Cycle News - Archive Issues - 1970's

~ -. 8 .. M INSURANCE AND THE MOTORCYCLIST I>- 0 ... - (l) This is the fzrst of four articles dealing with insurance related to motorcycles and cy'clists. In this article there will be a general discussion of insurance from several points of view, a look at the availability problem and a method of judging cost and value. In the following weeks we will look in more detail at the different types of insurance. To begin to understand the endurance game you must relize and thoroughly believe one simple statement: Insurance companies do not make their money from insurance. They sell insurance in order to accumulate money to invest. To the consumer, insurance looks like a gamble in which he (the consumer) is betting a certain amount (the premium) that a certain event won't happen (an accident). He wins if the event does happen and collects the face value of the policy. From a logical point of view this is a correct analysis. Unfortunately when business and the state become involved in an operation, logic evaporates in a hurry. Since, in the company's view, writing policy is just a necessary evil and investment is where it's really at, it follows that the stock market is going to have a great influence on the insurance business and this is indeed the case. When the market is poor, the companies do not want to accumulate money that they are going to lose in the market, so they "retire" from the insurance business, or at least some parts of it. Their brokers are instructed not to write certain types of policies and coverage becomes very hard to· fmd. When the market is good, brokers may be able to place a client with any number of companies. To the insurance company, the ability to predict losses accurately is most important. There is a kind of "gentleman's agreement" among insurance companies that payoffs will not exceed 50% of the money taken in. However, if less than 50% is paid ou t, the competition.staru looking seriously at the market. Thus the insurance companies want clients who will be predictable within very narrow limits. It doesn't matter what the actual losses are, as long as they can be accurately predicted and the insurance companies can be sure of their 50%. Enter the "Rule of large numbers." The rule of large numbers, as the insurance brokers refer to it, is nothing more than a non-scientific way of stating that the more events you observe, the more closely statistical mean will approach the average event. For example, if you flip a coin once, you don't know what will happen. It might be heads or tails. Flip it ten times and you could bet a sizable amount of money that you wouldn't get all h-eads or all tails. Flip it a million times and you could bet that 50% of the time it would land heads and you'd be right to at least two decimal places! Such is the statistical accuracy of large numbers. The insurance companies don't know what's ~oing to happen to vour By Ron Schneiders (especially if you're a poor driver). motOrcycle in the next year, but if one company was to insure, say, all of the Some people will say that they feel that they have a moral obligation to 250cc motorcycles in the country that are used on the road, in a very short financially protect people with whom time they could predict very accurately they come into violent contact. This what their losses would be. In fact, notion is at best mistaken and at worst though, one insurance company seldom supremely hypocritical. To protect gets a large enough "number" to ensure others with liability insurance, you must predictability. donate one dollar to an insurance When this happens, the company company for every dollar's worth of simply charges whatever the market will protection that you buy. A moral law that requires you to support an bear or gets out of that particular line of insurance. If the "number" is insurance firm is strange indeed. Usually those who claim they need insurance for statistically insignificant, as most are in moral reasons, also claim the. right to the motorcycle insurance business, each drive like idiots and endanger everyone broker keeps a "loss history" which is for a half mile around because they're simply a record of the amount he has "insured". If you drive like you really paid out. If his loss history with a care about the person in front of you, company shows that he is not taking in you have no moral problems. Even if twice as much as he is paying out, he you hit him, you cannot hold yourself loses that particular company and must responsible for that which you couldn't find some other company to write prevent. policies with. ,. The meaning of legal need is obvious. If a broker loses his underwriters, he If you are a promoter you will not be is out of business so 'he doesn't do it if allowed to operate without spectator there is any possible way to avoid it. His insurance. This doesn't mean that methods for avoiding an "in the red" anyone must be protected, only that operation are primitive but effective. He insurance must be purchased. Some notices that thieves prefer Harleys so he states require that all drivers be licensed, raises the rates on Harleys and while others like California have what is discourages Harley owners from doing euphimistically called a "Financial business with him. He notices that there Responsibility Law". The insurance were two accidents involvinl{ motorcycles with raked-out front ends, companies don't like th.ese laws because so he tacks a 10% surcharge on they are sometimes put in the position choppers. There is no science here; it's of having to do business at only a purely pragmatic. If three bikes painted moderate profit. But those who are red had an accident in some broker's really hurt by these laws are minorities. area there would be a surcharge on red Notice that the poorer you are, the motorcycles. You pay for what the more you must pay for insurance. A wealthy person with say, two cars, a previous rider did. For the rider this situation 'is a real house, a boat and a bike can buy his bummer. Under the best possible insurance at bargain-basement rates. conditions, if he is an average person, he Any IS-year-old Chicano would have to will get back 50 cents for every dollar pay half the cost of his scooter to get it invested in insurance, which is a lousy insured. There is a term for this kind of deal to start with. But since he's not operation: Exploitation. average (i.e. he's a motorcyclist) the If you must buy insurance, there is a deal is much worse. The more he way to evaluate it. First you must deviates from the average the worse the compute the money odds. This is the ratio of the mQney to be paid to the deal becomes. Do you have a large motorcycle, a chopper? Axe you money to be credited. If you must pay a under·age (whatever the hell that means)? Do you live in the ghetto (which is referred to as "the Black community" by those agents who want to sell you insurance at astronomical rates and "Watts" by those that don't want yO,ur business at all)? The natural question is why would anyone buy insurance under these conditions. It boils down to three different types of needs: real need, legal need and moral need. Real need is defined very simply: It is insurance to cover a loss that you absolutely can't afford. If you break up your body in a race you need medical care and if you don't pay for it on the spot, most hospitals will let you bleed to death in their waiting room and bill your widow for the mess. Medical insurance you need. If you're a student and have saved three years to buy your Bonneville, and you still have five years to go in school, you need insurance. If yOIl have a home or small business that its taken you some time to acquire, you need liability cti premium of $100 per year and your policy is for the cost of bike, you figure out what your bike will be worth halfway through the year and subtract the deductible from that figure. Say that you have a new Yamaba DT1. When its half a year old it will probably have a vlue of $600.00. If your insurance has a deductible of $100.00, your money odds 500:100 or 5:1. These are only the odds if you wipe out the bike completely. More likely, you will do less so adjust the figure accordingly. Let's say that your real money odd in this case are 3: 1. The real odds are the odds on your having an accident or suffering a loss through fire or theft. You must figure these out on the basis of your riding habits, your neighborhood, the desirability of your bike to thieves and whatever other factors you can think of. In my own case, having owned a road motorcycle for ten years and ridden some 60,000 miles without accident, J place the odds rather high against, about 1,000 to 1. You must evaluate your own case, but one you get past the first month, the odds increase in your favor very rapidly. When you have the real odds and the money odds, you simply compare them. In the example, money odds 3:1, real odds 1,000: 1. A really terrible deal. The worst slot machine in Vegas is saintly by comparison. If you are considering two insurance companies, compute the odds with both of them and compare them to each other. The outlook for a better system is pretty bleak. Certainly no one is ever going to get insurance companies to act in the public interest. Increased profits are the only motivating force. Profits can only be increased by across-the-board rate increases or by the exploitive methods described earlier. Neither solu tion is viable. Next week we will look more closely at insurance for the roadrider. In the following weeks we will explore the insurance possibilities for the off-road rider and the competition rider. ITS HEREII "BA 750101 This kit is made for the BSA A65 650. It has been developed by three individuals with over 50 years combined experience in racing and engineering know-.how. It has been completely tested under racing conditions a(ld carries a 3,000 mile - 90 day warranty on all parts. YOU MUST SEND IN YOUR A65 CYLINDER WITH ORDER. Be sure to pack it well so it will not be broken in the mail. SIMPLE BOLT-ON INSTALLATION MORE POWER THAN THE SUPER BIKES (add's 12 HP) COMPLETE INSTRUCTIONS 10.5·1 C.R., CHROME ALLOY CYL. 50.000 PSI 3,000 MI LE - 90 DAY WARRANTY An easy riding, 4 HP version of the mighty Minicross track-and-trail Minibike is now being produced by Bonanza Industries, Inc. The new 1310 sports a Ceriani-type fork, double-loop motocross frame, f(illding handrebars, selfsealing gas tank, and wheels that are 50 per cent bigger than those on most other Minibikes. It also features heavy duty rear shocks, hinged foot pegs, molded fibreglass gas tank, motocross fenders and optional headlamp. Kit contains: 2 piston with rings, pins, keepers balanced to within 5 grams, 1 cylinder finished to size ready to install, all gaskets. Simple bolt-on installation taking 4 hours or less using simple hand tools is all that is required. No machining is necessary. This kit adds a good 12 HP to this already potent motorcycle. Ph. (313) 537-7710 'Rand CO. PRICE 198.50 19764 ASHTON, DETROIT; MICHIGAN. 48219 ~ CIl ~ W Z W ...J U >- U

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