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

[invictus43]

Don't forget supply demand affect price. In province's/states where insurance is not a requirement, the pricing is actually quite reasonable/affordable because the insurance company needs to price lower in order to continue to attract business.

In areas where insurance is mandated by law (IE: Ontario), but the pricing is not regulated, the Insurance companies can gouge much more deeply. This is why they are posting record profits in 2003, 2005, and so on.

Here is the hard numbers:

$154.8 million - The Co-operators Group Ltd - PROFIT
$63.1 million - Industrial Alliance Insurance and Financial Services Inc. (IAG) - PROFIT
-$103.5 million - Kingsway Financial Services Inc. - LOSS
$35.1 Million - SGI Canada (coachman) - PROFIT

So briefly examining the situation, it is pretty clear the insurance companies are making money, with the exception of Kingsway. This is based off end of 2007 fiscal financial statements off the TSE, so there can be no dispute... they are hard numbers.

Statefarm is a US based company, and don't trade in Canada, but they posted a net profit of $5.46 billion for their USA business. This includes profits made in Canada.

Anyone who says they don't make money is lying.

Nites

In what province is insurance not mandatory? There is a lot more to cost of insurance than competition, which makes comparisons between locations very difficult. There is open competition in Ontario for cying out loud! You can get vastly different rates between companies in Ontario! I've tried to explain this over and over again and people just continue to rant like children. An insider comes here and explains how it works, an incredibly well written and intelligent explanation, and people STILL don't get it. And why shouldn't they make money? They're in business!! It's not a non-profit service.

[zc911]

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!

cool, thanks for posting all this info.

[[evo]]

THANKS for posting all this. Now how about this..

Every broker I visited that gave me a written quote for my car a few years ago ( I did less shopping this time, simply going with the lowest over the phone price. Just so happens to also be state farm) had the insurance broken down for me. I hade gone in asking for the minimums, 1M liability and basically nothing else. However, everyone ended up tacking extra things into the policy here and there. Can you explain what the basis of each of the following is and what IS and IS NOT required? I've got a good idea for some of them but it'd be nice to hear it from someone in the biz...

Liability

Accident Benefits

Uninsured Automobile

Direct Compensation Property Damage

Loss or Damage

Family Protection

[VifferFun]

THANKS for posting all this. Now how about this..

Every broker I visited that gave me a written quote for my car a few years ago ( I did less shopping this time, simply going with the lowest over the phone price. Just so happens to also be state farm) had the insurance broken down for me. I hade gone in asking for the minimums, 1M liability and basically nothing else. However, everyone ended up tacking extra things into the policy here and there. Can you explain what the basis of each of the following is and what IS and IS NOT required? I've got a good idea for some of them but it'd be nice to hear it from someone in the biz...

Liability

Accident Benefits

Uninsured Automobile

Direct Compensation Property Damage

Loss or Damage

Family Protection

Certainly!

Liability is definitely mandatory. Liability covers your butt in the event that you hit someone else and cause harm to their vehicle or to it's passengers who would in turn sue you. The premium for this coverage is large because the payouts can be HUGE. The minimum limit for Liability in Ontario is a mere $200,000, but most companies will only quote you at a minimum of $1M. It is NOT SMART to get less than $1M coverage, and in fact, you should really consider bumping this up to $2M . . . it doesn't cost that much more.

Accident Benefits is definitely mandatory, and it covers the health/disability bills that you and your passengers might incur as the result of an accident. Again, the premium for this coverage is large because the payouts can be HUGE.

Uninsured Automobile is necessary, but is usually a really small premium anyways. This premium is necessary from all people insured in Ontario and it covers you in the event that an uninsured person hits you. It is usually grouped together with Underinsured Motorist coverage which is very similar, but covers you when someone hits you and doesn't have adequate coverage to help "fix" you (like the dolts who purchase less than $1M liability).

Direct Compensation Property Damage (also known as DCPD) is mandatory in the province of Ontario. This covers damage to your vehicle in the event that you are in a not-at-fault accident. Even if you don't have collision coverage, as long as the accident is not your fault, your bike will be repaired free of charge by your insurer (and free of any deductible payment because the deductible is $0).

Loss or Damage . . . I think this is for coverage of a rental car in the event of an accident, but I am not 100% sure without looking it up. As far as I know, it is not mandatory, but the premium should be small.

Family Protection is also known as OPCF44 and I don't think it is mandatory, but am not 100% sure. The premium for this coverage is small anyways. OPCF44 provides coverage for you and your family from the actions of an at-fault, underinsured driver. If you are travelling in a province or a state where the mandatory liability coverage is low, Family Protection coverage ensures that you and your family are covered if you are injured in an accident up to your own policy's limits regardless of the other person's coverage levels.

Cheers!

[LiNK666]

can you reduce the prices for non-japanese sport bikes? looking to get a ducati or triumph next year

maybe classify them as sport touring.

[videosilva]

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!

I have always been curious how much would it be to insure a 2008 Chev. Cavalier , Porsche , Ferrari ?

[VifferFun]

can you reduce the prices for non-japanese sport bikes? looking to get a ducati or triumph next year

maybe classify them as sport touring.

Actually, the price differences between japanese/european/american bikes and sport/sport-touring/cruiser, etc. is set by the individual company. Some company base the price differentials on a combination of one or many of the following:

- Engine Displacement
- Current Retail Value
- Retail Value when new
- Class: Sport, Sport Touring, Touring, Cruiser, etc.
- Coutnrywide Accident history for the specific make/model

The rating process is a little less refined for bikes than it is for auto insurance. For auto insurance, an independent agency collects claims information for every make/model/year of car and publishes three "ratings", known as "rate groups", for each car:

The first rate group is from 1 to 99 (1 being the best, 99 being the worst). This rate group determines your Collision premium, and the number is higher for cars that cost more to repair (think Lambo).

The second rate group is also from 1 to 99 (1 being the best, 99 being the worst). This rate group determines your Property Damage and Comprehensive premium, and the number is higher for cars that cost more to repair or are stolen more frequently.

The third rate group is from 1 to 5 (1 being the best, 5 being the worst). This rate group determines how much you will pay for Accident Benefits, and the number is lowest for safe cars (think Volvo).

Cheers!

[videosilva]

EARLY CANCELLATION IN THE WINTER MONTHS

SCAM !!!




INSURANCE IN CANADA ISN’T REGULATED?!

BULL **** !!!

Insurance companies are regulated in THEORY only ! Its a monopoly they are all in bed together. Just more corruption in our society. Hey, It's ok to be dishonest in todays society no ?

[VifferFun]

I have always been curious how much would it be to insure a 2008 Chev. Cavalier , Porsche , Ferrari ?

Well, that really depends on who is driving it, where they are driving it, for what purpose, how many kms per year, the coverage they want, deductibles, etc. etc.

Cheers!

[VifferFun]

Insurance companies are regulated in THEORY only ! Its a monopoly they are all in bed together. Just more corruption in our society. Hey, It's ok to be dishonest in todays society no ?

I would like to hear you elaborate on your theory on why insurance is a scam? It sounds like a lot of empty words without any substantial proof to back your claims? I have already explained the whole insurance process but it sounds like you didn't take the time to read it. I suppose you don't understand the elementary equation I used to explain the winter-month cancellations either (or you simply didn't read it).

I would like to remind you that this thread is purely for informational purposes . . . I have nothing to gain by spending time posting this information except for the pure joy of knowing that I might be helping someone out.

Oh well, everyone is entitled to their opinion.

Cheers!

[videosilva]

Well, that really depends on who is driving it, where they are driving it, for what purpose, how many kms per year, the coverage they want, deductibles, etc. etc.

Cheers!

I PURPOSELY did not mention age , gender etc. because I KNEW you would beat around the bush ( you are trained for that ).

So ball park YOU give me an example how much does it cost to insure a Chev, Cavalier, Porsche, Ferrari ??

[videosilva]

I would like to hear you elaborate on your theory on why insurance is a scam? It sounds like a lot of empty words without any substantial proof to back your claims? I have already explained the whole insurance process but it sounds like you didn't take the time to read it. I suppose you don't understand the elementary equation I used to explain the winter-month cancellations either (or you simply didn't read it).

Oh well, everyone is entitled to their opinion.

Cheers!

Hey, I'm not the one who is brainwashed here or makes excuses for what is wrong. What IS WRONG IS WRONG !!!

I don't work to support insurance companies. If the profits are not there that is NOT my problem. Robbing me IS ! Dam I have to work almost 2 months just so that I can drive. Don't give me the you don't have to drive BULL **** ............

[VifferFun]

Hey, I'm not the one who is brainwashed here or makes excuses for what is wrong. What IS WRONG IS WRONG !!!

I don't work to support insurance companies. If the profits are not there that is NOT my problem. Robbing me IS ! Dam I have to work almost 2 months just so that I can drive. Don't give me the you don't have to drive BULL **** ............

Please read my initial post before you call it a scam. I am not brainwashed, and have nothing to gain by defending insurance. We are not robbing . . . in fact, quite frequently we have years of loss, so I guess the policyholders are robbing from us?

Well, insurance is not necessary in Ontario if you have the means to self insure. If you happen to have a couple million dollars lying around, then you can prove that you are able to insure yourself. I am certain that even if you did have $2M, you would still be shelling out the $1,000 or so to prevent yourself from losing your fortune.

Please, as I said before, let's keep this thread civil and mature. Explain to me your situation in a PM and then maybe I can offer some suggestions on how to get your rate cheaper

Cheers!

[johnp]

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.

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. .............
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......

Indeed this is where insurance companies make their money. Note they are very profitable even if they actually LOSE on the 'underwriting' side of the business. Key point is that they don't pay you a return on the premiums that you pay to them. Those premiums are invested in e.g. real estate, stocks, bonds, and eventually if there is a payout they still get to keep the money they made on their investments. That is where the real money is in the insurance game, even more so in life insurance.

[invictus43]

Indeed this is where insurance companies make their money. Note they are very profitable even if they actually LOSE on the 'underwriting' side of the business.

Actually, the profit statements that you hear include investment profit as well. So they can lose money on underwriting that exceeds their investment profit.

[johnp]

Actually, the profit statements that you hear include investment profit as well. So they can lose money on underwriting that exceeds their investment profit.

Agreed they can lose more on underwriting than investment income, (but typically not so).

Point is that prior posts suggest that insurance cos aren't making much money on the bike insurance itself & so what are you complaining about.

Point is that doesn't much matter to them if they make on the underwriting since the real point is that they get to use your money for free. And investing THAT money is where they make the coin.

[invictus43]

Agreed they can lose more on underwriting than investment income, (but typically not so).

Point is that prior posts suggest that insurance cos aren't making much money on the bike insurance itself & so what are you complaining about.

Point is that doesn't much matter to them if they make on the underwriting since the real point is that they get to use your money for free. And investing THAT money is where they make the coin.

Yup, absolutely. That money should absolutely be factored into their bottom line. Even if they lose money on underwriting, if they make 7% or whatever overall, well, that should be stated as income. Plain and simple. And they do that. They did lose money in the not so distant past..and they're back up again.

I really wish people would educate themselves as to why we pay so much. (not you John..). We pay a lot but we get a lot. Viffer made a point there about how long we take to "heal" here. We pay for those people who take advantage of the insurance system. We also pay for out entire driving/crashing experience. Very few courts cases..it's all settled via insurance companies. Complain to the government..not the insurance companies!!

[Innocent Bystander]

Hey, I'm not the one who is brainwashed here or makes excuses for what is wrong. What IS WRONG IS WRONG !!!

I don't work to support insurance companies. If the profits are not there that is NOT my problem. Robbing me IS ! Dam I have to work almost 2 months just so that I can drive. Don't give me the you don't have to drive BULL **** ............

ah, who unbanned him?

[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?