take away a few points and add on to their policy until they behave themselves. Reward good driving with good policy and severly punish those that F up. If it gets to the point where they lose all their points take their drivers licence away and force them to take more safe driving courses. All this at a cost to the offender not the driver with a 30+ year spotless drivng record. I take great offence to the fact that a 17 year old with a drivers licence can go out buy a car for as little as 200 dollars a month and go for insurance and it's 5 or 6 thousand dollars with a payment more then double his car payment. Please tell me what this young person did to deserve such treatment? Lets face it at the start of your driving career you have a clean record why base it on what some 17 year olds are doing? You want to talk stastics lets look at this one, it's a common fact that on average according to my insurance company that every Third vehicle you meet on the road is uninsured, now that is frightening. They also say there's not a whole lot they can do about it they refering to the insurance companies and the police. Well I say they are wrong, solution, very simple link the motor registration with insurance companies and the minute my insurance expires issue a tow order and the powers that be simply go take the vehicle and empound it.
You get your vehicle back when it's properly insured.
Of course all the cost incured will be the responsibility of the offender.
I personally think with long spotless driving records, those poeple should be rewarded with minimum price policies and good coverage.
My premium for one bike/car is not too bad but with more then one vehicle and have to pay for multiple policies that's rediculous.
I will still say that the insurance companies are profit gouging and are allowed to get away with it.
Gotta go beauitfull day here I think I will fire up the Triumph today and go for a ride.
All the best and ride safe
Dave

 

[VifferFun]

First of all a vehicle does not drive itself there has to be a driver, correct!
So why should I pay more for my CB 900 then I pay for my 650 Triumph and even less for my Goldwing with the biggest engine I am still the same driver. If I shag up on either I will be just as dead.
This can and should be looked at by insurance companies "solution"
start every driver when they get their licence with a clean slate and a reasonable price policy and lets say for example 12 points on their drivers licence. Forget about what they drive and only slap them with a penalty
when they F up. If little junior or little Mary get caught lets say speeding for an example take away a few points and add on to their policy until they behave themselves. Reward good driving with good policy and severly punish those that F up. If it gets to the point where they lose all their points take their drivers licence away and force them to take more safe driving courses. All this at a cost to the offender not the driver with a 30+ year spotless drivng record. I take great offence to the fact that a 17 year old with a drivers licence can go out buy a car for as little as 200 dollars a month and go for insurance and it's 5 or 6 thousand dollars with a payment more then double his car payment. Please tell me what this young person did to deserve such treatment? Lets face it at the start of your driving career you have a clean record why base it on what some 17 year olds are doing? You want to talk stastics lets look at this one, it's a common fact that on average according to my insurance company that every Third vehicle you meet on the road is uninsured, now that is frightening. They also say there's not a whole lot they can do about it they refering to the insurance companies and the police. Well I say they are wrong, solution, very simple link the motor registration with insurance companies and the minute my insurance expires issue a tow order and the powers that be simply go take the vehicle and empound it.
You get your vehicle back when it's properly insured.
Of course all the cost incured will be the responsibility of the offender.
I personally think with long spotless driving records, those poeple should be rewarded with minimum price policies and good coverage.
My premium for one bike/car is not too bad but with more then one vehicle and have to pay for multiple policies that's rediculous.
I will still say that the insurance companies are profit gouging and are allowed to get away with it.
Gotta go beauitfull day here I think I will fire up the Triumph today and go for a ride.
All the best and ride safe
Dave

Hi Dave,

That's a great response, and I thank you for your input.

Regarding one driver with many vehicles, can you offer a viable solution for me? I will definitely ask questions at work if there is a possible solution to the problem. One other issue I can think of is MTO-related . . . before a vehicle can be plated in Ontario, it must be insured by law.

Yes, linking the MTO to the insurance industry would be ideal, but do you know how much work that would be? If you are aware of the pace at which the Government operates, this would likely be a ten-year project for them.

Regarding your driving record system, what you are explaining is essentially a variation of the "Alberta Grid Insurance System". People start with a clean slate, and then move up or down the ladder with each mess-up that they make. Essentially, insurance companies writing in Alberta must rate using both the Government's rating manual and their own, and then take the lowest premium of the two. The result? The Alberta Facility Association is now THE largest insurer in all of Alberta, because no insurance company wants to take on policies that they are sure to lose money on. For example, a driver in Alberta with a couple of DUIs and a few convictions might only pay $1800/yr . . . this doesn't seem right to me, and I doubt that it seems right to you either.

Another problem with your driving record system is that, by assuming that all young drivers are perfect drivers and charging them a low premium in their first year, the premium collected WILL be inadequate for young drivers as a whole. If, on average, a 17yo driver incurs $3000 in damages in their first year of driving but we only charge $1000, the insurance company would be losing about $2000 per policy on all of their young drivers. If this system were in effect, no insurance company in their right mind would want to insure young drivers.

The only reasonable method of decreasing the premium of young drivers is to subsidize their premiums by increasing the rates of mature "clean" drivers. I don't think this would go over well with you, seeing as you are a responsible driver with a clean record. Would you be willing to pay an extra $200/yr on your policy so that Junior can pay a premium close to yours?

Insurance is not profit gouging . . . as of 2008 Q2, we are paying out $1.07 for every $1.00 we collect in premiums. How is this price gouging? See the reference below:

http://www.canadianunderwriter.ca/issues/ISArticle.asp?id=87579&issue=07282008

I have explained (earlier in this thread) the inevitable cycle of "bad years" and "good years" for the insurance industry. We had a good run from 2002 to the end of 2007, and we are now into the "bad times" once again. The only way we are really able to make money is by making smart investments. The "Combined Ratio" refers to the percentage of money paid out compared to the premium collected; thus, in 2008, our combined ratio is 107%. Have a look at the following graph from the Ontario Ministry of Finance to see the cycles of the Combined Ratio (yes, it is a little outdated because it doesn't show the profitable years from 2002 to 2007, but you get the picture):


NOTE: A ratio above 100% means the insurance industry is having an underwriting LOSS

Can you still say that we are price gouging?

Have a great ride on your Triumph

Cheers!

 

[Twilldous]

Hi Dave,

That's a great response, and I thank you for your input.

Regarding one driver with many vehicles, can you offer a viable solution for me? I will definitely ask questions at work if there is a possible solution to the problem. One other issue I can think of is MTO-related . . . before a vehicle can be plated in Ontario, it must be insured by law.

Yes, linking the MTO to the insurance industry would be ideal, but do you know how much work that would be? If you are aware of the pace at which the Government operates, this would likely be a ten-year project for them.

Regarding your driving record system, what you are explaining is essentially a variation of the "Alberta Grid Insurance System". People start with a clean slate, and then move up or down the ladder with each mess-up that they make. Essentially, insurance companies writing in Alberta must rate using both the Government's rating manual and their own, and then take the lowest premium of the two. The result? The Alberta Facility Association is now THE largest insurer in all of Alberta, because no insurance company wants to take on policies that they are sure to lose money on. For example, a driver in Alberta with a couple of DUIs and a few convictions might only pay $1800/yr . . . this doesn't seem right to me, and I doubt that it seems right to you either.

Another problem with your driving record system is that, by assuming that all young drivers are perfect drivers and charging them a low premium in their first year, the premium collected WILL be inadequate for young drivers as a whole. If, on average, a 17yo driver incurs $3000 in damages in their first year of driving but we only charge $1000, the insurance company would be losing about $2000 per policy on all of their young drivers. If this system were in effect, no insurance company in their right mind would want to insure young drivers.

The only reasonable method of decreasing the premium of young drivers is to subsidize their premiums by increasing the rates of mature "clean" drivers. I don't think this would go over well with you, seeing as you are a responsible driver with a clean record. Would you be willing to pay an extra $200/yr on your policy so that Junior can pay a premium close to yours?

Insurance is not profit gouging . . . as of 2008 Q2, we are paying out $1.07 for every $1.00 we collect in premiums. How is this price gouging? See the reference below:

http://www.canadianunderwriter.ca/issues/ISArticle.asp?id=87579&issue=07282008

I have explained (earlier in this thread) the inevitable cycle of "bad years" and "good years" for the insurance industry. We had a good run from 2002 to the end of 2007, and we are now into the "bad times" once again. The only way we are really able to make money is by making smart investments. The "Combined Ratio" refers to the percentage of money paid out compared to the premium collected; thus, in 2008, our combined ratio is 107%. Have a look at the following graph from the Ontario Ministry of Finance to see the cycles of the Combined Ratio (yes, it is a little outdated because it doesn't show the profitable years from 2002 to 2007, but you get the picture):


NOTE: A ratio above 100% means the insurance industry is having an underwriting LOSS

Can you still say that we are price gouging?

Have a great ride on your Triumph

Cheers!

I clearly understand where you're coming from with respect to young drivers and are you telling me that this is a fact that insurance companies are paying out more in claims then they actually collect in premiums?
A few years ago I was interested enough in insurance I actually attended and completed a night course for 6 weeks called insurance essentials I was interested in becoming an insurance adjuster but the more I learned about the actual job the less interested I became. I was told by one instructor that the job of an adjuster was to persuade clients to settle for as little as possible and always offer significantly less then the actual value of the vehicle. I was so disgusted with that comment I didn't go any further with insurance courses. That's part of the reason I have such negative attitude toward insurance companies, that and the fact that I have paid out in excess of 100,000 dollars over the past 35 years to insurance companies. That money should be sitting in my bank account right now and with compounded interest rate would be a tidy sum, don't you agree ?
By the way my Triumph is a 1970 Bonneville and my insurance company will not insure it except for liability because they say they have no way to value it too old they say. How's that for service?
I don't let that concern me because even if they could value it they said the premium would probably be through the roof.
I know what it's worth, priceless to me, irreplaceable.
I did have a great ride on my Triumph thank you very much.
She still turns heads everywhere I go.
Although I was insulted while gasing up today, one young lady asked
me could she have her picture taken while sitting on my Harley.
I laughed and pointed out that it wasn't a Harley it was a Triumph
and her boyfriend said wow even better its British.
True story, and don't feel too bad you Harley owners some bikes can still rub elbows with Harleys, case and point.
All the best and ride safe
Dave

 

[VifferFun]

I clearly understand where you're coming from with respect to young drivers and are you telling me that this is a fact that insurance companies are paying out more in claims then they actually collect in premiums?

Yes, this is true much of the time. If we can manage to collect more premiums than we pay out in claims (and we actually did from 2002 to 2007) then when are doing very well. As you could see in the graph, there wasn't a single year from 1991 to 2002 when the industry as a whole collected more premium than it paid out in claims. You can see why it frustrates me when people think insurance is a scam. I can totally understand where they are coming from, because insurance is probably one of the most misunderstood financial products available.

Anyways, even though we don't collect adequate premium to cover claims, we can still make a profit by wise investing. From 2002 to 2007 we made a profit by collecting more premiums than we paid out in losses, and sometimes made investment income (although the markets were a little rocky at times). 2002 to 2007 were very good years for the insurance industry . . . our "good" cycle. We have now returned to the "bad" cycle as of January 2008, and will likely remain in the bad cycle until 2015 or so.

A few years ago I was interested enough in insurance I actually attended and completed a night course for 6 weeks called insurance essentials I was interested in becoming an insurance adjuster but the more I learned about the actual job the less interested I became. I was told by one instructor that the job of an adjuster was to persuade clients to settle for as little as possible and always offer significantly less then the actual value of the vehicle. I was so disgusted with that comment I didn't go any further with insurance courses. That's part of the reason I have such negative attitude toward insurance companies, that and the fact that I have paid out in excess of 100,000 dollars over the past 35 years to insurance companies. That money should be sitting in my bank account right now and with compounded interest rate would be a tidy sum, don't you agree ?

Wow, they really told you that in the course? Where was this night course? Was it with an insurance company? I know that my company would never DARE to take such an approach to handling claims, as our marketing focus is on providing superior customer service (although that does come at a price of marginally higher premiums for our clients because nothing is free in this world). I would be disgusted by such a statement as well, but I am certain that there are not many insurance companies that would adopt this strategy. Could you imagine the negative PR this would receive?!

With respects to your "investment", I can understand what you mean. But how large would that investment be if you hit and injured someone, and were sued for $1M? Everyone always thinks that such occurrences only happen to other people, including the claimants who are in this unfortunate situation.

By the way my Triumph is a 1970 Bonneville and my insurance company will not insure it except for liability because they say they have no way to value it too old they say. How's that for service?
I don't let that concern me because even if they could value it they said the premium would probably be through the roof.

Sounds like a classy machine Although the insurance company cannot value it, you might be able to purchase coverage with a predetermined limit. For example, if you bike is stolen or totaled, you would receive $10K. Of course, the higher the limit you set, the higher the premium you will pay.

Cheers!

 

[rukus]

Of course CDN insurance and US insurance companies both are in the business of making $$. FUnny how US insurers can still turn enough profit to stay in business while charging 1/5th of what their CDN counterparts charge. And lawsuits are certainly more rampant in the USA than here, and our OHIP coverage would also alleviate some of the finacial burden on insurance companies when paying out liablity claims to injured parties, whereas in the USA, no one has free health care, so any trips to Dr and Hospital would all be costly, so the inju7red parties would go after insurers even harder.....so shouldn't our rates be even lower than those in the USA?

basically lower liability meana the insurer pays out less and the insuree pays more.

 

[VifferFun]

basically lower liability meana the insurer pays out less and the insuree pays more.

The insurer's exposure to risk is definitely decreased when the liability limit is set really low at the minimum mandatory liability limit in some States. I am not sure whether or not the insured pays out relatively more for coverage with a low limit; this would be dependent on the company.

Cheers!

 

[rukus]

I am not sure whether or not the insured pays out relatively more for coverage with a low limit

maybe im not understanding, but why do you think the insured would pay more for lower coverage?

 

[VifferFun]

maybe im not understanding, but why do you think the insured would pay more for lower coverage?

This was actually your comment when you said that "the insuree pays more". I was somewhat agreeing by saying that, perhaps, the insured would pay *relatively* more for lower coverage than for higher coverage (note the word "relatively"). In other words, the first $100K of coverage will cost you more than your next $100K of coverage (to a $200K limit) and so on.

Perhaps you would like to clarify your previous comment? I likely read it wrong.

Cheers!

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