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Computer or Car Insurance…Gigabytes or IRB…

It is widely known in my industry that the people of Ontario generally don’t understand their auto insurance coverage – until they need it.  For example, when buying a new computer you might look at screen size, megabytes, RAM, GIGs, processor, operating system, anti-virus software and extended warranty.  But when buying car insurance do you look at the coverage for housekeeping, NEB, IRB, attendant care, med/rehab, liability, and care giving?  No?  So, it begs the question: why are you paying for something you don’t understand?

In a brilliant display of smoke and mirrors, your auto insurance company (via the Insurance Bureau of Canada – IBC) pulled some tomfoolery in 2010.  They didn’t increase your car insurance premiums, but dropped your coverage significantly.  So, in essence at renewal you got half (or less) of the coverage for the same price.  That is like spending the same money on your previous computer to now only get the monitor.  

So, being an educated consumer, I “bought up” and paid extra for the same coverage I had before the changes.  I am one of less than 1% of the population that did so.  Now, IBC is saying they are going to drop rates by 15%.  Well thank you oh noble insurers.  That will give me the same coverage I had before 2010 (because I bought up) for the same price (because of the rate reduction).  So, I am back to where I started, but the other 99% of the population are getting 50% of the coverage for 85% of the price.  They are still at a significant loss. 

In a recent MBA class we talked about risk.   Driving a motor vehicle is the # 1 most unsafe activity when compared to 29 other activities people perceive to be risky (including smoking, drinking, extreme sports, risky professions, flying, etc.).  So, if driving is our riskiest activity, signifying a high probability of injury, why are consumers so unaware of their coverage?   Is it because we don’t think we will get in an accident (the “it won’t happen to me phenomenon”), or because insurance is “mandatory” we just purchase on price?  

I find it strange that people take the process of buying a computer more seriously than the process of renewing insurance – especially when driving is the riskiest thing we do daily.  In a PC World survey (2012), 63% of people indicated they bought a computer “extended warranty” yet research repeatedly shows that the $16B spent yearly on extended warranties is a waste of money.  Compare this to the less than 1% of people that bought an “extended warranty” (i.e. extra coverage) on their car insurance.  Buyer Beware!  It is time that Ontario drivers start to understand the product that is car insurance so they can ensure they have appropriate coverage for an appropriate price.
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