New Bike Insurance Model

[mjr]

@lane we do indeed ask for a Gold lock. Unfortunately this a requirement put on us. However, we only ask you to use it if you leave your bike unattended, which rarely any of our customers do anyways. The more likely scenario is that you take your bike out for a spin on a Sunday and put it back in the secure garage. We are currently revising our policy wording picking this up. Customers should only need to own / use a Gold lock if they want to / aim to leave their bike unattended.

What's "the secure garage" here? It's not defined in the terms in the policy document and it seems rather bizarre if people aren't being required to lock their bikes at home because so many bike thefts are from homes.

The Gold lock requirement seems rather strange and outdated given how easily they can be cut with modern tools like battery angle grinders. I wonder whether some of the Sold Secure trademark licensing fees go to the insurers. But I think you can often buy one for less than £30 which doesn't seem that much if you're paying for this sort of insurance which I suspect is pretty expensive because the range of cap values doesn't seem to be obvious on the linked site.

 

[lane]

@Tobi_Laka

Thanks for the additional information.

Some good points: No excess and claims do not increase cost of home insurance. Will the cost of the bike insurance increase with claims or will cover ever be refused based on claims experience?

Bad points: I go out for a spin on a Sunday but may still stop at a café or for some other reason. I do not believe I am untypical. All specialist bike insurance requires a gold standard lock but my home insurance does not. My home insurance also covers theft away from home (all of Europe) and damage. Also I can't see your scheme would save me any money but almost certainly cost me a lot more. However the downsides are typical of all specialist bike insurance not your scheme in particular.

 

[srw]

The Lloyds Model fell apart with the asbestos crisis and Underwriters had to default on their exposure. This can't happen in our case as we would need to see a lot of bikes nicked before Zurich runs out of money

You might want to pop over to Lime Street. There are still quite a lot of underwriters wandering around with folders...

 

[PaulSB]

@Tobi_Laka you will have to excuse my scepticism, it has nothing to do with your produt but with cycle specific insurance in general.

My needs are simple, theft, loss, damage etc. at or away from my property and including worldwide travel and in transit. I always use a quality known insurer that is competitive, not the cheapest. In other words I research the cover carefully to be sure I am purchasing what I think I'm purchasing.

I have looked at cycle specific cover on several occasions. The costs are out of all proportion to the general property market and offer no tangible additional benefits. My overall impression is the companies I've previously looked at are exploiting those customers who don't know or understand where else to look.

My annual cost is £204 for Buildings and Contents including £10000 bike cover which I do need.

I've carefully read your post and especially points a-d in response to my concerns. With careful research each point can be avoided.

I still have one simple question. What tangible benefits will I receive if I move to Laka? Moving to Laka will apparently increase my cost by £250-500pa.

How will Laka provide me with £500 of benefits on an annual basis?

 

[mustang1]

In a sense none of us pay insurance for driving we are not doing - when we take out our policies the insurer asks us to tell them our estimated mileage, and adjust the premium to suit the risk which that level of mileage presents. Less miles = lower premiums, so you pay for the mileage you do, not that which you don't. They're trying to make complicated something that is already accounted for, and which is already rather simple.

I read a while back that if your annual mileage is too low then your premiums go up because the insurance company thinks you are losing driving experience and therfthernore likely to have an accident.

 

[Tobi_Laka]

Insurance socialises, not eliminates, risk. The model proposed is as old as the hills - it's exactly wherw Lloyd's of London came from. But unless you know the other members of your pool you will feel stiffed when the cost is bigger than expected.

@srw - we have bought in a guarantee / personal cap from insurer Zurich. Unlike the Lloyd's example, each customers' exposure is capped at market rate with us.

 

[Tobi_Laka]

@Tobi_Laka you will have to excuse my scepticism, it has nothing to do with your produt but with cycle specific insurance in general.

My needs are simple, theft, loss, damage etc. at or away from my property and including worldwide travel and in transit. I always use a quality known insurer that is competitive, not the cheapest. In other words I research the cover carefully to be sure I am purchasing what I think I'm purchasing.

I have looked at cycle specific cover on several occasions. The costs are out of all proportion to the general property market and offer no tangible additional benefits. My overall impression is the companies I've previously looked at are exploiting those customers who don't know or understand where else to look.

My annual cost is £204 for Buildings and Contents including £10000 bike cover which I do need.

I've carefully read your post and especially points a-d in response to my concerns. With careful research each point can be avoided.

I still have one simple question. What tangible benefits will I receive if I move to Laka? Moving to Laka will apparently increase my cost by £250-500pa.

How will Laka provide me with £500 of benefits on an annual basis?

Hi @PaulSB, it is difficult to provide a generic answer not knowing the specifics of your home insurance product. Do you have an excess? If so, at what level? Does your cover include theft and damage away from home? We have often seen material gaps in the policy wording.

It could very well be that your insurer has given you a fantastic offer as long-standing customer, which I personally would hold on to (if the cover is the right one for you).

High profit margins and legacy costs affect the current pricing models of many insurance products, including cycling. This is why we have started with bikes. We believe that there is a mismatch in premiums charged and service provided.

We have turned this around and only ask for money at the end of the month, based on actual cost of claims. This way the price charged reflects the claims settled, ie value provided to cyclists. This should be closest to fair pricing in insurance. We protect customers from high payments through a personal cap, which we have never reached.

Take August, our customers only had very few claims and hence we had to ask for little. In July, there were a few more claims. On average, we charge 50% on the personal cap quoted.

The price you pay with us is a reflection of actual claims in a month, fully transparent - nothing less. If you pay significantly less with your current insurer can only mean two things: either the cover has loopholes or you have been given a great deal as a long-term customer (and the insurer might make money elsewhere).

We're a young firm and still have to prove that there's an alternative to upfront premiums which often appear doubtful in terms of value provided. Some further information below:

http://help.laka.co.uk/getting-started/how-we-calculate-your-quote

 

[srw]

@srw - we have bought in a guarantee / personal cap from insurer Zurich. Unlike the Lloyd's example, each customers' exposure is capped at market rate with us.

Which is economically just the same as an insurance company buying reinsurance.

Looking at the quote engine, the maximum price works out at an annual rate of 10% of value, which is broadly in line with commercial rates (as I'd expect). If you can really build up a decent customer base and then distribute some value back to customers in the long run, good luck to you. However, the extremely low claim volume in August is probably more about a small customer base and natural volatility than anything else. I wouldn't take a three-month combined ratio as representative of anything.

I spent long enough in the industry to know that anyone who claims there are high profit margins needs to go back and look at the numbers again. There are certainly frictional inefficiencies - which is why the Big Red Telephone (the last major innovation but one) worked for a while - but (at least in the retail market) there is so much competition that profit is extremely thin. You need to capture distribution extremely well to take it in the long run.

And I'm afraid I take claims of novelty with a very large pinch of salt. It was about 15 years ago that I first went, on behalf of my then employer, to talk to a distributor who was talking about some measure of mutualisation overlaid with a price cap. The numbers didn't add up. Since then there have been many attempts to do something similar.

 

[rogerzilla]

Sold Secure Gold locks don't need to be boat anchors. A Kryptonite mini-D qualifies. Ok, it isn't what you want on a club run but it's not the sort of lock you leave in the bike shed at work because it's too heavy to consider carrying.

 

[Tobi_Laka]

Which is economically just the same as an insurance company buying reinsurance.

Looking at the quote engine, the maximum price works out at an annual rate of 10% of value, which is broadly in line with commercial rates (as I'd expect). If you can really build up a decent customer base and then distribute some value back to customers in the long run, good luck to you. However, the extremely low claim volume in August is probably more about a small customer base and natural volatility than anything else. I wouldn't take a three-month combined ratio as representative of anything.

I spent long enough in the industry to know that anyone who claims there are high profit margins needs to go back and look at the numbers again. There are certainly frictional inefficiencies - which is why the Big Red Telephone (the last major innovation but one) worked for a while - but (at least in the retail market) there is so much competition that profit is extremely thin. You need to capture distribution extremely well to take it in the long run.

And I'm afraid I take claims of novelty with a very large pinch of salt. It was about 15 years ago that I first went, on behalf of my then employer, to talk to a distributor who was talking about some measure of mutualisation overlaid with a price cap. The numbers didn't add up. Since then there have been many attempts to do something similar.

Fully agreed that we have yet to prove ourselves over a longer period of time. Percentages shown are for illustration only and have further data for a longer time period. We have hundreds of happy customers in the UK who have saved c70% compared to the "10% commercial rate" you mentioned. I'll be happy to report back next year how it goes.

 

[PaulSB]

Hi @PaulSB, it is difficult to provide a generic answer not knowing the specifics of your home insurance product. Do you have an excess? If so, at what level? Does your cover include theft and damage away from home? We have often seen material gaps in the policy wording.

It could very well be that your insurer has given you a fantastic offer as long-standing customer, which I personally would hold on to (if the cover is the right one for you).

High profit margins and legacy costs affect the current pricing models of many insurance products, including cycling. This is why we have started with bikes. We believe that there is a mismatch in premiums charged and service provided.

We have turned this around and only ask for money at the end of the month, based on actual cost of claims. This way the price charged reflects the claims settled, ie value provided to cyclists. This should be closest to fair pricing in insurance. We protect customers from high payments through a personal cap, which we have never reached.

Take August, our customers only had very few claims and hence we had to ask for little. In July, there were a few more claims. On average, we charge 50% on the personal cap quoted.

The price you pay with us is a reflection of actual claims in a month, fully transparent - nothing less. If you pay significantly less with your current insurer can only mean two things: either the cover has loopholes or you have been given a great deal as a long-term customer (and the insurer might make money elsewhere).

We're a young firm and still have to prove that there's an alternative to upfront premiums which often appear doubtful in terms of value provided. Some further information below:

http://help.laka.co.uk/getting-started/how-we-calculate-your-quote
View attachment 437406

I feel I did give you adequate specifics of my policy for this conversation and feel you didn't both read or answer my question. So......

My Buildings and Contents insurance includes £10000 of cycle cover damage, loss or theft, worldwide, in or out of the home, in my garage and in transit. The excess is £50. The annual cost is £204.74 for all my property including cycles.

I find it hard to conceive other situations in which I might find myself and my bike.

Your posts suggest Laka cover averages £22/month capped at £40. This would add at least £264 pa to my insurance costs with a potential annual exposure of £480.

My exposure to increasing or decreasing cost is dependent on the actions of others. Taking cover through my Contents policy leaves control in my hands.

My question is what tangible benefit can you offer me as a prospective customer which make it worthwhile for me to risk an unknown annual premium possibly as high as £480?

 

[Tobi_Laka]

I feel I did give you adequate specifics of my policy for this conversation and feel you didn't both read or answer my question. So......

My Buildings and Contents insurance includes £10000 of cycle cover damage, loss or theft, worldwide, in or out of the home, in my garage and in transit. The excess is £50. The annual cost is £204.74 for all my property including cycles.

I find it hard to conceive other situations in which I might find myself and my bike.

Your posts suggest Laka cover averages £22/month capped at £40. This would add at least £264 pa to my insurance costs with a potential annual exposure of £480.

My exposure to increasing or decreasing cost is dependent on the actions of others. Taking cover through my Contents policy leaves control in my hands.

My question is what tangible benefit can you offer me as a prospective customer which make it worthwhile for me to risk an unknown annual premium possibly as high as £480?

@PaulSB the price of our cover is linked to the insured value. Whilst you say that your current policy covers up to £10,000 it doesn't allow us to provide an accurate comparison. You are more than welcome to take a look yourself on our website. Value of bikes and number of bikes will play a role as we offer a multi-bike discount.

You may have an incredibly good deal with your current insurer and our offering might not be for you (from a price and coverage perspective). We've seen cost for cover (from home insurers and standalone cover) usually at around 8-9% of the bike value in annual premiums per year. We are on average at around half that level, allowing many customers to save significant money. Maybe not in your case though.

 

[PaulSB]

@Tobi_Laka you clearly don't want to answer the question. Thanks. I'll continue with my "incredibly good deal" the sort which is widely available from a number of well known mainstream companies.

 

[byegad]

I used to get the trikes and bikes covered under our house insurance, then the insurer at the time [the CO-OP IIRC] stopped doing it, I looked elsewhere and many home insurers had also withdrawn cover for any bike worth over £500.
Looking for specialist cover I found the premium came to just over 10% of the combined value. As we owned 9 bikes and trikes at that time with a combined value of more than £10,000 I didn't go ahead. If motor insurance were similarly priced then my car insurance would more than quadruple!
In the intervening 10 yrs or so I haven't had a potential claim and while we are now down to 5 bikes/trikes the premium is still enough to mean if I lose the most expensive one every other year, I break even.
It's at my risk and while I can afford to replace a lost/written off bike if need be, others could not and so need to insure.