Bikes cheaper than cars, more expensive to insure

Insurance Helpline, With cedric Stephens

Question: Why should a J$250,000 motorcycle cost more to insure than a J$1.5 million motor car? My organisation has a group policy with a major local insurance company. It seems that bikes and cars are grouped together. Some bike owners pay more for motor insurance than some car owners. This is puzzling. The two reasons that were given why bike owners are bearing the burden of the premium pool is that bikes are more risky and that they are more prone to theft. I found these reasons to be absurd and flawed. What are your thoughts?

- oniel_rohan@yahoo.com

HELPLINE: I was reluctant to answer your first question. I felt - perhaps wrongly - that if you disagreed with my position on the issue you were likely to call my arguments silly and invalid and describe me as the mouthpiece of the insurance industry. On the other hand, this column does not shy away from matters that pose risks or have the potential to 'jook' its author.

Risk is at the root of the issues you have raised. The premiums that you and the members of your club pay are a function of how the hazards with motorcycles are perceived and how they compare with the risks of other kinds of vehicles. You asked the wrong question. It should have been: do motorcycles pose a greater risk to insurers than motor cars?

The Road Safety Unit is a division in the Ministry of Housing, Water, Transport & Works. It collects, analyses and publishes information on fatal motor vehicle accidents. In 2009, it estimated that private passenger motor vehicle fatalities - one mark of accident frequency that insurers feel is important - would be 67 persons in 2012.

The number for motorcyclists was 38. I was unable to get any information about the total number of vehicles in each group or any reliable estimate of the total number of accidents. My suspicions are that there are fewer bikes on our roads than other vehicles.

"Motor vehicle theft continues to plague owners and insurance companies," says the Insurance Association of Jamaica in the second edition of its 2010 Handbook.

The two-page discussion on the theft problem excludes data on bikes. Bikes and other vehicles are, however, grouped in the review of the industry's financial results.

There was no breakout of the results for motor insurance;however, the report stated that the "industry continued to experience underwriting losses".

Significantly, the company with the best financial results stopped insuring motor vehicles over two years ago. This suggests that motor is contributing to the losses.

Other sources will be used to get information in order to gain a better understanding of why insurers treat motorcycles as being more risky than other kinds of vehicles. The first is Safety & Accident Prevention by David C. Lawson.

Dr Lawson is an associate professor of occupational health and safety at Oregon State University. Among his other positions he chaired the State of Oregon's governor's motorcycle advisory group.

He says: "Automobile driving has its hazards but is a much safer mode of transportation than motorcycle driving ... the death rate for automobile drivers and passengers (in 1989) was approximately 2.25 per 100 million miles. For motorcycle riders, the rate was 29 deaths per 100 million miles ... motorcyclists were more than 12 times as likely to die as car drivers" (Page 40).

The Insurance Information Institute in the US provides other clues. It says on its website: "motorcycle fatalities rose 0.7 per cent to 4,502 in 2010 from 4,462 in 2009. In 2009, fatalities dropped 15.9 per cent, the first decline in 13 years." Also that "in 2009, 58 out of every 100,000 registered motorcycles were involved in a fatal crash as compared to only 13 out of every 100,000 passenger cars. The 2010 increase ... occurred despite a 16 per cent decrease in motorcycle sales."

"Motorcycles are far less crashworthy than closed vehicles. They are also less visible to other drivers and pedestrians and less stable than four-wheel vehicles. Operating a motorcycle requires a different combination of physical and mental skills than those used in driving four-wheel vehicles. Motorcyclists and their passengers are more vulnerable to the hazards of weather and road conditions than drivers in closed vehicles."

motorcycle accident study

A study of motorcycle accidents was carried out in 2004 for the UK Department of Transport in 2004. Among some of the findings were:

Motorcyclists have an especially poor safety record when compared to other road user groups. Their killed and serious injury (KSI) rate in per million vehicle kilometres is approximately twice that of pedal cyclists and over 16 times that of car drivers and passengers. Motorcyclists make up less than one per cent of vehicle traffic but their riders suffer 14 per cent of total deaths and serious injuries.

In 1999, a motorcyclist was killed or seriously injured for every 665,894 kilometres ridden. Car drivers, however, covered an average of 18,661,626 kilometres before a serious injury or death occurred. According to these figures, in 1999 motorcyclists were approximately 28 times more likely to be killed or seriously injured on the roads in Great Britain than car drivers."

Estimate of market value is only one factor is rate-making.

Should motorcycle riders in Jamaica pay proportionately more in premium in relation to the values of their vehicles than the drivers of cars? In the absence of information that contradicts the data I presented and in light of how many of our motorcyclists ride, I would say yes.

Cedric E. Stephens provides independent information and free advice about the management of risks and insurance.aegis@cwjamaica.comSMS/text message to 812-7233