As the sun starts to make an appearance at this time of year, it is not uncommon for many of us to be renewing our motorcycle insurance. I’m no different and recently went through the “How Much?” loop with a couple of insurance brokers.
I ended up saving a couple of hundred quid, which made me happy. It took a bit of work and a few long phone calls, but it was very much worth the effort.
Along the way I learnt the difference between Motorcycle Insurance Brokers and Insurance Underwriters. Now when I wanted to express my sentiments on the latest price hike, I know where to aim them.
Underwriters
Perhaps a better term for an underwriter would be “the company you are actually insured with”. It isn’t as snappy, but the underwriter is the company that provides your insurance, not the broker, who is a middleman.
Underwriters (insurance companies) make their money by (supposedly) knowing how much to charge so that their costs—the claims they pay out on—are always less than the money they receive for providing insurance coverage.
The Financial Services Authority (FSA) monitors the underwriters to ensure they are not taking too big a gamble by pitching the fees too low just to attract business.
As for underwriters charging too much for a legally enforced requirement, that is left to free market forces.
Behind the scenes, there then comes a complex arrangement of re-insurance, where the underwriter takes out insurance against having to pay out more than they forecast, Slips, Names and all sorts of other arrangements that result in you and me getting insurance to ride on the public roads.
But let’s stop with the FSA monitoring the underwriters to prevent them from selling cut-price insurance and then going broke. This is the worst-case scenario for us because, as a rule of thumb, if your underwriter goes broke, your insurance is null and void, and you will need to buy more insurance.
Brokers
The insurance broker is a sales function. It can be a one-person operation or one of the larger motorcycle insurance brokers, such as Bennetts or Carole Nash.
The broker does not have any liability towards you or me in the event of any claim, nor do they have any influence over the cost of your insurance.
They are simply acting as an intermediary. Although the broker received the payment for the insurance, they passed that money on to the underwriter minus a commission.
And sometimes, to keep us all confused, an underwriter might also be the broker and sell their product directly to us, the end user. There are FSA rules for companies that do this about keeping the two sides of their business separate, but it does happen (Aviva, for example).
Motorcycle Insurance
I’ve had a very happy relationship with Bennetts Motorcycle Insurance for the last eight years. They have switched me around between a few different underwriters, but I’ve bought my insurance through Bennetts, and they have always seemed to have a good range of policies for me to choose from.
During those eight years, I did have one sudden hike in my renewal cost, which the nice person at Bennetts helped me track down to my desire to include my metal luggage on the policy.
If I excluded the luggage, the price went back down, so I decided to “self-insure” the luggage – for which read, eat the cost if they were nicked or got wrecked.
Bennetts, Carole Nash or any other motorcycle insurance broker doesn’t set the cost or terms for the insurance they sell. They are a sales function that aims to connect me with the underwriter who best meets my requirements, and for this service, they get a commission.
Carole Nash
When it came to renewing my motorcycle insurance this year, many of the underwriters that Bennetts use didn’t want me because I had stated I ride about 12,000 miles a year. I could have “accidentally underestimated” my mileage to make me appear less of a risk, but … well … there is no telling where that might end up.
From the underwriters that Bennetts could introduce me to, who were happy to accept my “high” mileage, they all wanted a higher premium because they considered me a higher risk. In their assessment, I would be enjoying myself a bit too much if I was averaging 1,000 miles a month, and this level of enjoyment required me to dig deeper into my pocket.
So, I called Carole Nash, who could obtain insurance quotes from different underwriters, and the cost went down by 43% – quite a chunk of cash.
That doesn’t make Bennetts bad and Carole Nash good—it just reflects my circumstances and the underwriters each broker represents. If Bennetts had the same underwriter on their books as Carole Nash does, I’d have paid Bennetts the same premium. It makes no difference to me which broker I use.
Multi Bike Policies
But there are other things to consider, as well as the cost. I once went to buy a Triumph 675 I had found online. This was an indulgence purchase, as I’d always liked them. This was the R rather than the RS (which I wanted). It had a solid service history and the extras I wanted, all in one package, 15 miles from my home.
I gave the gentlemen selling the bike a small deposit and left to make arrangements to transfer the rest of the money and add the bike to my insurance. It was then that I discovered that the underwriter I was currently insured with didn’t offer multi-bike policies.
My options were to cancel my current policy and lose a significant portion of the premium or take out another policy.
As you can only apply the discount for claim-free years to one policy at a time, this would make me a middle-aged bloke buying a Triumph 675 as my first bike, which was going to be expensive.
In the end, I had to apologise to the gent for wasting his time, offered him the deposit as compensation against any costs he would incur advertising the bike again, and went off for a good long sulk.
Bottom Line
Through all of this, what did I learn?
- The person on the phone isn’t responsible for your renewal quote. Often, they don’t even work for the company (the underwriter) that sets the prices, so be nice.
- Brokers are sales functions. They offer insurance policies for sale but have little or no control over the policy restrictions or the costs.
- The Auto-Renew option is the work of the devil. It is always worth shopping around, as one broker doesn’t always have the best deals. I’d have paid through the nose this year if I had enabled auto-renew or blindly accepted Bennetts’ renewal quote.
- Know what coverage you need and what the policy conditions are. Switching to a multi-bike policy in the middle of your insurance year can be expensive, but having a multi-bike policy with only one bike on it might only cost a few pounds more.
- Take a look at the underwriter. The insurance might be “cheap,” but if the underwriter goes bust, you will lose your original policy fees and while the FSA tries to work out who gets what, you will have to pay all over again for a new policy.
It took me about an hour to reduce my motorcycle insurance costs by a couple of hundred quid. The policy conditions are roughly the same, and I get to ride more miles.
This made me happy. If I were paid that amount as an hourly rate, I’d be ecstatic.
It still annoys me that I can’t get a zero claim excess – deductible, I think it is called in America – on a total loss while being willing to accept £1,000 excess on damage [see Motorcycle Insurance Excess].
But why would they? It wouldn’t be in the underwriters’ favour, and the law requires me to have insurance, so those benefits that come from “free market forces” will mostly flow towards the underwriters rather than you and me.
Then again, the sun is shining, so rather than thinking about that, I’m going to go and use some of those 12,000 miles I’m paying for.
Clarity
I write about motorcycles. I’m not a financial advisor, insurance broker or in any way qualified to give you advice on such things. This article is based on my experiences and circumstances. Yours may be different. Carole Nash and Bennetts are trademarks that belong to the people who own them. Fire is hot. Water is wet. And yes, we live in a world where I need to say these things.
