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

[VifferFun]

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 (~30%) + PROFIT (~5%)

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 and the other driver doesn't flee the scene, 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.

7.) Increase your Collision or Comprehensive deductibles.



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!

[dropgear]

Thanks for that. Very informative!

Now for some snide anger:

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

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

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

[VifferFun]

Thanks for that. Very informative!

Now for some snide anger:

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

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

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

A bit of anger is OK and completely understandable

Rates are VERY different depending on the region where you are being insured because the claims experience can be very different. One fairly extreme (but 100% REAL) example is that it statistically takes people in Ontario THIRTEEN TIMES longer to heal from an injury than someone in British Columbia. Do you think Ontarians REALLY need all this extra time to heal, or do you think Ontarians just take advantage of the insurance more? You tell me. The more people claim, the more everyone has to pay in their rates.

I am no expert on the American side of insurance, but I do know that the mandatory minimum level of insurance varies A GREAT DEAL from state to state. I believe the minimum amount of liability coverage in Michigan is only about $40,000! That is just ridiculous. I would not be on the road if I only had $40,000 coverage . . . that wouldn't even cover legal fees! I think it is more common for our American friends to have LOW near-minimum liability limits, which would significantly reduce their premiums because the exposure to the insurer is much lower. This is like comparing someone with a $250,000 Life insurance policy to someone with a $25,000 Life Insurance Policy. I suggest you start by asking Filip what his Liability Limit is on his bike policy.

This website will show you the minimum liability limits by province/state:
http://www.auto-insurance-knowledge....liability.html

In Ontario, the minimum liability limit is $200,000, but even that is much too low. Most brokers won't quote you at any level less than $1,000,000. Could you imagine the negative PR if you got in an accident, only had $200,000 coverage, incurred $2,000,000 in damages, and the "Evil Insurance Company" wouldn't pay for the additional $1,800,000?

By the way, I whole-heartedly recommend increasing your limit to the full $2,000,000. It doesn't cost much extra to go from $1,000,000 to $2,000,000 and it is well worth it! It takes nothing to get over a $1,000,000 claim these days.

Cheers!

[Pegassus]

Rates are VERY different depending on the region where you are being insured because the claims experience can be very different. One fairly extreme (but 100% REAL) example is that it statistically takes people in Ontario THIRTEEN TIMES longer to heal from an injury than someone in British Columbia. Do you think Ontarians REALLY need all this extra time to heal, or do you think Ontarians just take advantage of the insurance more? You tell me. The more people claim, the more everyone has to pay in their rates.

With all your due respect sir you are full of it. And whose statistics are those...? Your own industry's? Please.

Can you explain to me why Texas motorcycle insurance is 75% cheaper than Ontario insurance even though people there ride ALL year round? There's an astronomical increased chance of more injuries and crashes in Texas than in Ontario, that's for sure.

BTW why do you wolves charge a FULL year even when you know very well we don't ride in the winter? Now, there's NO excuse for that at all, it's fraud if you ask me.

Can you explain to me why N.Y. state with a similar demographic and weather as Ontario pay less than half for insurance?

P.S. if the government was not backing you guys in defrauding us and gouging our eyes out and insurance was voluntary I bet all your mambo-jambo economic excuses would fall apart and your industry would be kissing our butts to take their polices for $199 a year.

[RetroGrouch]

Dear VifferFun,

First of all, could you please teach all the knuckledraggers on this forum how to write clearly and concisely such as yourself? And to maintain civility while being flamed from all sides?

Secondly, your explanations are compelling but I disagree with offering only full year policies. There used to be an optional 8 month policy for a little less but that has since been eliminated. Why so?

[VifferFun]

Dear VifferFun,

First of all, could you please teach all the knuckledraggers on this forum how to write clearly and concisely such as yourself? And to maintain civility while being flamed from all sides?

Secondly, your explanations are compelling but I disagree with offering only full year policies. There used to be an optional 8 month policy for a little less but that has since been eliminated. Why so?

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!

[invictus43]

Can you explain to me why Texas motorcycle insurance is 75% cheaper than Ontario insurance even though people there ride ALL year round?

Case in point..

[VifferFun]

With all your due respect sir you are full of it. And whose statistics are those...? Your own industry's? Please.

Can you explain to me why Texas motorcycle insurance is 75% cheaper than Ontario insurance even though people there ride ALL year round? There's an astronomical increased chance of more injuries and crashes in Texas than in Ontario, that's for sure.

BTW why do you wolves charge a FULL year even when you know very well we don't ride in the winter? Now, there's NO excuse for that at all, it's fraud if you ask me.

Can you explain to me why N.Y. state with a similar demographic and weather as Ontario pay less than half for insurance?

P.S. if the government was not backing you guys in defrauding us and gouging our eyes out and insurance was voluntary I bet all your mambo-jambo economic excuses would fall apart and your industry would be kissing our butts to take their polices for $199 a year.

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!

[Pegassus]

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.

Who cares? I would LOVE an insurance policy for my bike where I would be charged only $200 a year and I won't care if the coverege is only $40,000. Why? Because I know that 95% of all motorcycle crashes will not exceed $40,000 in property damages.

So you are saying that we are paying $4,000/year for a supersport because we have a $1 million dollar insurance coverege? WHO CARES, we will never see that $1 million, at least not 99% of us who are bankrolling those huge amounts with our exorbitant monthly payments.

BTW, you insurance wolves still don't get it do ya? We simply pay you because the government forces us to pay you, there are a thousand other things I do which are as dangerous as riding a motorcycle and I have never needed insurance for them. Back in my country I rode motorcycles for 12 years on city streets with NO insurance and look at me now, here I am, healthy and complete.

"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.

C'mon Singh, let's not play dumb here, as an insurance agent you pretty well are aware that you guys quote us "$1,500 year" on the phone and we go out and buy our bikes and then 3 months later we find a letter in the mailbox telling us that our premium is "$2,800/year" and that it was a "mistake".

[too much]

This is like comparing someone with a $250,000 Life insurance policy to someone with a $25,000 Life Insurance Policy.

In Ontario, the minimum liability limit is $200,000, but even that is much too low. Most brokers won't quote you at any level less than $1,000,000. Could you imagine the negative PR if you got in an accident, only had $200,000 coverage, incurred $2,000,000 in damages, and the "Evil Insurance Company" wouldn't pay for the additional $1,800,000?

By the way, I whole-heartedly recommend increasing your limit to the full $2,000,000. It doesn't cost much extra to go from $1,000,000 to $2,000,000 and it is well worth it! It takes nothing to get over a $1,000,000 claim these days.

Cheers!

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]

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.

[VifferFun]

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.

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.

[VifferFun]

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.

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...&postcount=162

Insurance companies are now cash cows, and are subject to significant risk of loss.

[rukus]

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

yank insurance ist a totally different ball gome.

[zc911]

i ahve a questions about two or more bikes and one rider

Why do i ahve to pay as if i only had one bike?
i can only ride one at time.
Would it not make sense to pay the liability on the most expensive bike, and the other bike should be covered. Just pay extra if you wanted fire/theft/collison on the second, third, foruth ect.. bike

And don;t give me the BS about someone else riding one bike, while you are on another. Thats a big asssssumption, and it would be simple enough to deny a claim if two bikes where out at once.
Hell have a person sign somthing saying nobody else is insured on this bike.

[EX500R2001]

i ahve a questions about two or more bikes and one rider

Why do i ahve to pay as if i only had one bike?
i can only ride one at time.
Would it not make sense to pay the liability on the most expensive bike, and the other bike should be covered. Just pay extra if you wanted fire/theft/collison on the second, third, foruth ect.. bike

And don;t give me the BS about someone else riding one bike, while you are on another. Thats a big asssssumption, and it would be simple enough to deny a claim if two bikes where out at once.
Hell have a person sign somthing saying nobody else is insured on this bike.

Agree.
For instance, if I have 2 exact same cars insured by the same insurance company, shouldn't the second car cost ~80% less (liability) than the first one? Why do I get only 10%-15% off on the second car? Why do I have to pay liability twice? Isn't it a pure fraud?

[gcrouse]

Question. Why can't we cancel our insurance without penelty during the winter months?

[spankayf]

i ahve a questions about two or more bikes and one rider

Why do i ahve to pay as if i only had one bike?
i can only ride one at time.
Would it not make sense to pay the liability on the most expensive bike, and the other bike should be covered. Just pay extra if you wanted fire/theft/collison on the second, third, foruth ect.. bike

And don;t give me the BS about someone else riding one bike, while you are on another. Thats a big asssssumption, and it would be simple enough to deny a claim if two bikes where out at once.
Hell have a person sign somthing saying nobody else is insured on this bike.

This one drives me nuts

[Avi Singh]

And don;t give me the BS about someone else riding one bike, while you are on another. Thats a big asssssumption, and it would be simple enough to deny a claim if two bikes where out at once.
Hell have a person sign somthing saying nobody else is insured on this bike.

Call it BS if you want, but you licensed the bike for a year, and it needs to be insured as such. Furthermore, the bike is licensed to be used by any licensed individual.

Having people sign waivers doesn't do much with a good lawyer, so the insurance companies have taken the stance that if it's licensed for the year, it's insured for the year. Simple.

[zc911]

Call it BS if you want, but you licensed the bike for a year, and it needs to be insured as such. Furthermore, the bike is licensed to be used by any licensed individual.

Having people sign waivers doesn't do much with a good lawyer, so the insurance companies have taken the stance that if it's licensed for the year, it's insured for the year. Simple.

simple and unfair. I have no problem paying extra for fire/theft/collision for a second bike, but i have a problem paying for liability twice. i can only be liable for one accident a time lol

My brother has a horrible driving record. My parents insurance came up for renawl and becuase of him they where going to be dropped. All that had to be done was TD sent over some forums saying he was not insured if he drove any car on the policy.

Do the same for the bike. Send me the same forum saying the bike is insured for you only, and at no time shall both bikes be operated on the road at the same time (that sounds funny)

I know, US different system, but they can add second bikes this way for like $20/year (no papers to sign just common sense)

vifferfun, thanks for the input. But same general comments to your post as well