invictus43
Well-known member
Case in point..
I help set rates for a Major Canadian Insurance Company! Some thoughts . . .
- Thread starter VifferFun
- Start date
Case in point..
You are correct, the investment income IS factored into the bottom line. Insurance rate-making is a very difficult and thorough process, and I have REALLY simplified it in my explanations. People are already confused with the simple explanation I have given, so if I went into all the specifics with regards to investment income I don’t think anyone would understand anyways.
Cheers!
I am not trying to lie with statistics; I re-iterate that I have nothing to gain by defending the insurance industry in an GTA Motorcycler forum. If you really don’t believe me, then I welcome you to look it up yourself.
With regards to the Texas motorcycle insurance, I mentioned in a previous response that rates can vary greatly by region based on the claims experience and the minimum amount of required insurance. In Texas, the minimum coverage is a mere $40,000 where as your typical quote from a broker/agent in Ontario would provide a $1M coverage. $1M is twenty-five times higher than $40,000. Certainly, if we were to write your policy with such a low limit (meaning low exposure to the insurance company), your premium would be drastically reduced. Would you really want to be riding on the highways of Ontario with only $40,000 coverage though? I for one would not. Do you know how far $40,000 goes with lawyers alone? Not very far!
The government is NOT backing us; just think a little about what you are saying. What would the government have to gain from helping an entire industry price gouge the very people that cast the ballots? In fact, it is more like the other way around. In the not-so-distant past (within the last three years), the government has been dictating rules to the insurance industry as part of its own political agenda. The government can indeed help with reducing rates, but they go about it the wrong way. For example, in Alberta the government issued a mandatory 10% decrease in rates a few years back in order to gain the favour of the public. Does this solve the problem? Certainly not! Instead of forcing rules and rate reductions, the government needs to address the root of the problem: people making outrageously-large or fraudulent claims. Soft-tissue body injury claims are outrageous in Ontario as well. I was in a four-vehicle accident a few years back (in my car), and even thought I barely felt the bump, ALL FIVE PASSENGERS in the van ahead claimed whiplash injuries. Give me a break!
Do you really want insurance to be “optional”? I doubt you would have the same opinion when someone hits you on the 401 and you have to go on disability for the rest of your life. Where would the money come from then? Even if you were insured yourself, what would be the chance that the person who hit you was actually covered? Insurance is mandatory to protect EVERYONE on the road.
With regards to your other questions, I will not address them because I have already answered them in previous posts. Before you start ranting, please at least take the time to read my explanations.
Cheers!
Sorry, but I think I have already explained the winter cancellation issue pretty thoroughly in a previous post. With regards to the 8-month policy, this is completely up to the individual company. Personally, I don’t see any point in offering an 8-month policy, because the amount of money saved by the insured would be next to nothing. If you company was giving you a big discount for an 8-month policy, then they probably realized that they were losing money by doing so, which is why they would stop offering that option.
Cheers!
Just a quick question along those 8 month insurance option.
Wouldn't it make more sense for insurance companies to give an option to get rid of collision and only have fire/theft coverage while the bike is stores for winter?
I know with some companies you don't have that option. You sign for a year; that's what your coverage is and what you pay.
Do any companies have this policy? I could cancel with statefarm during the winter months and then re-get the policy in summer, but would that have a negative impact on my record as a customer?
Wouldn't it make more sense for insurance companies to give an option to get rid of collision and only have fire/theft coverage while the bike is stores for winter?
I know with some companies you don't have that option. You sign for a year; that's what your coverage is and what you pay.
Do any companies have this policy? I could cancel with statefarm during the winter months and then re-get the policy in summer, but would that have a negative impact on my record as a customer?
![Wind]v[ill](/xf/data/avatars/m/15/15026.jpg?1552068087){kind=avatar}
LOL! Same question over and over...
See, the attached picture is a bell curve. The red line in the middle is the average cost / month. Most insurance companies charge you the average cost / month.
Most of the insurance cost as already pointed is incurred during the summer months. The cost to insure you from Nov. to Feb is very very little ... maybe saves you 100$/year.
If you do not have insurance for the colder months, you'd only be reducing the average cost / month by a very insignificant amount.
If you choose to take insurance for only the summer months, if that were possible, you'd still be paying 80% or more of the premium you are paying for the full year policy.
If you were to pay for 8 moths, you'd still be paying 90% of the premium you are paying for the full year.
Now, if you take the full year coverage, and cancel in the winter months, you have to pay the insurance company. This isn't a fine (maybe some part of it is a fine) but most of it is the extra amount from the more expensive summer months (premium higher than the average) that got distributed over to the winter months which you are now refusing to pay.
See, the attached picture is a bell curve. The red line in the middle is the average cost / month. Most insurance companies charge you the average cost / month.
Most of the insurance cost as already pointed is incurred during the summer months. The cost to insure you from Nov. to Feb is very very little ... maybe saves you 100$/year.
If you do not have insurance for the colder months, you'd only be reducing the average cost / month by a very insignificant amount.
If you choose to take insurance for only the summer months, if that were possible, you'd still be paying 80% or more of the premium you are paying for the full year policy.
If you were to pay for 8 moths, you'd still be paying 90% of the premium you are paying for the full year.
Now, if you take the full year coverage, and cancel in the winter months, you have to pay the insurance company. This isn't a fine (maybe some part of it is a fine) but most of it is the extra amount from the more expensive summer months (premium higher than the average) that got distributed over to the winter months which you are now refusing to pay.
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Well, it would be possible to offer the option of fire/theft only in the winter, but the financial benefit to you as the policyholder would be miniscule and hardly worth the effort. Allow me to explain with a little bit of Insurance Accounting:
Insurance companies “earn” premium over the months that a given coverage is in effect. When we receive an annual premium from you up front, it actually does not appear on our financial statement as “income” until we “earn” the premium. In fact, premium dollars received show up as a liability on the balance sheet because it is not our money until we have paid out all of the claims associated with that premium received.
So, what does this boring account stuff have to do with winter cancellation of Liability and Accident Benefits? Well, since we know that the majority of your riding is done in the Spring and Summer months, we earn the Liability and Accident Benefits premiums nearly to completion over these Spring/Summer months. The premium is earned according to the early-cancellation schedule example that I posted in a prior reply. Hypothetically speaking, if we have earned 95% of the Liability and Accident Benefits premiums by October, then this means that there is only about 5% of the Liability and AB premium left to refund to you should you decide to “pause” this portion of the policy over the winter months. This is a bit tricky to understand, but I think this is the best I can do to explain it in a simple manner.
There really is no point in cancelling your StateFarm policy for the winter months, since you will only be receiving about 0% – 5% of your premium back as a refund (depending on State Farm’s policy). Besides, if you cancel your insurance over the winter then this will be considered a lapse in insurance experience, which is not a good thing! One big rating criteria is “number of years consecutively insured” and if you cancel every winter, you will never even build up a full year of consecutive experience. You would likely end up losing a lot more money in lost discounts than you would gain from receiving about 5% of your premium back. Besides, by being insured in the Winter you can get your bike out on the occasional warm winter day
[FONT="]Cheers! [/FONT]
If you've been paying a flat insurance rate of xyz$/month throughout the year, would you not actually have to PAY Statefarm if you cancel the policy in winter months after taking it for a full year?
If it makes it easier understand, consider the case where you pay $1200/yr. Suppose we instead write one-month policies. We would charge you the following premiums for the following months, and you can cancel whenever you want. You pay more for months where you ride more, which I think is pretty easy to understand?
JAN -- $0
FEB -- $0
MAR -- $60
APR -- $120
MAY -- $120
JUN -- $240
JUL -- $240
AUG -- $240
SEP -- $120
OCT -- $60
NOV -- $0
DEC -- $0
Hopefully this should clear up any remaining confusion. The benefit of paying annually rather than monthly is that you get to ride in all of the summer months, but you get the winter months as freebies.
Cheers!
Good explanation
khehehe... its grade 10 math. But I'll take the brownie pts anyway..
There is a more mathematical explanation... you can take the integral of the area under the bell curve up to any point in the year, and compare it to the integration of the flat line up until the same point in the year.
A) If the two are the same, you owe the insurance company nothing
B) If the area under the bell curve exceeds that of the square wave integration, you OWE the insurance company.
C) If the area under the sq. wave is greater than that of the bell curve, the insurance company owes you.
Case A happens when you try and cancel on the very last day of ur policy
Case B happens when you try to cancel late in the year, in winter
Case C happens if you cancel insurance early in the year, in spring
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I stated "Province/State". Secondly, Quebec and Manitoba. They offer mandatory provincial insurance which is DIRT cheap in comparison to Ontario's "Competetive" market.
Competitive. This is an interesting word when used in business. It indicates that one person will drop their price, or offer a better product in order to obtain the business. We see active competition in the electronics/computer markets all the time. We "say" there is competition in the Insurance industry but in reality it is minimal. I just quoted out some insurance on Kinetix's website yesterday, and 5 of 8 results were within $300 or so bucks of the top to bottom. 2 of the quotes were drastically higher. 1 was substantially less. Not all companies compete. Some, and very few... do.
I am not a child. Do not insinuate that. I do not rant like one either. I put forward rational thought with facts to back it up.
Insurance is hardly regulated. More control's need to be instilled to stop "bait and switches" and other dirty tactics.
Nites
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Merriam Webster defines competition as:
Main Entry: com·pe·ti·tion
Pronunciation: \ˌkäm-pə-ˈti-shən\
Function: noun
Etymology: Late Latin competition-, competitio, from Latin competere
Date: 1579
1: the act or process of competing : rivalry: as a: the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms b: active demand by two or more organisms or kinds of organisms for some environmental resource in short supply
2: a contest between rivals; also : one's competitors <faced tough competition>
What you've described is competition. The average pricing is where most are, one company is way out in front with the best rates, and another lagging way behind. That there are differences shows there is competition. For collusion, look towards the banks and oil companies.
"Bait and Switches"????
Have you ever applied for insurance and been given something other than what you thought you were buying? ie. you went in for insurance and came out with a snowblower? I'm not following you with the whole bait and switch thing.
Manitoba, Saskatchewan, and British Columbia are special cases because the insurance in these provinces are run by the provincial governments. This is a “monopoly” of a sort, since you have no option but to purchase your mandatory coverages through them (although you can purchase optional coverages such as Collision and Comprehensive elsewhere). Since the provincial government has the ability to control costs by implementing laws, they can reduce their insurance exposure and offer cheaper insurance than the private industry in Ontario. If the Ontario government were to step up to the plate and control implementing laws to control costs, then the rates would be much different in Ontario as well.
With regards to Quebec, I am not too sure about that one. There aren’t many Quebec-specific insurers that I know of, and most companies insure all of Canada. The profit margin is no higher for Ontario than it is for Quebec, so that means that there must be a cost-controlling measure in Quebec which allows them to have cheaper rates.
There is definitely competition in the Ontario insurance industry. I know from experience that insurance companies have teams of people specifically dedicated to analyzing their competitive stance with other insurers who share the same target market (and I have worked on these teams before).
The reason why the premiums are hardly different between insurers is because they are all already charging near the minimum that they can in order to ensure their profit margin of about 7% after paying out claims and expenses. I would be more concerned if there was a HUGE variance among insurers, because this would mean that there is actually tonnes of profit that could be lowered to try and make the rates more attractive.
You don't think insurance is regulated? I guess you didn't read my prior post.
Also, just a tip, I wouldn’t rely exclusively on Kanetix for rates . . . they only quote you on a few of the MANY insurance companies in Ontario. If you don’t happen to fall in the target market of one of these companies, then you won’t get a good rate.
Cheers!
They are also able to subsidize the premiums with tax dollars.
I skimmed your posts a bit, but the reason why I asked this is because last year my brother canceled his insurance with statefarm in january.
There was no cancellation fee for statefarm and they actually sent him a check with some money saying 'We only charge x amount for nov-dec'. I assumed because the extra dollars were added on those months to pay for the summer months up until june when he would've had to renew.
With being said, what I meant was that I wouldn't want to cancel my insurance completely in the winter months. I would just like collision removed. I think for me it's $50/month extra for collision on top of comprehensive.
But thanks for the explanation I got what you mean. That the winter months are going to make up for the high amount for summer months.
Even if they had the policy for 8 months I'd assume it would be high, almost close to what I would pay for the entire year.
There was no cancellation fee for statefarm and they actually sent him a check with some money saying 'We only charge x amount for nov-dec'. I assumed because the extra dollars were added on those months to pay for the summer months up until june when he would've had to renew.
With being said, what I meant was that I wouldn't want to cancel my insurance completely in the winter months. I would just like collision removed. I think for me it's $50/month extra for collision on top of comprehensive.
But thanks for the explanation I got what you mean. That the winter months are going to make up for the high amount for summer months.
Even if they had the policy for 8 months I'd assume it would be high, almost close to what I would pay for the entire year.
johnp
Well-known member
ha ha I'm sure you've got hard evidence to back this up.
johnp
Well-known member
Maybe so but investment income is typically the MAIN source of profit for insurance companies and that can be obscured by long discussion of underwriting gains/losses.
