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

[VifferFun]

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First off Viffer, I want to thank you for your input to this site. I've always hated insurance with a passion, but its something that we cant live without, so might as well understand it and deal with it that way. The reason I think people dont take off home insurance, is because it's (usually) their biggest asset. Hell, if I crash my $3500 Integra today, I'll feel like *** for a few weeks, then move on. (I do realize that I can cause thousands more in damage with said car) However, when a 60 year old man's $400,000 house burns down, and he is left with nothing, its a whole different ballgame. Personally, I feel the costs of having car/bike insurance are a bit high in relation to the returns. Whereas a house is a huge asset, and paying some $$ monthly to keep is secure seems worthwhile.

This is exactly my case in point -- a house is PERCEIVED as a person's largest asset, but what value do you give to your body and its ability to enjoy life and earn future income? Would you rather lose your $400K home to a fire or become brain damaged in a collision? What dollar value do you put on your ability to walk? To me, I put much, MUCH greater value on my physical health than I do a home. A home can be replaced, but your ability to think, walk, work, etc. cannot. Your mandatory insurance policy primarily covers damage to your human body and your potential to cause damage to other human bodies. Perhaps Auto insurance should be relabeled as "Auto Injury Insurance" to emphasize this point. Your human body is very costly to repair and your insurer is on the hook to both repair your body and compensate you for future losses.

I'm 18 years old, male, and driving a 2 Door Integra. Yes, I've got quite a few points that would raise my premiums. But driving for 2 years with a 100% clean record, driver training certificate, and under parents policy..yet still paying $300 a month is a slap in the face to me.

Two years is hardly what I would call "experience", and Driver's Training surprisingly does not reduce the likelihood of a claim. Drive for 6-10 years without an incident and then you will have proven that you are a better driver than your peers (and your premium will reflect this).

I'm looking at getting my first CBR125 this coming spring, simply because insurance would rape me even on a 250 ninja.

Usually the premium difference between a CBR125 and a Ninja 250 is minimal. They are usually classified in the same displacement band.

Done the research, and Jevco is my only option, yet every broker on their broker list decides to "give me a call back" as soon as they hear of a bike quote in the winter - they know I'm not buying right now.

That's surprising . . . many of the brokers in the sticky even post in this forum. If you are looking for a quote assuming that you are buying a bike in the Spring, they can't provide you with that yet (since rates can change between now and then).

Insurance is just frustrating because I'm expecting to pay about $130 a month for the bike (hopefully), on top of $300 for a car. For someone who has taken both driver, and rider training courses, and NEVER had any accidents/tickets/claims..I'm sure you can agree that $480/month is very unreasonable.

No, $480/mo for two vehicles for an inexperienced 18yo is quite reasonable. (FYI, I doubt you will find insurance on a bike for less than $170/mo). Driver's Training does not reduce your likelihood of a collision, and Rider Training has become an expectation now that everyone takes it (and its effect on claims reduction is already reflected in rates). Two years of claims-free experience is nothing . . . if you actually had a claim in such a short period of time, then you are likely a horrible driver instead of just being inexperienced. You might think you are some driving/riding prodigy and invincible to collisions, but most people feel the same way when they are 18yo (at least, before they crash for the first time).

 

[VifferFun]

I've worked in the past for the largest bank in Canada that also happened owned an insurance company ( i guess you have figured it out by now). 10% growth every year is actually a quite profitable sum for an organization worth hundreds of millions of dollars. If we made 10% of our salaries every year as bonuses compounded every year e.g 10,000 dollars +1000 every year, we would be doing quite well. Strong economies grow at 3%, yes 3%..So imagine 10% ? this is something like the growth of the Chinese economy. Its huge!!!

I presume you are speaking about your previous employer. 10% growth in what? Premium? Profit? Market share? Was this growth for insurance operations only?

Also, you forget to mention that Insurance companies ARE Investment companies!

No, I've mentioned this many times. The insurance company's expected investment returns must be considered when setting premiums. If the company expects a 10% return on their investment portfolio, then this must be accounted for in the setting of rates. If the company actually ends up with a return of 1%, they can't go back and recoup premium from existing policyholders. If the investment horizon looks bleak, then the expected investment return over the next year will be decreased, and premiums will increase. At no point will an insurance company expect a NEGATIVE return, which means that the investments benefit the policyholder -- if money was no invested, then the expected return would be 0%, which is the worst-case scenario from the perspective of the insured.

And when rates go up it is NOT because of CLAIMS. More correctly it is because the INSURANCE companies got BAD RETURNS ON THEIR INVESTMENTS, by MAKING POOR INVESTMENT DECISIONS. What this means is that the Insurance company takes your premium money and invests it in stocks and makes profit when the stock goes up. Alternatively, when the stock goes bust they lose money and pass that loss onto their clients by way OF RATE HIKE!

Completely false (as I explained above). You may have worked for a bank that sells insurance, but you don't understand how insurance rates are set.

Please stop perpetuating confusion, VIFFERFUN and please explain the whole truth to the members here. I respect your composure given the angry responses to your post but please tell everyone here the WHOLE TRUTH.

I do explain the whole truth the best I can. My goal is not to confuse a bunch of bikers into loving the insurance industry.

 

[promac]

Also, you forget to mention that Insurance companies ARE Investment companies! And when rates go up it is NOT because of CLAIMS. More correctly it is because the INSURANCE companies got BAD RETURNS ON THEIR INVESTMENTS, by MAKING POOR INVESTMENT DECISIONS. What this means is that the Insurance company takes your premium money and invests it in stocks and makes profit when the stock goes up. Alternatively, when the stock goes bust they lose money and pass that loss onto their clients by way OF RATE HIKE!

That assumes all insurance companies are in the same boat from an investment performance point of view. Motorcycle insurance is not a permanant insurance product with cash surrender value, but it is an interesting concept. Inspite of the oligopolistic nature of the insurance market in Canada, the insurance business is competitive. IIRC, Kingsway's premium to insurance cost ratio was 138%. If I was a Kingsway customer facing a 45-50% increase in premium the next year, I think I'd shop it elsewhere.

Going back to the permanent insurance concept, consider that with variable premium levels based on an individual's risk assessment every 3-5 years, what would you think of such a product? It might give some a level premium option, cash surrender value depending on driving record/risk, an investment vehicle and incentive to behave themselves on the road, although I suppose that incentive is already there.

On another note, having adequate insurance coverage is certainly comforting when you are served with a statement of claim for damages etc, of $700,000 by the other party who was uninsured. That was 16 years ago for a rear end collision at <20km/h. I had a $1,000,000 primary and $5,000,000 excess policy back then. $1,000,000 today is nothing!

Hey Vifferfun: Why did the tax lawyer become an actuary? Tax law was too exciting!

 

[Gummiente]

Going back to the permanent insurance concept, consider that with variable premium levels based on an individual's risk assessment every 3-5 years, what would you think of such a product? It might give some a level premium option, cash surrender value depending on driving record/risk, an investment vehicle and incentive to behave themselves on the road, although I suppose that incentive is already there.

Anybody who recommends any form of whole life insurance product in any situation to any consumer is not helping them in any way. It is a flawed product that no financial advisor in their right mind would recommend. If you think automotive insurance is a scam, it is nothing compared to what the life insurance industry does to its clients on a daily basis. Combining life and auto would be a very, very bad idea for the consumer - but a great income stream for the unscrupulous agent who peddles it.

 

[promac]

Anybody who recommends any form of whole life insurance product in any situation to any consumer is not helping them in any way. It is a flawed product that no financial advisor in their right mind would recommend.

I don't know about that........a lot of financial advisors do recommend it. As you get older, the risk of health issues increases exponentially - you could end up being uninsurable when your term insurance becomes unaffordable and need to re-apply and provide proof of health.

 

[Gummiente]

I don't know about that........a lot of financial advisors do recommend it.

The reputable ones do not.

As you get older, the risk of health issues increases exponentially - you could end up being uninsurable when your term insurance becomes unaffordable and need to re-apply and provide proof of health.

The smart person (or the one who has a smart financial advisor) will have a financial plan that will result in a minimal need for life insurance from the time of retirement all the way to time of death. And most companies offer term life insurance to age 85, anyway.

 

[Baggsy]

I don't know about that........a lot of financial advisors do recommend it. As you get older, the risk of health issues increases exponentially - you could end up being uninsurable when your term insurance becomes unaffordable and need to re-apply and provide proof of health.

Eventually, you are supposed to have enough saved to self insure.

 

[Gummiente]

Eventually, you are supposed to have enough saved to self insure.

Aka the policy is "paid up". Problem is... it isn't. The cash value that has been built up over the years when premiums were paid are now used to pay the premiums to keep the policy in force. But people are misled into believing they're getting "free" insurance with this feature. One other major point that most people don't realise - and their life insurance agent never tells them - is that the beneficiary never gets the cash value AND the payout at time of death, it's one or the other but never both.

 

[promac]

Eventually, you are supposed to have enough saved to self insure.

What if you have a business, have a succession plan in place with your kid(s) taking over, and estate freeze shares with substantial capital appreciation? With a permanent life policy, the owner can defray the pure cost of insurance with tax-free returns of the cash value built up and use it as collateral security for loans if the need arises. Large tax liabilities may also come due from trusts subject to the 21 deemed disposition rules, vacation and cottage properties that the owner would like to pass on to his/her kids for their future use. Otherwise, estates/trusts/holdcos would have to sell assets/shares or borrow against them to pay the tax. It provides both immediate and long-term protection, because eventually may never come once you pass 75 and your term insurance is too costly to continue to age 85 - then it's a little too late to apply for permanent insurance.

 

[vit100]

Insurance by defnition is voluntarily thing.
If you are scared or can not pay in case of excident - get insurance...
Someone makes money on this, and goverment covers this...

 

[VifferFun]

Insurance by defnition is voluntarily thing.
If you are scared or can not pay in case of excident - get insurance...
Someone makes money on this, and goverment covers this...

Liability and Accident Benefits coverage (or a large bond to prove you can pay in the event of a claim) are mandatory in Ontario.

 

[49over]

Is it Possible to have Insurance set up to Insure the person, not each vehicle the person operates.
Eg: Liability- base it on Age, sex, etc. but not per vehicle but base it on blanket policy Idea. ( commercial insurance base )
seperate the premium fee for the specific vehicle.
This would be a way to let the accident free drivers pay alot less then they(I) am now.
Our household has 3 vehicles Insured. 2 "cars" 1 bike. I pay Liability for each vehicle, but I can only drive 1 at a time. If I where to get in to and accident My liability is only good on the vehicle I was driving. If I could use and combine the liability from all 3 vehicles. paying 3 premiums would make sense.
Scenario;
Male 16-M2= start rate premium $1000/yr ( all blanket coverage relating tothe person, accident, liability, etc)
Vehicle -Pontiac sunfire, value $2500- premium $500/yr (disposal car, unlikely to be repairable)
Total =$ 1500/yr

eg 2

Male 36 yrs old - Married, homeowner, no Accidents or claims 10 yrs, no tickets 10 yrs.
base rate: $500/yr ( Blanket coverage relating to the person)
Vehicles- Bike Value -$10,000- premium 200/yr
Mini Van - $ 15,000- premium 210/yr
Blazer - $2500 - premium 100/yr
Total Insurance= 1010/yr.
I know it's a stretch but It could work..
Don't look at the numbers just the concept..

 

[VifferFun]

Is it Possible to have Insurance set up to Insure the person, not each vehicle the person operates.
Eg: Liability- base it on Age, sex, etc. but not per vehicle but base it on blanket policy Idea. ( commercial insurance base )
seperate the premium fee for the specific vehicle.
This would be a way to let the accident free drivers pay alot less then they(I) am now.
Our household has 3 vehicles Insured. 2 "cars" 1 bike. I pay Liability for each vehicle, but I can only drive 1 at a time. If I where to get in to and accident My liability is only good on the vehicle I was driving. If I could use and combine the liability from all 3 vehicles. paying 3 premiums would make sense.
Scenario;
Male 16-M2= start rate premium $1000/yr ( all blanket coverage relating tothe person, accident, liability, etc)
Vehicle -Pontiac sunfire, value $2500- premium $500/yr (disposal car, unlikely to be repairable)
Total =$ 1500/yr

eg 2

Male 36 yrs old - Married, homeowner, no Accidents or claims 10 yrs, no tickets 10 yrs.
base rate: $500/yr ( Blanket coverage relating to the person)
Vehicles- Bike Value -$10,000- premium 200/yr
Mini Van - $ 15,000- premium 210/yr
Blazer - $2500 - premium 100/yr
Total Insurance= 1010/yr.
I know it's a stretch but It could work..
Don't look at the numbers just the concept..

This has been discussed already, if not in this thread but in others. If you search, you can probably find it. In short, I agree that this is a shortcoming of insurance, but have explained the reasons previously.

 

[Freestyle72]

I know what you mean, and I am asking a Product Specialist at my company why we don't insure two bikes in such a way. I will let you all know if I can get any more details.

As someone already pointed out, lawyers can cause a problem when it comes to exclusions. Excluding a specific driver with a poor record is common practice, but exluding ALL other drivers is not something I have ever heard of before.

To be brutally honest, I think for the majority of companies it just isn't worth the headache of filing rates for this multi-bike situation with FSCO where the financial benefit in doing so is well below the associated costs.

Cheers!

What do?

 

[VifferFun]

What do?

I've been very busy, but I'll get around to it sometime.

 

[GYMPY]

Hi there. Avi Sign you better look up the policies of other insurance companies when you say all insurance companies will insure other motorcyclist driving your motorcycle or trike. "Well, my insurance company won't" and I have it in writing if you wish to read it. To much garble, garble, garble here by some insurance people. Insurance companies fight all cases even knowing they could not win in a court of law just to make you say "I give up and cannot win. Who pays for all those hours, man power, lawyers to do this???????????? We do in insurance rates. We are like a money tree on which money grows. Unlimited source of income for them. Costs are up, jack up the rates to compensate. Have had it done to me, but said it won't work. My motto, Pay now, or it will cost you more latter. It did. Roger

 

[GYMPY]

Now another tactic they want us to believe is that it costs millions to settle. Only in a very severe, castrofic case of an accident where it is usually a very young person, eg. child which has a very long life span ahead of it and will always need a whole lot of medical care till they die. If you should get into a case like that, the insurance industry would rather you die as it is cheaper for them than caring for you for the rest of your life. In this province, all payouts are regulated, like lost wages for life, pain and suffering, maximum of 80.000.00 dollars, punitive damages, around 500,000.00 if you are lucky. must be serious case for that or more, and courts take into effect your medice needs for the rest of your life. Very seldom claims get to a million dollars.

 

[GYMPY]

Well, how would I know all that since I am not an insurance agent???????? Fifteen years ago, I lost a leg due to medical malpractice in a hospital. That insurance company knew they had to pay out. It took six an a half years to get a payout from them. What I listed in the previious thread is exactly how the payout to me was done. My work career was done at an age of forty five years of age. Still had two kids to put through college, which I did with no help from the insurance company. Till the moment they paid out, they said they were not responsible. They had to pay all my lawyers fees, court costs, their own lawyers fees, my expenses to a certain amount for six years to go to see my lawyer when he needed to consult with me, consultation fees my doctor had with other specialists and the list goes on. If they had aproached me with a year to six months after the amputation, I probably would have settled for peanuts compared to what they had to pay out. "NO, NO, NO" I did get nowhere near a million dollars on this insurance claim. Flame suit on for the insurance boys. Let me have it. I can give it back. Roger P.S. Are insurance companies crooks????????? You tell me!!!!!!!!!!!!

 

[Corey McNeely]

GYMPY

Your situation is not really what we are discussing here in this forum. I can't speak on the procedures of malpractice insurance. Auto and Home insurance works differently then malpractive insurance.

 

[GYMPY]

Nice try Corey. Does not matter what you sue for, car medical,etc the insurance industry still treats you the same. Still apply the same procedures to you to get out of paying a claim which they know they will have to pay. Cory, why not tell the people on here when they sue and insurance company, at discovery prior to trial where all facts are taken which occurs whenever you sue, insurance, your neigbour, company you work for, the insurance company wants all your personel info going back 20, 30 years past. They will even ask you about your, get this, "Sex Life" with your wife, girl friend, common law wife etc. Yes, they can really get very low like a snake to make you feel like you are a lizzard. Again Corey nice try. You can give it. I can take it but also give it back. I have a lot more I can say but will reserve it for other times. Roger

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