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Issue 2 > 2010, From the Green Room
Decoding the Puzzle: Your Insurance Premium
Think you have your insurance rates figured out? You may want to think again. (Photo: Hussain Al-Ahmed)
Look into the magic 8-ball and we will determine ... your insurance rate!
The way insurance premiums are determined can be mystifying, but we'll attempt to pick apart this knotty subject.
Computer programs that help insurance companies determine premiums also help them make finer distinctions between different policyholders, contributing to the complexity, said Charlie Schein, an independent insurance agent in Rocky Hill, Conn. for Progressive and other insurers. Before these programs were available, companies used just a few rating tiers; now they can have hundreds, he said.
In addition, different companies emphasize different aspects of a rider's profile, said Larry Wertel of the New York State Insurance Department.
But there is a bit of guesswork involved. "Insurance is different from many other industries because we don't know the definitive cost of our product until after it has been sold and used," said Leah Knapp, spokeswoman for Progressive.
Another element is regulation. Certain things can be legally factored into a rate in some states, and not in others. For example, in California, a rider's credit rating cannot be used, while it's a big factor in Connecticut, Schein said.
Based on conversations with state insurance regulators, insurance agents and insurance companies, here's what we found:
| New riders should consider a motorcycle that fits their abilities and needs to start out, such as the Ninja® 250R. |
Driving history: It's an obvious and direct correlation: the cleaner your driving record, the better your rate. "You see someone that has three speeding tickets, there's probably a link in that person's general behavior," said Kirk La, Geico's assistant vice president of powersports. Naturally, it's important to keep your record clean, La said.
The length of time you've been driving is also a major factor in determining your rate. In California, it's one of three factors, including miles driven and general safety record, that must be included when calculating a rider's rate, said Molly DeFrank, spokeswoman for the California Department of Insurance.
Age: "Generally ... the more mature the rider, the better the risk and the better the rate," said John Gundersen, an executive with Dairyland Cycle Insurance. More than likely, a rider in his 20s will pay a higher premium than a rider in his 40s, even if the two riders have equal time as a licensed motorcyclist.
Type and size of bike: Generally speaking, sportbikes are more expensive to insure because they're more susceptible to theft and their riders are generally less experienced, La said. This is why it's important for a beginning motorcyclist to get a bike that fits their ability, said Tom Garner, Geico's director of powersports. A bike that's the right size will help keep your insurance premiums down, he said. "Get some experience under your belt, then upgrade since you'll then have a track record," he said.
Where you live: Rates can vary depending on where you live, Wertel said. Different areas, such as cities and rural regions, can have very different rates. If you live in a neighborhood where bike thefts are more common, that may be considered in calculating your premium. There can be differences based on your region: since the northern states have shorter riding seasons, policies may be written to cover riders for only part of the year, since many motorcycles are idle during the winter months.
Credit rating: A rider's credit rating can be used in the calculation of premiums, but it can't be used to increase a premium, said Gerald Scattaglia of the New York State Insurance Department. It also can't be used to terminate policies, his colleague Wertel said. Several insurance companies feel a good credit score is "an indication of insurability" Schein said.
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Franke Santos is a longtime journalist covering local governments, business, and most importantly, motorcycles. She has been riding since 1995 and is truly at peace while on two wheels. When not riding, she thinks about inventing a Bedazzler for motorcycles, and adding seat hydraulics to a KLR.
