What type of bike are you currently riding?

[Vlad]

The purpose of no-fault insurance is so that every little claim does not result in a battle between insurance companies.

Sounds reasonable and logical, but I'm still confused. How come it didn't result in lower premiums since it's supposed to save everyone time and money? If the system was that good how come everyone else doesn't use it? Consider these questions rhetorical since no answer will affect my premium .

Did you know that it takes someone in Ontario 13 times longer to heal than someone in British Columbia?

I didn't know that, thanks for the info. However, I still cannot accept that it's affecting my premium as I have proven not to be a burden to any insurance company, ever. Actually I'm their cash cow as I haven't laid a claim in my life, let alone a fraudulent or exaggerated one.

Capped payments do decrease claims payouts (and hence premiums), but a supreme judge ruled the law unconstitutional in Alberta so it was struck down in February 2008 (and so the premiums are going up again).

We can always count on Alberta to be at the forefront of protecting our right to get $1 million for a sprained ankle

We are covering your potential to harm yourself and/or others more than we are covering your auto/bike. This can be very expensive.

Potential, can be, what if... Next to impossible to measure, easy to abuse. Especially if you are the one gauging the "potential" that directly affects your bottom line.

I'm talking strictly about coverage mandated by law in Ontario here. You are covering what the law mandates me to be covered for in order to use public roads in this province. Correct me if I'm wrong, but that's "liability only", i.e. coverage for the damage I can do to other people - not damage I can do to myself. How does my "potential" compare to a car driver's, everything else being equal? I guess from the insurance perspective I should be penalized for choosing an inherently riskier way of transport, regardless of who's fault the claim is going to be...

If you are in an accident that was not your fault, your rate will not go up as a result. We are prohibited from rating you based on your not-at-fault claims experience.

I had a different, obviously wrong, impression. Thanks for correcting me.

[VifferFun]

Sounds reasonable and logical, but I'm still confused. How come it didn't result in lower premiums since it's supposed to save everyone time and money? If the system was that good how come everyone else doesn't use it? Consider these questions rhetorical since no answer will affect my premium .

There are cost savings associated with the no-fault system, and the rate would likely be even higher if no-fault insurance were not in place. Everyone doesn't use it for the same reasons that the USA and Britain still use the Imperial system of measurement.

I didn't know that, thanks for the info. However, I still cannot accept that it's affecting my premium as I have proven not to be a burden to any insurance company, ever. Actually I'm their cash cow as I haven't laid a claim in my life, let alone a fraudulent or exaggerated one.

It is unfortunate that the exaggerated claims made by people affect everyone, even the honest insurance clients such as you or I. The only way that this can really change is by government intervention, but when laws are made to limit outrageous claims, they are struck down by judges (such as in Alberta).

Potential, can be, what if... Next to impossible to measure, easy to abuse. Especially if you are the one gauging the "potential" that directly affects your bottom line.

The insurance companies don't determine the potential . . . lawyers do. When lawyers are able to increase settlements for their clients beyond what is due, then the claims costs for the insurance industry increases, and hence your premiums. If people weren't regularly awarded in excess of $200K for minor injuries, then our premiums would be MUCH lower.

Correct me if I'm wrong, but that's "liability only", i.e. coverage for the damage I can do to other people - not damage I can do to myself. How does my "potential" compare to a car driver's, everything else being equal? I guess from the insurance perspective I should be penalized for choosing an inherently riskier way of transport, regardless of who's fault the claim is going to be...

Mandatory coverages are Third-Party Liability, Accident Benefits, and Direct Compensation Property Damage.

Third-party liability covers the damages that you do to other people when you are at fault, and is used when damages are so severe that you are sued by the other insurance company to recoup on costs (even in the no-fault system).

Accident Benefits covers medical damages to you and/or your passenger if you hurt yourself on your bike, regardless of fault. This is the most expensive part of your Motorcycle policy for obvious reasons. If the car driver is at fault and you are hurt badly, then your insurance company will sue theirs to recoup on costs.

Direct Compensation Property Damage covers damage to your motorcycle if you are involved in a collision that is not your fault. Your insurance company will pay your the damages to your bike, regardless of fault. Because these amounts are small (i.e. under $10K), insurance companies do not sue to recoup costs (and save on court fees). Overall, everything evens out between the insurance companies.

[Avi Singh]

I don't see how the marginal cost associated with each additional policyholder is reduced by a significant amount in the insurance industry. You can save on internal operating expenses (such as IT infrastructure, advertising, etc.) but the cost of servicing a customer (claims, inquiries, etc.) does not decrease with each additional policyholder. If I recall correctly, the Expense ratios for American insurance companies are not significantly lower than they are in Canada.

Those are huge costs, IT, Advertising??? After claims what's the next largest expense? 1/4% savings over hundreds of millions of dollars year over year??? Like I said, it's not the only factor, but it is a factor. We're talking about billions of dollars here, even a fraction of savings is a lot of money.

[VifferFun]

Those are huge costs, IT, Advertising??? After claims what's the next largest expense? 1/4% savings over hundreds of millions of dollars year over year??? Like I said, it's not the only factor, but it is a factor. We're talking about billions of dollars here, even a fraction of savings is a lot of money.

Yes, these are huge expenses; however, the average expense ratio for an Ontario P&C Insurance company is in the range of 25%. This is the costs of servicing a policy that does not include the actual claim payouts (i.e. Payroll, Rent and Overhead, Advertising, etc.). Of this 25%, the majority would be attributed to Payroll of which the marginal cost does not decrease significantly for each added policy. As you add policies, you require more adjusters, agents/brokers, customer service reps, etc. to service them. Realistically, an economy of scale would allow you to cut back about 5% of your expenses (because you do not require significantly additional buildings, Accountants, Actuaries, etc. for additional policies), meaning the policyholder would pay about 5% less in premiums. This is not terribly significant from a microeconomics perspective in my opinion.

An economy of scale is more prevalent in manufacturing. For example, if you invest in advanced robotic equipment (for $1 Million) that produces widgets, the marginal cost per widget decreases significantly for each additional widget you produce.