OIP News - Controlling Your Insurance Premium Rates
OVMA Insurance Program Administrators, Pottruff & Smith Insurance Brokers Inc.
Do insurance rates have the same mystery for you as gas prices – inexplicably up and down? In fact, there is a rhyme and reason to determining your insurance rates.
What You Don’t Control
Insurance companies earn revenue from two primary sources: investments and premiums paid by policyholders. When investment returns are good, insurers reduce rates to attract more policy holders and therefore generate more premiums which can then be invested. Competition heats up and sometimes insurers have to reduce rates just to retain existing policyholders. We call this the “soft market” cycle. During this soft market cycle, rates typically decrease because there are more insurers willing to offer the same or better coverage.
This cycle, however, is unsustainable. While rates fall, claims continue to occur and an insurer’s operating costs invariably increase. Underwriting profits begin to suffer and insurers have to correct the situation. The cycle turns and the market becomes “hard” – rates then increase and insurers are more careful about the amount of coverage offered.
Beyond these powerful market forces are very specific reasons why insurance rates rise and fall. Rates are influenced by:
- The number and type of claims the insurance company has had, for any type of insurance offered;
- The general health, occupation, smoking habits, and medical history of everyone enrolled in an employee medical health benefits plan;
- What we drive, where we live, the value of our property, our driving history, years experience, and number of drivers under 25 years old for our personal insurance;
- The type of products and services offered by our insured businesses, in this case veterinary practices.
What You Do Control
Despite all of these important factors, you can still have a significant impact on your own insurance premiums. Here are some simple tips:
- Your premiums will rise if you have frequent claims against your policy. To reduce the frequency of claims, take steps to reduce typical insurance claims. For example, one of the most common claims against veterinary practices is slips and falls by employees and clients. You can reduce these claims by ensuring that sidewalks are repaired and free of ice and by cleaning slippery spills within the practice immediately. Another common claim arises from injuries sustained by practice staff and clients who are trying to restrain an animal. To reduce the frequency of these types of claims, make sure that all staff are trained in proper restraint techniques, and that clients are not placed in a position where they may be bitten by a cat or dog or kicked by a horse or cow.
- Choose your vehicle carefully. Luxury vehicles, sports cars, and vehicles with high repair costs have higher rates (see the side bar).
- Check with your broker about discounts available for installing home, automobile and business burglar and fire alarms and protection systems. Ask about discounts that may be available for insuring your home and auto with the same insurer, and about loyalty discounts for maintaining your insurance with the same insurer for multiple years.
- Speak with your broker first if you think you may need to make a claim. In some cases, the cost of the deductible and a potential resulting increase in premiums may make the claim an undesirable decision in the long run. This is especially true if you are currently benefiting from a claims-free discount.
- If your practice provides extended health, disability and/or life insurance coverage, promote stop-smoking programs and fitness programs among your employees to help increase the overall health profile of your business.
How Can A Broker Help?
A broker is an intermediary between the insurer and the policyholder and knows all the “ins and outs” of the insurance business, offering many advantages for lines of coverage:
- To start, the broker can get you – the individual or a member of a group – the best rate for the specific coverage you require from a wide selection of insurers.
- When making a claim, the broker can work with you to expedite and simplify the process or determine if making a claim is really to your advantage.
- Also, when managing a claim on your behalf, your broker acts as your advocate to ensure you receive a full and proper settlement within a reasonable period of time.
Buying a New Car?
Find out why some makes and models carry higher insurance rates
If you're shopping for a new car, don’t forget to check the cost of insurance. OVMA Insurance Program members can call or email Pottruff and Smith to ask about the cost of insuring potential vehicles, to help you avoid insurance sticker shock.
While your own driving record, where you live, and the demographics of the drivers in your household will all help to determine the cost of your auto insurance rates, the make and model of your vehicle can also have a big effect.
- Collision-damage costs are an important factor in determining the cost of insuring your car. If you drive a luxury vehicle, it will likely cost more to fix after a collision. Some high-end cars also feature aluminum body panels that are more expensive to fix or replace than sheet metal.
- Cars that are attractive to potential thieves and cars favoured by young, risky drivers will generally carry higher insurance premiums. Cars such as Audi Quattros, Subaru Imprezas and Hondas Civic SiRs tend to fall into this category.
- Another factor is how much damage your vehicle is likely to inflict in a crash. For example, if you drive an SUV, your liability premium (which covers damage to other vehicles), could be higher because of the increased damage a vehicle of that size can cause in an accident.
The bottom line is that, while you may be a very safe driver, your insurance premium will to some extent reflect the driving habits of everyone who owns a similar car.
The 10 cars with the most expensive collision losses, starting with the most expensive, based on 2002 to 2004 figures from the US Highway Loss Data Institute are:
- Mitsubishi Lancer Evolution
- Mercedes CL-Class
- Dodge SRT-4
- Subaru Impreza WRX
- Jaguar XK (convertible)
- Lexus IS 300
- Honda S2000
- Acura RSX
- Nissan 350Z
On the other hand, insurance companies have noticed that ‘family’ vehicles – minivans, station wagons and family sedans – generally get into fewer crashes than cars that tend to appeal to young male drivers.
The 10 least expensive models to insure, in terms of collision losses, starting with the least expensive are:
- Volvo XC90
- Chevrolet Malibu Maxx
- GMC Safari
- Buick LeSabre
- Nissan Pathfinder Armada
- Pontiac Montana (standard model)
- Mazda MPV
- Ford Thunderbird
- Pontiac Montana (extended model)
- Ford Taurus (station wagon)
Just as with the most costly picks, a variety of reasons can land a vehicle on the least expensive list. For instance, the Volvo XC90 is a family vehicle, driven differently than the vehicles on the "worst" list," The Ford Thunderbird, on the other hand, tends to be a second or third car and is not driven as often.
Let us help you to be an informed consumer.
Find out what that new car you’re looking at might cost to insure. Consult with the OVMA Insurance Program administrators – Pottruff & Smith Insurance Brokers Inc – today, before you buy your next vehicle. Whether you are insured with us or not, we promise to help you make the right decision.