And hope you don't get pulled over for DUI? lolol.
I help set rates for a Major Canadian Insurance Company! Some thoughts . . .
- Thread starter VifferFun
- Start date
And hope you don't get pulled over for DUI? lolol.
Griffin
Well-known member
I just wanted to express my thanks to the OP for all the detailed explanations and the willingness to continue to provide thoughtul advice despite the attacks by posters that are obviously either so incensed by their own experiences or so limited in their ability to understand the simple explanations.
Thanks. This information has really changed my views on insurance.
Thanks. This information has really changed my views on insurance.
No problem!
My goal isn't to change views on insurance, but to merely explain how the insurance mechanism works and why it is necessary. There are definitely some issues in the Ontario Insurance industry, but many are outside of the control of the insurance companies (such as increasing injury awards).
too much
Well-known member
Life insurance is optional, car / motorcycle insurance is mandatory. I really think this is a scam, that insurance companies take advantage off in Ontario. Let ME decide how much coverage I need, 2 mills will only create the opportunity for people to take advantage and insurance companies to make more profit.
If one will consider in a life time how much insurance have paid, without using any (haven't used a bit of my insurance for allmost 20 years), than will realise that unless half of us would claim 1 mil each, the insurers made a huge profit on our back ...
And than there is the double standard. On health insurance if I get sick, dsabled, i will be paid only a meager amount of my income for at most two years, than what is the 2 mills liability accounting for ?
Plus, how come the rest of the world (or most of it) ca have lower insurance rates? how come in Europe I was able to insure my bike for 6 months only ?
No personal offence, but I really believe that the insurance executives are just a bunch of scammers and thieves.
too much
Well-known member
I want to thank the OP, all this information is really helpfull to understand better how the insurance premiums and the business works.
And I am really sorry that you have to take that many attacks, including my own
But I believe you understand already that people hate insurance companies in Ontario (I didn't use to hate them before). And I really believe they are justified to do so ...
But again, thank you for your effort, I really appreciate it.
And I am really sorry that you have to take that many attacks, including my own
But I believe you understand already that people hate insurance companies in Ontario (I didn't use to hate them before). And I really believe they are justified to do so ...But again, thank you for your effort, I really appreciate it.
Please read the previous posts in the thread . . . I've explained all of this already. An your policy limit is not the limit of how much it will pay out . . . it is the limit of LIABILITY only. There is no cap on how much your company will pay for your own injuries. There was just recently a State Farm claimant in Beeton, ON who received an $18M settlement.
Regarding profits, please read this post:
http://www.gtamotorcycle.com/vbforum/showpost.php?p=1061064&postcount=162
Insurance companies are now cash cows, and are subject to significant risk of loss.
I want to thank the OP, all this information is really helpfull to understand better how the insurance premiums and the business works.
And I am really sorry that you have to take that many attacks, including my own
But again, thank you for your effort, I really appreciate it.
That's no problem. Please have a read through my other thread as well (regarding Pay-as-you-go Insurance). There is some interesting discussion regarding the insurance industry if you are interested. We are trying to decrease rates, but it isn't easy. You can't pay out $1.00 and expect to receive only $0.90 for doing so. We are trying to put some limitations on the "lottery winnings" that people are successfully awarded by the courts when they get into collisions. Lower claim payouts translates to lower premiums.
RC8BOY
Well-known member
Clearly you didn't read the discussion in this thread.
Also, the actual dollar value is not relevant. A company that charges $1.00 for a can of pop that costs only $0.25 to manufacture is much more profitable than a company that sells a $2000 insurance product that costs $1900 to service. The pop company is earning 300% profit where as the insurance company is earning 5.3% profit.
I suggest you read up on the financial concept of "Rate of Return"
http://en.wikipedia.org/wiki/Rate_of_return
RC8BOY
Well-known member
http://www.consumeraffairs.com/news04/2008/01/insurance_profits.html
What ever brother. I know what rate of return is.
http://articles.latimes.com/2006/apr/05/nation/na-insure5
I can cut and paste too.
here's another one.
http://business.timesonline.co.uk/t...ectors/banking_and_finance/article5355565.ece
After riding for 25 years. hold on, insured and riding for 25 years with the same insurer. I've been riding my last bike an 02 998 since 02. This year I bought an RC8. My insurer bumped my insurance up an extra 500 dollars because they didn't "recognize the bike yet". So if you think I and 99% of the people I know. (The other one percent being family and friends that work for insurance and seem to be brainwashed as you are) beleive people like you, think again. Btw, I have never put a claim in 25 years and Had one speeding ticket in my car. just 10 km over in my 25 years of riding.
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Why aren't you looking at the most recent year's results? If you have read the discussion, you will understand that insurance goes in cycles of excellent profit to dismal losses. We have just left the excellent profit cycle and re-entered the dismal loss cycle. Check out the 2008 year-end results.
http://www.gtamotorcycle.com/vbforum/showpost.php?p=1061064&postcount=162
In the end, it all balances out to a sustainable level of profit that is not excessive. If you truly believe that the insurance industry makes money hand over fist, I invite you to invest all of your savings in the industry. If you are correct, then the GUARANTEED capital gains will far outweigh any insurance premiums that you are paying.
The "$500 bump because your insurer doesn't recognize the bike yet" is rather strange. I don't think that your agent/broker communicated the reason for the increase clearly to you. Insurers don't randomly hike rates on "unrecognized" vehicles.
I don't understand your point? So you have contributed about $50K to the insurance pool over 25 years and are disappointed that you didn't have to make a $2M claim?
I am not brainwashed, but rather understand the mechanism. Unfortunately, 99% of people don't, and this is party the fault of the insurance industry that doesn't adequately educate their customers.
RC8BOY
Well-known member
First off, I would never invest in anything that allows a CEO to take multi-million dollar bonuses. It's just wrong. Everyone pays for it. Secondly, the average person would never have enough to invest in insurance and make more than what they pay in insurance. So that's just a stupid suggestion.
If you don't understand my point, Perhaps you should reread my original post. You claimed that they do not make huge profits and it's just a misconception. Liberty Mutual Insurance made 1,518,000,000 in PROFITS last year. If you don't consider that huge, move over Warren Buffet, we have a big player here. So my point AGAIN is, instead of screwing people over to make BILLION dollar profits so that a CEO can take home a incentive based bonus of millions, perhaps lowering rates a bit and making hundreds of millions would make people like me and the other 99% of uneducated people happier.
Btw, we must remember that you are paid by the insurance companies to justify to the government that they need more money. So in reality, you are part of the problem of high insurance.
You can't argue with facts. Insurance companies make billions. Period.
I'm going to take a nap before my ride. Ciao
My suggestion was not stupid, but it is a suggestion that I always receive irrational responses to. The insurance industry does not employ child labour, cause excessive pollution, or exploit third-world countries. In fact, insurers give back to the communities with lots of charitable donations. Most successful companies have well-paid executives, and if you decide not to invest in a successful company for this reason, that is purely irrational. My point is that if ANY industry was a cash cow, it would be eliminated by the free market. If the insurance industry made the risk-free profits that you claim they do, then every rational investor would have a large portion of their investment portfolio in the insurance industry. I doubt that many do.
I understand what you wrote, but there is no real point to it. I never said that Insurance Companies cannot make huge profits; I said that do make large profits in some years, and experience large losses in other years. If you look at the industry results over a longer time span (such as 15 years), the rate of return is not excessive.
Yes, insurance companies can make millions, but don't forget that they also lose millions. If $50M of profit is made on a $1B revenue stream, then I don't consider 5% profit to be excessive. You are looking at dollar amounts rather than percentages, and that simply doesn't make sense. Would it make you happier to be insured with a small company that made $1M in profit on a $10M revenue stream? Even though they made fewer dollars in profit, they are reaping a 10% return.
Btw, we must remember that you are paid by the insurance companies to justify to the government that they need more money. So in reality, you are part of the problem of high insurance.
I justify premium increases if they are needed, but I will also justify premium decreases if they are warranted. It's a competitive industry, and the insurance product, which is seen as a commodity, is largely driven by price.
Nope . . . you definitely can't argue with facts. The insurance industry *can* make millions, and I never said that they couldn't. They can (and do) also lose millions. You are only looking at one side of the coin, which would lead people to believe that you don't have your facts straight.
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Bumbobee
Active member
I've read 21 pages and had enough, some descent info but still nothing beats direct comparisons.
I'd like to see if someone here could take the time to work out 2 side by side insurance policies, one in Mississauga, Ontario, one in Niagara Falls, New York. From what I've read here the Ontario policy has much more coverage therefore the cost is higher, with obviously the added risk of being in the GTA.
Age 25
Bike: 2009 V-Rod
M license (2 years + experience)
Clean driving record since 16
Let's go with a typical 1 million liability coverage policy, and try to get the exact same policy on the US side. I'd be curious to see the numbers and make my judgements from there about what is fair and what is just being raped out of my money.
I'd like to see if someone here could take the time to work out 2 side by side insurance policies, one in Mississauga, Ontario, one in Niagara Falls, New York. From what I've read here the Ontario policy has much more coverage therefore the cost is higher, with obviously the added risk of being in the GTA.
Age 25
Bike: 2009 V-Rod
M license (2 years + experience)
Clean driving record since 16
Let's go with a typical 1 million liability coverage policy, and try to get the exact same policy on the US side. I'd be curious to see the numbers and make my judgements from there about what is fair and what is just being raped out of my money.
forexman
Active member
Who really understands the financials of an insurance company with that beautiful black hole in accounting called reserves which they inflate and deflate at will hence showing profits when they need to and losses when they choose to. Its unfortunate that there are no really well defined guidelines as to the limits of this "reserve" account which they have on their books and if one looks a bit closely you will see that it fluctuates very widely from year to year.
So setting rates based on so called experience is only one part of the profit equation. Do they actually take into account what % of this reserve will actually be brought back into the P&L before these analyst set their rates. I very much doubt it.
So setting rates based on so called experience is only one part of the profit equation. Do they actually take into account what % of this reserve will actually be brought back into the P&L before these analyst set their rates. I very much doubt it.
Reserves must be adequate to pay out both claims reported and not yet reported for accidents that have already occurred. Actuaries determine the reserves using statistical techniques, and their careers are at stake if they mess up. You are not allowed to use reserves to make an unprofitable company look profitable -- there is no inflating and deflating at will.
Reserves can fluctuate, especially when their are changes in legislation. For example, the Alberta courts decided to dismiss the appeal to remove the cap on minor-tissue injuries. Companies had set aside a great deal of money in reserves to pay out additional claims should the cap have been removed. Since the appeal was rejected, all of these reserves can now be released, which is well into the millions of dollars for many companies with business in Alberta. This is only one example of many. The reserves fluctuate each year as new information becomes available and the estimate can be adjusted accordingly.
You do not anticipate reserve increases or decreases. When the actuary sets the reserve, this is their best estimate of the cost to pay out claims for accidents that have already occurred. If reserves are released, then this improves the historical experience for Pricing actuaries, since one of the most important datasets being analyzed is the sum of Paid and Reserved Claims.
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O.k. you messed up big time last year.
How many actuarialists were let go?
What do you want for the gixxer.
Or were you forgiven, and we'll pony up for your mistakes, after the company fills out the appropriate forms with the government?
Who messed up? Reserves are mandated to protect the consumer. The reserves ensure that the policyholder doesn't have to worry about whether or not their insurer has enough money to pay their claims. I haven't heard of this situation occurring last year.
I'm guessing that you kept your accusation so general because you have no idea what you are talking about. And it's Actuaries, not Actuarialists.
You're right I'm somewhat ignorant of what goes on in the Insurance business.
I assumed that people with actuarial science degrees calculate how much the company needs to charge to keep the government mandated reserves. My insurance keeps going up, so I assume that those reserves are being depleted, and the insurance company then needs to fill out some paperwork to justify an increase, and it then gets granted. From that premise, when you mess up, my rates increase. If the rumour of a large 2010 across the board increase is true, doesn't that mean that someone messed up with their guessing?
I assumed that people with actuarial science degrees calculate how much the company needs to charge to keep the government mandated reserves. My insurance keeps going up, so I assume that those reserves are being depleted, and the insurance company then needs to fill out some paperwork to justify an increase, and it then gets granted. From that premise, when you mess up, my rates increase. If the rumour of a large 2010 across the board increase is true, doesn't that mean that someone messed up with their guessing?
Increasing rates do not mean that the actuaries made poor estimates, but rather that the expected cost of future claims is rising. There is no "across-the-board" increase taking place in 2010, although many companies are taking rate increases in Ontario (and particularly the GTA) this year due to really poor claims experience. A company can only take a rate increase if it is approved by FSCO.
The people that you can thank for the rising rates are the people driving up the cost of claims. It's not so much that more accidents are occurring than they have in the past, but rather that people are being awarded much larger settlements. As settlements increase, then premiums must also increase.
