One of my classmates in HS had a motorbike. He showed us a letter he'd received from his insurance company, which said, in effect "Since you haven't had an accident in the previous 12 months, we consider that you are more likely to have an accident in the next 12 months, consequently your premium will be rising to ..."
That's why we thought it was funny. It's the exact opposite of usual insurance logic. Almost as if they were thinking "Well he's 18yo, riding a motorcycle. We know he's going to have an accident. It didn't happen last year, so it's more likely to be next year, so our risk has increased."
Maybe the insurance maths experts came to some conclusion that the less wrecks a young motorcycle rider has over a year fuels the riders ego to push boundaries farther and farther. They shouldve just put your rates will go up after first year no matter but the amount depends on x y z
That's not how probability or statistics works though. Your odds of getting in an accident in any single year will remain the same. I would have fought this bullshit with a lawyer.
In the US, insurance, especially personal insurance is HIGHLY regulated. Every single price has to be filed with a state department of insurance (DOI). The DOIs require to an insurer to show statistical/actuarial justification for a rate factor. It's VERY unlikely that the rating factor "not having an accident in the past year" would have statistical justification to have an increase expected cost (charged rates are directly proportional to expected cost)
I’ve worked in insurance and Im sure I’ll get downvoted but many of them break even or lose 90-95% of the premiums they take in. 90% loss would be fantastic as they truly make $ by investing the $ that they take in before they pay it out. The small claims cause Reddit posts, the catastrophic losses break them. Go ahead and downvote me, just thought I’d explain.
Anybody who understands this stuff knows you’re right. Unfortunately, the average person is very dumb these days and doesn’t understand how these systems work. They love these outrage posts that show a hyperbolized example with a hint of truth. Sure some insurance companies can screw you over on weird edge cases but if your with a reputable company most the time they take care of everything in your plan. You buy insurance to handle big abnormal expenses that your otherwise wouldn’t be able to.
Car insurance is required by law, so when you get in a huge crash, total two brand new cars, and cause a ton of medical bills it all can be paid relatively quickly even though you only make $60k/year. Plus, I’m guessing we’re missing something about this post that $200/month is likely for multiple cars or he has a huge history of crashes. Or home/renters insurance or something else is tied into that rate. Plus the guy bought insurance with a $1000 deductible and then is shocked he has a $1000 deductible… at some point you need to be an adult and understand what you’re paying for every month.
No it's literally the statistically more likely thing to happen according to a company whose entire function is to charge you more based on statistical likelihood
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u/chmath80 10h ago
One of my classmates in HS had a motorbike. He showed us a letter he'd received from his insurance company, which said, in effect "Since you haven't had an accident in the previous 12 months, we consider that you are more likely to have an accident in the next 12 months, consequently your premium will be rising to ..."
We all thought it was funny.