Motorcycle insurance | Your questions answered

John Milbank, BikeSocial Consumer Editor
By John Milbank
BikingMilbank BikeSocial Consumer Editor, John owns a KTM 1050 Adventure. He's as happy tinkering in the workshop as he is on twisty, bumpy backroads, and loves every bike ever built (except one). He's bought three CBR600s, two Ducati Monsters, several winter hacks, three off-roaders, a supermoto pit bike, a Honda Vision 50 and built his own custom XSR700. 

Insurance: your questions answered

BikeSocial puts your bike policy questions to the boss of Bennetts

 

“Why has my motorcycle insurance premium price gone up this year?” It’s probably one of the most common questions you’ll hear from a biker if they’re grumbling about the cost of riding.

If you ride on the road (and that includes green lanes / byways), legally you need to have a valid insurance policy. It’s something almost all of us have to buy, and it’s also one of the most emotive subjects.

We asked members of the BikeSocial Test Team Facebook page what they most wanted to know about insurance, so we could ask Vince Chaney, managing director of motorcycle insurance specialist Bennetts.

Social media amplifies the moans and gripes of this world, but while there are far more people happy with their insurance, the question of price increases is common, and even more so in 2017/2018; “Insurance is a contract between the customer and an underwriter to put you back in the situation you were before a claim,” Vince tells us. “Premiums are calculated based on the likelihood of a claim being made, and the cost of settling that claim.

“In the past year, a number of things have happened in the insurance market: The cost of parts and services to repair a bike typically go up around 5-6% each year, but with many parts coming from Europe, those prices have further fluctuated due to Brexit.

“The government is also on a drive to increase insurance premium tax, which has almost doubled over the past two years.

“And finally, the biggest impact over the last year has been the Ogden rate, which is used to determine the cost of long-term claims – for instance an injury that affects a rider over several years. Changes by the government to this rate alone have caused vehicle insurance claim costs to increase by around 15%.

“Overall, the cost of policies has typically gone up by around 20-25%, so it’s inevitable that most people will have seen some increase to their premiums.”

Watch our video interview, and you’ll see that we also went on to ask Vince why policy prices from the same underwriters can vary so much, and why it can seem cheaper to use a comparison website, like Go Compare or Compare the Market, and why insurance companies sponsor big events and riders – one of our Test Team members wanted to know why the money wasn’t used to give them a cheaper premium instead.

Other questions addressed include why telling your insurer about any modifications on your bike matters – not all of them add to the price of a policy, but some might increase the value… or of course significantly increase the performance.

Should your insurance be cheaper if you have aftermarket parts like a cheaper-than-OE end-can? Why can pillion cover increase your policy price? And why are there are sometimes additional charges for altering your insurance?

We asked Vince why someone who’s made a claim on their car insurance, can see their bike policy affected; “Insurance companies will try to calculate the right price base on the likelihood of a claim taking place and the value of that claim,” said Vince in our interview. “While they may not seem related – being different insurance products – the statistics suggest that someone who has been involved in a car accident is a higher risk on their bike.”

In that case, why isn’t your car no claims discount applied to your bike policy? The reason is that you can only use your NCD on one vehicle at a time, and riding a bike requires very different skills to driving a car, therefore underwriters need to know about your history on a bike. In addition, obtaining your license to ride a bike and drive a car are often done at different times, so the two discounts are treated separately.

Whether or not insurance companies are transparent enough with their fees, and why some riders seem to think that if they’re in an accident and their bike’s written off, they might not get back the money they believe the motorcycle’s worth, are other questions we raised.

If you’re unsure how the insurance industry works, and wonder why your policy costs what it does, our interview should answer some of those nagging questions…

Full video transcript

So Vince, the most commonly question we got asked is why has my insurance premium gone up this year despite me having full no claims bonus?

 

VC: Thank you John, I think it would be really helpful to start with to have a brief explanation of how insurance works. Essentially it's a contract between you, the customer, and an underwriter to put you back into the situation you were in before a claim takes place. And that claim might be a theft of your bike or an accident that you may cause. And premiums are calculated based on two things really; the likelihood of a claim taking place and the value of the claim, the cost of settling that claim.

 

So, in the past year there's been a number of things that have happened across the insurance market in general that have led to prices going up. The first one is that there's a normal cost of claims increasing, so that might be parts or services that we use in order to put you back in the situation you were in prior to the claim. That's typically around 5 - 6% per year and obviously with Brexit and a lot of those parts coming from abroad, those prices fluctuate quite a lot at the moment.

 

The Government is also on a drive to increase Insurance Premium Tax (IPT) and over the past few years we've seen that pretty much double. And finally, in the last year, probably the biggest impact has been something called the Ogden Rate. What that's used for is to determine the cost of long-term claims so if you have an injury that affect a rider for a number of years, then the value of that claim is calculated using this Ogden rate.

 

That has increased claims on its own by about 15% in the past year so overall we've seen the cost of policies go up between 20 - 25%, and therefore it's inevitable most people will have seen an increase in their premiums this year.

 

OK, but why can policy prices from the same underwriter often be so different?

 

VC: So, the insurance market works in very similar ways to the way that, for example, broadband or mortgage and many other services work, in that they'll offer introductory discounts for the first year to attract new customers and obviously when that policy comes up for renewal that introductory discount may no longer be in place.

Also, if it's not offset by let's say extra experience or age of the bike then it can result in a customer's premium being higher at renewal than it would be than when they first came to the broker.

 

So when taking out a policy, why is it often cheaper to use a comparison website?

 

VC: So I think firstly it's not always cheaper to get a policy on a price comparison website. They operate with a very specific set of questions that they use across all of their brokers and underwriters and they may not been be a perfect set of questions to provide the best price for an individual broker. And, for example, they're not usually very specific about your previous experience if you have a new bike and speaking to your broker directly, you can quite often get a better price with that being taken into account answering the brokers specific questions. I think secondly, that price comparison sites are fantastic at comparing, as you would expect on price, but they're not very good at comparing features or really telling you whether the cover actually meets your needs which is why they'll always pass you onto a broker before you actually buy a policy. So I'd just urge everybody to have a look at your policy documentation, any information that's available and the features within the product to make sure that it's right for you before you buy it.

 

Most of our questions revolved around value for money, so one person did ask us why do insurance companies spend so much money sponsoring big events and riders when surely they should spend that money on giving us cheaper policies?

 

VC: I think part of any business is about bringing new customers into a brand and also retaining the customers that we have. We are able to offer cheaper prices because of the number of customers that we have so it's important that we keep adding more customers to our business. And sponsorship is a very effective way of us doing that, coupled with the fact that it allows us to give something back to British motorcycling. Something that we at Bennetts believe is really important. And we know it's appreciated by our customers. I think if we weren't doing that we'd be spending the money in other ways whether that would be digital advertising or leaflets and flyers and so on, so we just think this is a better way of doing it. And also, being involved in sponsorships and events and riders allows us to provide experiences to say thank you to our customers for their loyalty to us. And we take a large number of customers to the most recent to the BSB rounds and we've think it's a really good way for people to experience motorcycling and to get something back for their policy.

 

So, moving away from prices, we were asked why insurance companies need to know about all the modifications on your bike and then why you sometimes charge more for them?

 

VC: Modifications are a very important part of motorcycling for many riders and in fact the majority of bikes have some form of modification from the standard manufacturer's build. If you remember, the cost of a policy is based on the likelihood that a claim is going to take place and the value of, or cost of settling that claim. And modifications can affect both of those things. If you have a performance enhancing modification to your bike, say for example you bored out the engine, then that might increase the likelihood of an accident or the likelihood of a claim. Similarly, if you had a race-replica for example, it might be more attractive to thieves and therefore increase the risk of theft. Equally, it may cost more money to actually settle those claims should they take place in the first place. Not all modifications do add to the price of a policy but certainly those that enhance the value or the attractiveness to thieves do.

 

We had somebody ask why their policy isn't cheaper when they have an after-market end-can fitted to their bike. Wouldn't it be so much more expensive to replace an OE end-can?

 

VC: So, an end-can may well be cheaper to replace from after market rather than from an OEM and we do see this from the likes of Akrapovic and Honda Parts direct form Honda can be more expensive but it's not just about the cost of the claim, it may have a bearing on the attractiveness of the bike and frankly a standard fairly vanilla end-can versus a nice carbon weave, dressed-up end-can might make the bike more attractive to thieves, and therefore it can increase the cost of the claim or the likelihood of a claim taking place.

 

OK, we also had people ask why they're charged more for pillion cover. is that fair?

 

VC: It's a really good questions and it's a little bit complicated but I'll do my best to answer it. So, some underwriters do exclude pillions altogether from their policies, so they won't insure anybody who's carrying a pillion and also others may charge an additional premium for it. So if you're talking to a broker you might find that your first choice underwriter, the very cheapest, doesn't accept pillions so that in itself will mean you'll go to the next price which will increase it. In the vent of an accident involving a pillion our insured customer would be responsible for any injuries or damage to equipment that that pillion may incur as a result of that accident and quite often, as you might well be aware, injuries involving motorcycles can be quite significant and so the costs of those claims can be higher and hence many underwriters will charge a bit more for carrying pillion passengers.

 

Now something that seems to aggravate people quite a lot is additional charges. Why do insurance companies want more money to change the address of your house?

 

VC: There are couple of things that may help with the answer to this question; the very first one is that we talked about the likelihood of a claim and moving house or changing you garaging arrangements can affect the likelihood of a claim taking place so they can affect the risk and insurers will price a risk based on their experience so if you go from, say, one postcode to another, there may be more thefts in that postcode and therefore that can affect the premium that you pay. The second thing is that your broker or insurer may levy a charge for making a change and these change fees, or amendment fees, are in place because we believe that it's fairer who charge people who use the service rather than spreading that cost across every single one of our customers irrespective of whether they call us to make changes during the year.

 

Now you mentioned postcodes, why does there seem to be cases when somebody's premium goes up when they've moved house to what they think is a quieter, safer location?

 

VC: So, again insurance pricing/premiums are based on the experience of that underwriter so there can be a couple of things that play into that. Firstly, a nice rural location may result in lower risk of theft, or it may actually be an increased risk of theft because fewer people about gives thieves more time to break into a garage for example, that they wouldn't risk in a busy environment. And secondly, it will change the roads that somebody is riding on; country lanes can be fantastic fun to ride down but they tend to have worse visibility, poorer road surfaces that can make them more dangerous and therefore increase the likelihood of a claim taking place.

 

OK, so if a claims made why is it sometimes a case that people seem to think they've not been paid out what they believe their motorcycle is actually worth?

 

VC: I think we'll go back to that 'what insurance is for' question; it's designed to get you back into the place you were in before the claim took place. Now, the insurance industry will provide a price that's based on industry benchmarks and experience of settling claims. All I would say is that if you have evidence that bikes the same as yours have been sold for different amounts recently or that you have reason to want to discuss that valuation with your insurer, I'd encourage you to go and get that evidence to make that conversation a lot more straightforward.

 

OK, so most people who have got motorcycles have also got cars, they're drivers, why do insurance companies penalise bikers for an accident they may have had in a car?

 

VC: Firstly, insurance companies aren't out there to penalise anybody for past experience. What they're trying to do is calculate the right price based on the likelihood of a claim taking place and the value of that claim. And whilst they may not seem related because they're different insurance products, the statistics suggest that somebody who has been involved in a car accident is a higher risk on their bike and so the likelihood that they're going to have a claim on their bike is higher if they've been involved in some kind of car accident in the past.

 

OK, we also had a few people ask if insurance companies are transparent enough with their fees, are they?

 

VC: I think it's important to bear in mind that we're not allowed to have any hidden charges and certainly there are regulations in place to make sure you're able to find out what fees and charges are involved in your policy before you take that policy out. Now, as with any industry some companies are more up front and open than others and more trustworthy, and certainly at Bennetts we like to provide any prospective policy holder with all of the information before they take out their policy. I'd just encourage any customer to take advantage of that, read the policy documentation. You can usually find examples online to check what the fees and charges will be and think about your circumstances - if you know you're going to move house, if you know you're going to change your bike then that may change your opinion of the policy to start with.

 

That makes sense. Theft is a major issue for motorcyclists at the moment, what role is the insurance industry playing in trying to reduce this?

 

VC: I think firstly, it's worth bearing in mind that motorcycle crime isn't in anybody's interests, we all have an interest in reducing bike thefts in particular. Now, we do work with both the Motorcycle Industry Association's MASTER Scheme and a number of brokers are also involved with various police constabulary's in initiatives, predominantly in London, to reduce motorcycle crime. The other thing that we do as part of our policies and premiums is to encourage greater security, will it be certain devices, certain security methods will attract a discount on the price and if you are thinking about installing more security, it's worth calling your insurance company because they can help you, tell you which of those will reduce the premiums and it's usually a good indicator of how effective those devices are.

 

Now, do you think people trust insurance companies?

 

VC: I think as with any market there are some providers who are more trustworthy than others and you can get a pretty good flavour of that based on online reviews or social media these days. So I'd encourage prospective customers to go and have a look at those sites to get a flavour for how those companies are perceived. I think the insurance industry as a whole doesn't always do a lot to improve its reputation so I hope this interview helps to explain why things are as they as and particularly some things such as fees and price increases, for example, why those take place and why those things exist in insurance. At Bennetts we're always looking to improve what we do and we'd really welcome feedback from either our customers or other insurance customers out there to help us improve the way that we work and how our products work.

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