Born to be Wild or Something Like It

Get your motor runnin’
Head out on the highway
Lookin’ for adventure
And whatever comes our way
–Steppenwolf, 1968

Easy Rider,” the 1969 filmic ode to the chopper life featuring Steppenwolf’s song, “Born to be Wild,” reinforced the stereotype of the biker as a freewheeling outsider unconcerned with the conventions of polite society. It may have been pure fiction but it sure looked like fun.

Fast forward 30-plus years and the reality is that the typical owner of a street motorcycle is 38 years old with an annual median household income of $44,000. He may ride a Harley but chances are it’s an Ultra Classic Electra Glide touring model decked out with a side car and gold cast wheels. Or she may be getting her kicks on a chic little Vespa, cruising around town with carefree abandon, a la Audrey Hepburn and Gregory Peck in the 1953 movie, “Roman Holiday.”

While they may not worry about insurance in the movies, in the real world of today operating without it is a ticket for disaster. The market is not huge, and is somewhat specialized in the sense that carriers authorized to sell personal auto insurance can sell motorcycle coverage if they choose to and many do not. Some 551,350 motorcycles of all varieties were registered in California in 2002 according to the state’s Department of Motor Vehicles. It’s estimated that there are around six million motorbikes registered nationwide.

Progressive, Dairyland and Foremost are generally considered to be the big dogs in the motorcycle insurance business, with Progressive leading the pack. While she wouldn’t confirm exact figures on Progressive’s market share, Marcy Gray, motorcycle product manager for Progressive, said the company holds the number one spot in the U.S. as far as market share goes and has been writing motorcycles for over
30 years.

Safeco, a relative newcomer on the block for motorcycle insurance, began a nationwide rollout of its motorcycle product in Ohio in March. The company launched the product in Texas in April and expects to introduce it in California in August. Currently the product is also offered in Colorado, Oregon, Indiana, Missouri, Idaho and Arizona.

Bob Enna, senior product manager in Safeco’s Specialty Lines division, said one of the most important things agents should keep in mind when selling motorcycle insurance is the nature of the coverage. For “any agent that’s writing this business on an accommodation basis,” he said, “the issue becomes: Is the contract a motorcycle contract or is it an auto policy?” Enna, who’s heading up the rollout of Safeco’s new product, explained that there are coverage differences between the two types of vehicle policies, citing guest passenger liability as one predominate example of differentiation.

“I would ask any agent to be sure that they understand the market that they’re putting [the business] with,” Enna added. “That they’ve got the proper coverage and an adequate rate for their exposure. I think the market leaders that offer the broadest amount of pricing segmentation are clearly where the industry is going and where agents should be looking to place their business.”

Gray said that, “when they add a customer’s motorcycle to their automobile policy, agents/brokers may be missing out on specialized coverages and program features that are unique to motorcycles. Progressive recommends that all riders find an insurance company that specializes in motorcycle insurance and understands motorcyclists and their special needs.”

Enna commented that specialization, or segmentation, in the motorcycle policy is important to both the effectiveness of the product and in accurately pricing it. “Part of the problem with the motorcycle industry, I believe for the insurance side of it,” he said, “is that most of the products lack … segmentation. A couple of the primary market leaders, premium-wise, have developed well-segmented stand alone [products]. A lot of the industry carries this line as an accommodation and therefore they lack the pricing segmentation.” Enna noted that the lack of segmentation can “lead to huge swings in the competitive nature” of the product. For companies that treat the line as an accommodation and don’t have the segmentation established by other carriers, their products can be “really under-priced when compared to a properly priced product.”

Pricing considerations
Enna stressed that pricing can vary widely on any given policy depending on the coverage requested and a number of other factors. He estimated, however, that the average base policy for a large touring bike driven by a middle-aged owner with a clean driving record and good financial responsibility would fall into the four-to-six hundred dollar range for a twelve month premium.

“Insurance rates are developed using a method known as cost-based pricing,” Gray said. “Unlike most companies, insurance providers don’t know the definitive cost of their products and services; therefore, they use predictive factors to determine the lowest possible premium for consumers that will also cover the cost of insurance losses in the future. Factors vary by state, but generally include: territory or place of residence; driving record; use of vehicle; age; gender; marital status; and vehicle type and model year.”

Jeff May, a pricing analyst for Safeco, commented that the type of motorcycle and its intended use are rating factors. He said Safeco has around 28 classes of bikes. “They go from scooters all the way to Harleys, all the way to sport bikes, cruiser bikes, touring bikes, standard bikes, trikes, ATVs [all terrain vehicles.]”

“Insurance companies determine rates based on their experience with drivers of similar ages, vehicles of similar ages and individual results in a specific location,” Gray added. “Because no insurer has either the benefit of complete information, or control over the random event of an individual accident, it is not surprising that each insurer may differ in setting base rates and adjustment factors.”

Gray noted that “Progressive’s rating technology utilizes motor vehicle records, claims history, and other consumer information at the point of sale to produce a quote that’s highly accurate. Our ability to provide specialized coverage for a wide variety of makes, manufacturers, and levels of customization is another factor in helping agents provide accurate rates.”

Most companies consider the various state helmet laws when establishing their base rate for a certain territory, and will write to the overall experience of a particular state in that regard. California requires all motorcycle riders to wear helmets, but many other states have laws that allow riders to forego helmets under certain conditions.

“If an insured should request $10,000 of medical insurance for his motorcycle policy, because his intent is to ride without a helmet,” Enna said, “then logic would tell you that we would price up the premiums for $10,000 of medical insurance, versus carrying a lower limit when we know you are required to wear a helmet.”

Both Enna and May said policy prices in general have risen over the past couple of years and they expect them to keep edging up, at least on an inflationary basis. May noted that in addition to the pressures of the market, the fact that prices for the motorcycles themselves keep rising has pushed the premium trend upward. He estimated that the price for the vehicles has nearly doubled in the past 20 years.

Topics California Auto Agencies