Illogical! Car insurance costs!
I’ve just been looking over our car insurance renewal documents that came in the mail. Our policy renews on the 30th of this month, so 2 days from now. Our rates haven’t changed for this 6-month renewal period, they’re the same as we paid for the past 6 months beginning on 30 March. In any case, I have a hard time believing some of these figures:
|
Insurance type |
2004 Volvo V70R |
2001 Saab 9-5 |
1992 Saab 900 |
|
Automobile Liability Insurance |
128.76 |
163.54 |
151.28 |
|
Personal Injury Protection Benefits |
34.85 |
51.52 |
46.18 |
|
Uninsured motorists insurance |
53.53 |
46.39 |
46.39 |
|
Auto collision insurance |
137.02 |
130.11 |
– (not covered) |
|
Auto comprehensive insurance |
65.85 |
57.46 |
40.49 |
|
Passive restraint Discount |
(-14.93) |
(-22.07) |
(-11.53) |
|
Antilock Brake Discount |
(-29.52) |
(-32.63) |
(-16.18) |
The crazy question I need answered is this: Why does my underpowered 15 year old Saab 900 cost more to insure for liability than my 3 year old sportwagon with 300 HP? And why is Ani’s basic 9-5 sedan more expensive than either of those?
The fact that the 9-5 costs the most for Personal Injury Protection is ludicrous. I can see why the Volvo would be cheaper, because it provides more occupant protection in the form of curtain airbags. But the 9-5 has far better occupant protection than the 900, which is cheaper to insure.
Comprehensive makes at least a little bit of sense, as the vehicle worth the most money costs the most to insure. But the discounts are off… there are more airbags in the Volvo than in the 9-5, but the 9-5’s discount is greater, and the ABS discount should be the same for each of the cars which is ABS equipped, but it isn’t.
I think I’m going to direct my insurance agent to my blog. Perhaps he can post a comment on the crazy rates. Also, maybe my dad will have some words of wisdom, having retired a couple of years ago from a long career in the insurance industry.
Insurance rates are calculated by a bunch of number crunching nerds who know nothing about real life and real cars, but a lot about statistics. These calculations are based on actual experience, both of the specific company, and the industry overall. The insurance commissioners office has to approve each rate and in theory does so when they are satisfied that it is reflective of experience and not unfairly descriminatory.
Thankfully I never had to get into this in much detail. I think ckasses of cars are lumped together. So, for example, your 900 may be lumped with other sedans like the CAMRY for statistical purposes. So since we know Camry owners cause all sorts of accidents, your liability coverage on the 900 is almost as much as the 9-5. But V-70 drivers cause few accidents so that costs less. Boring stuff, but basically it will only make sense to total geeks.
My insurance agent just sent me this email instead of posting a reply on the blog, so I’m posting it up here for your digestion…
—
Kevin,
I looked over you blog and I can offer some comments. However Allstate frowns on us making posts using their network so I will respond directly back to your email instead.
Part of your reasoning is right. The year, make and model of the vehicles make up a component of the rate algorithm. Each vehicle has specific safety features and insurance experience factors (cost to repair, damage ratios, injury ratios, etc.). Driving experience and records are also a component but for your policy you and Ani pencil out equal. Another component often overlooked especially in three car family is usage. The Volvo and new Saab are your primary cars and have similar ratings in that regard. The older Saab is rated for limited use and a secondary vehicle and therefore its ratings are modified.
Insurance is all about numbers. The actuaries analyze them over and over and come up with various algorithms. The insurance commissioner office then dissect them over and over and if they make sense they approve the rates. Within our best rated policy group we have hundreds of
different price points.
It would easier to discuss this over the phone so please feel free to give me a call once you get back in town.
—
If the 900 is rated just for “limited” use, i’d hate to see how much it costs to insure for “full time” use! Would it be more expensive than the Volvo? ! In any case it’s interesting to get this perspective on the insurance costs.