Shopping around for auto insurance is worthwhile

She may appear a conservative driver in her sport utility vehicle packed with kids. But that soccer mom is actually a bigger risk than someone a little more notorious — the young male driver from the suburbs.

At least that’s the view of TD Meloche Monnex, one of the nation’s largest car insurers.

“People refer to the soccer mom, driving kids to daycare and soccer and all that. You know what, that profile in the [greater Toronto area] will likely cost more than a male driver that’s younger and that lives in [suburban] Whitby and goes to school [nearby],” says Henry Blumenthal, chief underwriter at TD Insurance.

The mystery of how insurance companies derive their rates is not something any of them will reveal. It is based on complex algorithms, with everybody trying to get an advantage. Discover a male driver from a Toronto suburbs is not as risky as once thought and you can lower his rate and steal market share. “That’s why pricing is very important and we invite Canadians to shop around,” Mr. Blumenthal says.

Chris Kissell, managing editor of insurance.com, says shopping around may sound like standard advice but it is worthwhile. “You get a couple of tickets and you can be resigned to an increase but you start looking and you might find something cheaper,” Mr. Kissell says.

RBC Insurance won’t say how it rates soccer moms but Tim Bzowey, vice-president of home and auto insurance, says he can understand consumer frustration with the process.

“It does differ from company to company,” Mr. Bzowey says. “Like any industry, different companies are better at different segments of the market.”

RBC does offer a bit of a window on how your policy might be affected by an accident or a speeding ticket. Its anonymous claims advice line could come in handy as you decide whether to fight that ticket or pay for that accident.

“It’s a little bit of a best-kept secret,” Mr. Bzowey says. “Our friends would call us and say what should I do. We thought it would be preferable to speak to someone who is an actual claims specialist.”

While you have to report most accidents to police, you do not have to tell your insurance company and can opt to pay out of pocket.

“Sometimes people are not sure they want to report a claim and they want to get a little bit of an idea as to whether it makes sense,” Mr. Bzowey says.

Jim Christie, the president-elect of the Canadian Institute of Actuaries, says about 35% of its members are employed by insurance companies. “It’s all variations on the same theme. What they are trying to do is use your past experience or characteristics to estimate your future costs and then set a price according to that,” he says.

Some things that affect your policy are out of your control to change. Insurance in high-density areas is going to cost you more, so short of switching jobs, you are stuck.

“Toronto is a much more expensive location for insurance than Thunder Bay. Think of a pool table. You put 10 balls and bash them around and a few hit. Put 50 balls and bash them around and a lot more hit,” Mr. Christie says.

If you want to save some money, take public transit to work. Driving to work will jack up your rate. “It means you have to drive your car every day, no matter what the weather. It’s not going to be sitting in the driveway like if you are retired,” the actuary says.

Everybody knows at-fault accidents are killers but it’s not because your insurer is mean-spirited. People who have had previous accidents are statistically more likely to have another accident.

And, yes, if the accident is not your fault, it won’t count against your record. But have too many of those and watch out. “I’d be leery of someone who has at five no-fault accidents in the last year,” Mr. Christie says.

Traffic convictions are a little trickier. It differs from company to company but there is usually a little leeway here, with the exception of more serious charges like impaired driving. “The general feeling is anybody can get caught once,” Mr. Christie says. “Typically the cut-off is three.”

It may sound unfair to discriminate based on age but insurance companies get around this by tying rates to “driving experience” — tough to achieve before you are 16. Elderly drivers face the same discrimination as rates go up when you reach a certain age. Seniors don’t notice because they drive less, which lowers their overall rate.

“Sure their accident rate goes up when they get behind the wheel but they don’t get behind the wheel much,” Mr. Christie says.

And that soccer mom? “I’m guessing she probably has a more expensive vehicle. She’s living in Toronto. She’s probably got five soccer players in the car. You get in a accident and suddenly you’ve got six claims. The guy in the countryside has a beat-up car and probably just his girlfriend in it.”

Financial Post

gmarr@nationalpost.com