Why young males pay more: Insurance Math in Layman's terms

[slowbird]

It does not (and can not) work that way. Did you read my Lotto 649 analogy?

If you stay claims free, your insurance rates will go down relative to people who have made claims.

I read your Analogy and I don't agree with it. I don't think you should compare the two. Yea...I can see how they are similar...but the Lotto people don't charge certain people of a certain age, sex, or Postal code more if there are more lucky people in their category.

Not to mention I still win a free ticket or $15 every now and again from the Lotto......I almost NEVER get breaks from the insurance people.

It's been 8 years and I haven't had a claim! What good excuse is there to raise my premiums and keep me at such a high premiums?!

No excuse.

[VifferFun]

I read your Analogy and I don't agree with it. I don't think you should compare the two. Yea...I can see how they are similar...but the Lotto people don't charge certain people of a certain age, sex, or Postal code more if there are more lucky people in their category.

The analogy's purpose was not to explain the differences of age and gender--its purpose was to explain that a lottery (or insurance) cannot return money to people who didn't win (claim) in the past. Just because you haven't won the lottery (made a claim) in the past, it doesn't mean that you won't win (claim) in the future (although your chances are reduced in the insurance scenario). Your lottery ticket money (premium) is required to go into the pool of money that will pay out to the future winners (claimants). If money was returned to people who didn't win (claim), then the pool of money wouldn't be sufficient to pay out future winners (claimants).

Not to mention I still win a free ticket or $15 every now and again from the Lotto......I almost NEVER get breaks from the insurance people.

Winning $15 in the lottery is not similar to an insurance "break", but rather a small insurance claim. In the insurance world, winning $15 in the lottery is like making a glass claim or a vandalism claim.

It's been 8 years and I haven't had a claim! What good excuse is there to raise my premiums and keep me at such a high premiums?!

No excuse.

Say you have been paying $2K/yr for eight years . . . that's $16K that you have contributed to the pool. In the big scheme, this is a pretty small amount of money. This wouldn't even be sufficient to pay out for the physical damage of most newer cars, and that isn't even beginning to mention injuries (where the BIG dollars are paid out, and are the largest premium coverages on your policy).

Also, as the cost of repairing cars and people's bodies increases, your premium will increase as well. This is the case with pretty much ANY product you buy . . . they must increase with inflation. As of late, the rate of inflation for injuries exceeds the common rate of inflation by a large degree.

[slowbird]

The analogy's purpose was not to explain the differences of age and gender--its purpose was to explain that a lottery (or insurance) cannot return money to people who didn't win (claim) in the past. Just because you haven't won the lottery (made a claim) in the past, it doesn't mean that you won't win (claim) in the future (although your chances are reduced in the insurance scenario). Your lottery ticket money (premium) is required to go into the pool of money that will pay out to the future winners (claimants). If money was returned to people who didn't win (claim), then the pool of money wouldn't be sufficient to pay out future winners (claimants).

Yes but The Lottery is a system that is low paying, and high rewarding (if you win) but more importantly, it is voluntary. I'm sure if you were required by law to buy a lottery ticket they would jack up the price.

There is always something that raises the premiums....insurance companies come up with all kinds of jibber jabber.

I have to give it to the insurance companies...they always come up with good excuses for their premiums...and it looks like you are well versed in those excuses.

I just have to find a cheaper Postal code to live in...get married...and make sure if I make a claim I bleed the insurance dry.

....****....I've never even put a windshield on any of my cars. I should get one.

[Trowa]

Viffer.

No offence, but everyone is entitield to their opinions.

Most and including my opinion. Insurance = Highway robbery

[VifferFun]

Yes but The Lottery is a system that is low paying, and high rewarding (if you win) but more importantly, it is voluntary. I'm sure if you were required by law to buy a lottery ticket they would jack up the price.

There is always something that raises the premiums....insurance companies come up with all kinds of jibber jabber.

I have to give it to the insurance companies...they always come up with good excuses for their premiums...and it looks like you are well versed in those excuses.

I just have to find a cheaper Postal code to live in...get married...and make sure if I make a claim I bleed the insurance dry.

....****....I've never even put a windshield on any of my cars. I should get one.

You are correct that a lottery is low-pay and high winnings, BUT, the probability of winning the lottery is slim-to-none.

On an insurance policy, your expected "winnings" each year is about 70% of the premium to pay. If you are paying $2000/yr, your expected loss to the insurance company is roughly $1400 (which does not include insurance overhead, salaries, claims expenses, etc.) It is possible that your "winnings" could be $0 over the next year, but it is also possible that you "winnings" will be $500K.

I'm not citing "excuses" . . . these are the statistical reasons why rates are set the way that they are.

[VifferFun]

Viffer.

No offence, but everyone is entitield to their opinions.

Most and including my opinion. Insurance = Highway robbery

I never once said that people aren't entitled to an opinion, but when someone doesn't understand something, I will do my best to try and explain. I have nothing to gain by convincing GTAM members that the Insurance Industry is perfect (and in fact, I have explained many of the shortcomings in other threads). However, you can't dispute facts. If my "opinion" was that 1+1=3, I would simply be incorrect.

The big problem is that insurance mathematics are quite complicated, and trying to explain to some people with closed ears and no background in Statistics usually ends up as simply a futile attempt on my part.

[lil red bird]

The point of my comment was to illustrate how ridiculous Ontario claims can be. The value of claim settlements indicate that Ontarians take 13 times longer than a British Columbian, because they are on disability/medical payments for that much longer. I doubt that Ontarians really take that much longer to heal, but they are just that much more greedy and the courts are that much more generous.

I still don't see what this has to do with "stationary" or the credibility of my data though (as indicated by eastcoastgsx).

Why send a person 3 times to see the same doctor for the same report?
I know this because my husband was hurt in a m/c crash 5 years ago ( we just settled). and this happend with each and every time some one needed a report!

[slowbird]

You are correct that a lottery is low-pay and high winnings, BUT, the probability of winning the lottery is slim-to-none.

Yes but when someone WINS the lottery....they get the Winnings and they go home.

You wanna claim something with the insurance...it ain't that easy.

If your car gets totaled or stolen, they take forever to pay out and when they finally do they low ball you.
If you get injured they request a million check ups and Doctors reports giving you a hard time when you've just been through hell.

We are paying them for Insurance....and when it comes time for the insurance to do anything but take your money....they clam up and give you the run around.

[slowbird]

Most and including my opinion. Insurance = Highway robbery

Amen!

I never once said that people aren't entitled to an opinion, but when someone doesn't understand something, I will do my best to try and explain. I have nothing to gain by convincing GTAM members that the Insurance Industry is perfect

No. I have tried settling our discussion with an "Agree to disagree" comment and instead of taking the road of compromise you decided to say that:

• I don't *want* to understand
• I don't understand
• I already understand, but don't want to admit it

When the correct answer was:

• I don't agree with you but I'd rather not argue about it cause I agree with many people that Insurance in some areas (GTA) is highway robbery and I don't believe I should have to pay the amounts I have been and am currently paying.

[VifferFun]

Why send a person 3 times to see the same doctor for the same report?
I know this because my husband was hurt in a m/c crash 5 years ago ( we just settled). and this happend with each and every time some one needed a report!

This is one of the shortcomings of insurance that I have previously discussed. The percentage of your premium that pays expenses (overhead, salaries, form filling, adjusters, agents/broker, etc.) is roughly 28%. The insurance industry needs to work hard at improving the system to make it more efficient so that we can lower our expenses and hence lower premiums. One area as you have pointed out is the multiple forms. Hopefully we will see some improvements over the next short while.

[VifferFun]

Yes but when someone WINS the lottery....they get the Winnings and they go home.

You wanna claim something with the insurance...it ain't that easy.

If your car gets totaled or stolen, they take forever to pay out and when they finally do they low ball you.
If you get injured they request a million check ups and Doctors reports giving you a hard time when you've just been through hell.

We are paying them for Insurance....and when it comes time for the insurance to do anything but take your money....they clam up and give you the run around.

I don't know who you are insured with, but this is not the case in general. According to claims satisfaction surveys conducted by an independent third party (Financial Services Commission of Ontario), over 85% of Ontario claimants are pleased with the level of service of their adjuster and their settlement value. I have personally made a number of break-in, vandalism, and not-at-fault collision claims in the past and I have always been pleased with the service (and I didn't work for the companies I was insured with). There are indeed some better and worse insurance companies out there, so I'm not going to deny that poor service occurs with some insurers.

[VifferFun]

No. I have tried settling our discussion with an "Agree to disagree" comment and instead of taking the road of compromise you decided to say that:

• I don't *want* to understand
• I don't understand
• I already understand, but don't want to admit it

When the correct answer was:

• I don't agree with you but I'd rather not argue about it cause I agree with many people that Insurance in some areas (GTA) is highway robbery and I don't believe I should have to pay the amounts I have been and am currently paying.

My bad . . . sometimes I get carried away

I hope you understand that my intention is to educate rather than "win over" GTAM members. I really have nothing to gain by GTAMers thinking that the Insurance Industry is perfect.

Explaining the highly-misunderstood insurance mechanism is something that I simply enjoy doing, and I love questions I also love constructive criticism to improve the current system, as it is definitely far from perfect. If people have some suggestions to improve the insurance system, please let me know.

[slowbird]

My bad . . . sometimes I get carried away

Bah.....no worries
It's good that you are passionate about something.

We are all good buddies now.
Care to get me some insurance discounts

[VifferFun]

We are all good buddies now. Care to get me some insurance discounts

Hahaha! Even as an employee of an insurance company, we only get a 10% group discount. I'm not insured by the company I work for, because it is cheaper for me to go elsewhere This stresses the importance of shopping for the company where you fit their target demographic.

[phucyall]

Great explanations and all, but you seem to be very pro insurance. I've had many discussion with people who (by the sound of it) do the same type of work you do, but are much more disgruntled about it.

My bottom line has always been that insurance is a business. They run to make a profit and not to break even or provide a service. They make business on the fact that insurance is mandatory and you have no choice but to get it. Sure there are calculations as to how much money you will cost the insurance company, but there is also an adjustment for how much profit they want to make off you.

I am OK with that to the point that I understand you can't run a business when operating at break even. What I am not OK with is when that is left out of the explanation for why my rates are so high.

[VifferFun]

Great explanations and all, but you seem to be very pro insurance. I've had many discussion with people who (by the sound of it) do the same type of work you do, but are much more disgruntled about it.

My bottom line has always been that insurance is a business. They run to make a profit and not to break even or provide a service. They make business on the fact that insurance is mandatory and you have no choice but to get it. Sure there are calculations as to how much money you will cost the insurance company, but there is also an adjustment for how much profit they want to make off you.

I am OK with that to the point that I understand you can't run a business when operating at break even. What I am not OK with is when that is left out of the explanation for why my rates are so high.

I've included the explanation of profit provisions in my stickied thread. This thread has been kept simple to explain the concept of expected payouts. It's confusing enough as it is, and explanations are easier done in small doses.

In general, an insurance company wants to maximize its profit, but this is best done by offering the most accurate rates (i.e. rates that reflect the expected payout). If we charge $3000 for a risk that is only expected to claim $2000, then our competition will steal the client by offering a lower rate. Likewise, if we charge only $2000 for a risk that is expected to claim $3000, then our competition will let us keep the crappy risk and we will end up losing $1000 on the policy. the trick to making money in the insurance industry is being able to distinguish "good" and "bad" risks better than the competition. If you suck at distinguishing the "good" from the "bad", then you end up losing money--the bad risks will be attracted by your less-than-adequate premiums, and you will lose money on them.

In general, 95% of your premium pays out losses and expenses, leaving about 5% for profit. Even with just 5% left over, the insurer can still make more money by wise investments (however, with the economic slump the investments haven't been doing too well lately).

I'm not really "pro insurance" although I can see that I might come across that way. There are inefficiencies in the insurance industry that must be addressed, and some members here have offered some great suggestions that I have brought to the table.