Few places in Canada offer the peaceful solitude, natural beauty and diversity of species as Grasslands National Park. I tried to capture the magic of this place during our visit last week. With the help of a lone bull bison gazing down into the Frenchman River Valley on a foggy August morning, I got the photo I was looking for. (click on the image for the full size)
If you are ever in Saskatchewan this park is one of the gems of the province and certainly well worth the detour.
Not owning a car in US or Canada can make life harder, yet there are quite a few of us in that category. And obviously we resort to rental cars to fill in the gaps in our needs. As some one who have been enjoying renting car, particularly while I go on trips, I have learnt a thing or two about car rental insurance that makes me eligible to write this post.
When it comes to car rental insurance, most of us seek cheaper (or in many cases ‘cheapest’) option – be it limitng the insurance coverage or trying to use the default rental insurance that comes with your credit card. But, taking insurance coverage not seriously could get you into some serious financial trouble. Here are some of my tips that you can consider before taking insurance for your rental car.
1. Never go for un-braded rental agencies, just because its cheaper
Me and my friends once rented car for a weekend from a company called ‘Zoom Rent a Car’ in Mississauga, Canada and we had a terrible experience dealing with them, after we met with a small accident. Everything may seem normal until you meet with an unfortunate event. Even though we had taken insurance from the same rental company, they gave us hard time when we tried to raise a claim, and they ended up intimidating us into an ‘off the table’ settlement for a few thousand dollars.
Very soon, I came to know from a family member about a great experience with ‘Enterprise’ in such unexpected situations.
So, don’t just let yourself blindly attracted by cheapest deals in the internet, and deal with unprofessional agencies. Always prefer a branded rental agency like Enterprise or Avis, even if its an extra few dollars.
2. Know the limitations of your credit card auto rental insurance
This is one of the important things that I wanted to mention. Some of us have credit cards that provide ‘Auto Collision Damage Waiver’, and is a good thing only if you are well aware of your limitations.
Most credit card insurances have limitations on
– the type of vehicle you rent (vans, mini vans, pickup trucks, and in some cases SUVs are not covered)
– the cost of vehicle you rent (my CIBC platinum visa doesn’t cover vehicles costing above $60k)
– who drives the vehicle (in some cases, coverage applies only if you are behind the wheel, not your friend)
– special exclusions (most exotic vehicles and sports cars are not covered)
– the period that you can rent a vehicle continuously
So, if you are not fully aware of these terms, and if you end up falling in of their ‘exclusions’, well …its going to be a serious damage to your credit, not for your car anymore. J
3. Know about your plan deductions
‘Deductibles’ is the amount that the customer will have to contribute to the damage, before the insurance company starts contributing its share. If the cost of repair is $3000, and your deductible is $1000- – then you will pay $1000 and the insurance company will pay $2000.
Not always we meet with serious accidents, often the repairs are minor, and if you have higher deductible, you will end up paying more than what your insurance pays you.
4. Have adequate Third party liability (TPL) coverage
Canada, like most countries, mandates third party liability insurance paid by the vehicle owner (which is in this case, the rental company). However, the mandated coverage could be limited. Here, if you hit someone, you could be easily be liable to pay millions. Most rental car companies provide additional third party liability coverage for a little extra premium. Though it’s not a ‘must’ to take, it’s suggested that you are aware of how much you are covered for, and take adequate TPL coverage if needed.
5. Road-side assistance comes in handy
Road side assistance programs (otherwise called as ‘RAP’s ) are special services charged by the rental companies to respond to your emergency distress calls, with essential services like towing. I recently read an article in Metro daily (Toronto), about how car drivers are getting abused by the tow truck agencies in GTA, and the article sites incidents where their fee could mount up to thousands of dollars. Not just that, what if your battery is dead? what if you run out of fuel in the middle of nowhere in a cold winter weather? and much more….
For example, Enterprise offers RAP (Road side assistance program) for about $4/day, that includes 24 hrs assistance in situations like lost keys, fuel outage, vehicle breakdown etc.
6. Take full coverage from the rental agency if you are travelling in groups
If you are going out on a trip with a couple of other friends, I would recommend going for the ‘full coverage’ provided by the same car rental company, instead of using your own credit car insurance. As siad earlier, the credit card car rental insurance has several limitations, and since you are in a larger group, sharing the extra bucks for full coverage and sharing the risk along with that- is a smart approach.
7. Make sure you add your additional drivers properly
Once again, when you travel with a larger group (especially) with your friends, make sure to expect (or ask) who would like to share the drivers seat during the trip, and add those names as additional driver before beginning the trip. Most rental insurance doesnt cover damages if the driver is not on the paper. Note: calling the rental agency and asking them to add a person after you met with an accident is not going to work out, most rental agencies doesnt accept that.
8. If you are a traveller, you will need PAI
PAI (stands for Personal Accident Insurance) covers you with medical expenses, including hospital and ambulance expenses, in the event of an accident. Now, particularly, if you are a traveller to the country and you dont have proper travel insurance that covers you, PAI could be save you thousands of dollars in case of any unfortunate event.
Now, all the above mentioned steps are pre-cautions that you take before something happens. But just in case if the time is bad and you meet with a minor accident, do remember to take following actions to make your claims process go smooth
– Always get police report by voluntarily calling and reporting the authorities. trust me its worth the effort, the insurance companies cannot question your claim if you have an official report from police department
– Report immediately to the rental agency and insurance company. Most insurance companies require you to report an accident within 24 hrs to facilitate the claims process without hurdles
– Take pictures: “A picture is worth a thousand words” and its true in this case as well. Once again, one of the first few questions the car rental insurance companies ask you when you report an accident is that “do you any evidence for the accident? like pictures?”
Be educated and have a risk-free car rental insurance experience. Cheers!
What is Earned Premium?
Earned premium is the part of the premium (collected by the insurance company) that can be attributed to the period of the policy that is already over. For e.g. if you are paying $1200 per year as premium for a particular risk coverage for a year, and the first 3 months of the policy period is already over without any claims reported, then $300 is the earned premium. This term is mainly used by the companies while reporting their financial statements, to account for the per
What is Lloyds of London?
Lloyds of London is one of the world’s oldest and most popular insurance markets headquartered in London. It is not an insurance company, it’s a market regulated and overseen by Lloyds Corporation. It has a unique position in the industry for providing coverage for most complex and unique risks. The buyers are individual entities or corporate. The sellers are group of investors called syndicates who are ready to take the risk for a premium. The policies are handcrafted (risks are underwritten) with both representatives of both parties sitting together in the market place (which explains the iconic building construction with hundreds of underwriter tables). Most of the business takes place through brokers, and middle men who has expertise to do so.
How is Lloyds of London different from insurance companies?
Insurance companies are individual entities having specific nature of business as like auto, life, home etc). The insurance companies provide a predesigned set of policies for a target group of customers, and are not custom made. In most cases, the risks covered are generic, and the companies have their own limitations on what risks to cover, based on the overall strategy. Where as Lloyds is an open market; we need to go back to the basics to explain the Lloyds operations i.e business between people who want their risk to be covered, and who would like to cover them. The two parties meet and make business.
In simple, an insurance company is a single entity that designs and markets insurance products where Lloyds is an open market place where companies and customer come together desing products that meets both their needs through a broker.
Who are the players in the Lloyds market?
The best way to explain this is through an example. Imagine that Mr. John works for a company that does offshore oil extraction, and his company sends him to find an insurance cover for specific valves that are laid under the ocean and form key component of the extraction process. Obviously this is one of its type cover that Mr. John cannot find in the commercial market. He goes to the Lloyds, finds a broker and explains him the cover requirements. The broker then takes the cover needs to the Lloyd’s underwriting room, where he meets with underwriters representing the different syndicates. Syndicates are formed to accept risks on behalf of the members, who are basically investors. The specialist underwriters measure the risk, calculate the premium and sometimes negotiation takes place with the broker. The broker, after meeting up with different underwriters, compares the options available on the table and takes it back to the Mr.John & his company (in this case the policy holder). And if both the parties are satisfied, deal!
This entire process is overseen by the corporation of Lloyd’s, ensuring that future valid claim if happens is fully paid. Its because of the existence of the corporate that Lloyds is not one of the most reliable and sustaining market place trusted by each stakeholder we have seen above.
How does Lloyds work?
Lloyds of London Explained
Why Lloyds of London?
– Lloyds market offers custom made insurance solutions for unusual and complicated risks
– Lloyds clearly is well regulated and associated with trust and reliability. The leading rating agency A.M. Best has rated it as A (Excellent). The agencies Standard & Poor and Fitch has given A+ (Strong)
– Lloyds also holds track record in responsible paying for valid claims
The famous Lloyd’s building
This unique insurance market is housed in a unique building. The Lloyds building, built in 1986, is often cited as ‘inside-out’ building. Looks like an industry from outside, with huge pipes and ducts, leaving an uncluttered space inside. The building, till today, is considered one of the innovative architectures in the world.
Top issues faced by insurance companies
Regulations
The regulatory environment has always been one of the most influential force affecting the insurance companies, and with no surprise it still remains one of the important concerns. In the 2012 PwC 15th annual global CEO survey ,the over regulation pushing the insurance companies has been voted as the second largest threat to the growth. Though the regulatory complexity have been prevailing for longtime in the history of insurance companies, the increasing pressures from country level authorities by rolling out requirements specific to the local market poses severe challenges.
Social Media
Insurance industry is one of its kind where historically, the trust and relationship between the customers and the company representatives (agents or brokers) have played a critical role in doing business. But now the world is changing, information is easily available for the customers through various technology mediums like internet; customers can reach out to their computers, tablets or mobile phones to get information on various products and premiums. Though the significance of these middlemen in making the customers comfortable in buying an insurance policy has not been reduced significantly, the world is changing. Thanks to the recent economic lessons history has taught us, the companies are more proactive towards embracing the social media change. But ‘How’ still remains a big question, at least in the insurance industry.
Increasingly maturing market
Though the recession has not hit insurance industry as badly as it hit the banking industry, the overall growth has slowed down significantly. Mature markets like US and UK have been seeing negative growth, and if they do recover the growth is expected to stay less than 1%. So the CEOs are left with a choice to either take aggressive performance improvements to squeeze out better margins, or to expand into the growing markets. No wonder why data analytic and optimization is seeing enormous growth in recent times!
Costs vs Service
As the revenues decrease, the insurance companies face hard time dealing with increasing costs as well. Just like any other companies, as the margins get reduced the companies’ services decrease, partly due to the limited human resource power. With the average age of employees in insurance industry wavering around 50, the challenge in retaining the talent pool becomes another critical issue for the insurance companies.
While fuel efficiency is a critical factor in countries like India the monthly insurance premiums in countries like Canada adds up in your credit card bill and makes a notable impact. Lets look into five important factors that you need to take into account to reduce your insurance premium
Well, we all know that the age is one of the important factor influence your insurance premium. Well as we look out of such things on which we don’t have much control on, there are always certain levers through which we can have optimal control on our insurance premiums. Lets look at some of them.
1) The balance between the old and the new.
As the principal amount insured on a new vehicle is quite high, the premium tends to be a higher too. The older the car gets the lesser the insured value, and eventually the insurance premium. However, that’s not always the case. Often, it turns out the older cars has lesser safety features, and more the risk of loss, which in turn fuels the increase in insurance premium. So its always the optimal balance between the age of the car, and features preferred by the insurance companies, that gives you the scope for saving that extra money in the premium.
2) Drive less
Yeah it sounds stupid, then whats the point in buying a car? But what I try to mean here is that, drive for and when needed. Sometimes, small efforts can make big changes. For e.g. if you have a convenient public transportation for your office, you can avoid driving a car and take public transit. This could save you significant bucks, not just in insurance premium ,but in parking too & fuel too. Insurance companies tend to decrease the premium rate for people who drive lesser miles/km.
3) Insurance as a factor in your buying choice
The best precautionary measure that one can take in reducing his/her monthly auto insurance premium, is considering the insurance premium as an important factor for making a purchase decision on your car. Reach out to an insurance agent, provide him with your choice of cars, and get insurance premium quote for each of your selected model, and choose the best fit for you.
4) Voluntary deductible
Do you have this question in your mind – ‘I am confident that I will drive safe, I really don’t want to pay this much for my premium’ , then voluntary deductible in a car premium insurance contract is a good option for you. This means that, you can actually volunteer to take part of the risk on yourself and in turn, you get to pay less monthly premium. But remember, in case of an accident, you might have to shell out more money from your pocket to cover your loss
5) Buying multiple insurance coverage from the same company
Most of the big insurance companies offer various insurance products under their portfolio. For example, the same insurer might offer home, auto, travel insurance etc. Often, when you buy two or more insurance coverage from the same company, you get significant discounts on your premiums. You can go for a recognized and reliable insurance company in your city, and buy all your insurance needs from that particular company.
6) Have a safe driving record
Not but not the least, probably this is the best solution to keep your premiums low in a long term basis. Drive safe, build safe record in your driving regulation authority’s database, and you are given discounts automatically.
7) Build your driving history
Drive your own car to build a strong driving history. I have heard people sold off their personal car, fearing higher insurance premiums, and rent a private car every weekend. That might save you some fixed costs of owning a car, but it wont help you build a profound driving history, which is important too.
Happy saving on your insurance premiums !
The insurance and financial services industry is the highest contributor for Canada’s GDP, and there is constant growth observed year by year. In 2011, $84.2 bn of the total GDP was contributed by the Insurance & Financial Services sector.
The following graph shows how the GDP contribution has been steadily increasing.
Source: Industry Canada
Property & Casualty Insurance is one of the vital sector in Canadian Insurance industry, employing nearly 115,000 Canadians, and paying more than $7 bn in taxes alone ,and a premium base totaling $44 bn [Source: Insurance Bureau of Canada]
In 2009, the total GDP contribution by the property & casualty insurers to just the Ontario province is $7.5 billion, which is substantial.
Actuaries
– Actuaries, in an insurance company, help design and price insurance policies for their companies, such that they remain competitive and maintain profits. They extensively use analytics, economics and mathematics skills and tools to evaluate risks. They are the ones who set guidelines for each risk class and category. The underwriter’s role comes after an actuary’s role and decision.
– An actuary’s role in a company is similar to that of a brain in a human body. If actuaries do wrong pricing for the policies, then the companies cannot make profits. If the price is very low, then the profit margin is not adequate, where as if the price is very high the customers won’t buy any policies from the company.
– Roles: Determine likelihood size of the policy holder’s losses and put a price tag. This is called ratemaking. Apart from this, they also perform reserving, risk management, reinsurance roles
Underwriters
– Underwriters, in an insurance company, decide the category in which each customer falls, based on the table/matrix created by the actuaries. They look at the data of the individual customers and decide in which risk class and category the particular customer falls in.
– Underwriters evaluate each client’s risk and decide upon how much coverage the client can be given, and for which how much premium he should pay. Sometimes they make decision as in whether certain client’s risk is coverable or not.
A perfect Analogy explanation
I remember reading a perfect analogy explaining the role of an actuary and an underwriter.
“An actuary, an underwriter, and an insurance salesperson are riding in a car. The salesperson has his foot on the gas, the underwriter has his foot on the brake, and the actuary is looking out the back window telling them where to go.”
Organizational chart for Actuaries and Underwriters
Organizational chart for actuaries and underwriters
Ontario province faces huge outstanding debt securities. What is Don Drummond and Moody’s saying?
Brief
Ontario Province face huge debt (has huge outstanding debt securities)
Don Drummond’s report/recommendations for Ontario released on Wednesday
Ontario’s rating outlook was cut to negative from stable by Moody’s Investors Service
Who is who?
Dalton McGuinty
The Premier of Ontario (Premier ministre de l’Ontario in French) is the first Minister of the Crown for the Canadian province of Ontario.
Mr. Don Drummond
Mr. Drummond is the recently retired Senior Vice President and Chief Economist with the TD Bank. Prior to joining TD in 2000, the native of Vancouver had a long and distinguished career in the federal public service.
Moody’s Investors Service, often referred to as Moody’s, is the bond credit rating business of Moody’s Corporation, representing the company’s traditional line of business and its historical name. Moody’s Investors Service provides international financial research on bonds issued by commercial and government entities and, with Standard & Poor’s and Fitch Group, is considered one of the Big Three credit rating agencies.
Ontario province
Ontario has about $190 B in outstanding debt securities.
Ontario’s struggles are crucial for the country because its economy is larger than that of many countries, including Sweden, Poland and Belgium, and accounts for about 40 per cent of the national economy, with a gross domestic product of $612-billion last year.
However, the province has a $16-billion deficit and a rate of growth that is slower than that of some other provinces, which makes it difficult to find ways to balance the books.
A credit rating downgrade would not only make Ontario’s government bonds – which accounted for just over half of all trading in Canadian provincial bonds in the first nine months of 2011 – less attractive to investors, it could also make it more expensive to borrow money at the very time when the debt is mounting.
Drummond’s recommendation released
It has been about a year since Premier Dalton McGuinty asked him to dive into Ontario’s public services and find ways for the minority Liberal government to wipe out a $16-billion deficit by 2017. Mr. Drummond and his three co-authors on Wednesday served up 362 recommendations spanning more than 540 pages – the biggest print job in Queen’s Park history. He is proud of this. The executive summary is 62 pages.
“We call it the ‘summary for the not-very-busy executive.’ ” Drummond says
Drummond’s Proposals
His proposals range from overhauling health care by moving more services away from hospitals, to scrapping electricity subsidies, to making tax breaks for businesses conditional on whether they help boost productivity, not just whether they create and maintain jobs. The general thrust through the entire document is making the success of all programs measurable, so they are run more efficiently, or junked. So far, the McGuinty Liberals have outright rejected only one recommendation – to kill all-day kindergarten.
“I hope they’ll implement them, but if they don’t, I don’t think it’s because they weren’t good ideas,” he says. “I would probably do 350 of them even if I had a huge fiscal surplus. I mean, why would you want to run a program inefficiently?” –Don Drummond says
His recommendations – hard to implement
It’s certainly nothing compared to the massive “radicalization” he is about to call for in how Canada’s most populous province operates. Mr. Drummond sounds supremely confident that his sweeping and sometimes draconian proposals offer the best hope for Ontario to get its house in order. But he is realistic about how hard it will be to implement them.
“No government in the world has ever done this before,” he says. “I’m calling for a revolutionizing, a radicalization, of virtually everything a government does, to make it focus on efficiency, not just in one area at a time, but simultaneously in virtually everything they do. It’ll take unbelievable courage and unbelievable intelligence, and it’ll take an unbelievable capacity at both the political level, and the bureaucratic level.”
Moody’s
Moody’s Investors Service warned on Thursday that it might lower the rating if the province doesn’t take serious steps in the next budget to deal with its multibillion-dollar deficit.
If we don’t do what he recommends, then Moody’s (Investors’ Service, the debt-rating agency) might downgrade us, increasing the cost of borrowing.” Moody’s cites Ontario’s slowing growth and growing debt for revision.
Term insurance is the basic and original form of Insurance. But the popularity for the term insurance among consumers is less popular, especially in countries like India.
Can you define Insurance? Insurance is something that takes back to the financial position you were in, before experiencing an unexpected loss.
Typically, a Term insurance is pure form of insurance, where the policy holder pays premium for the risk, which in this case is mostly loss of life, and covers his risk using the premium paid. If the policy holder has not faced any risk in the agreed term, no insurance premium is accumulated and paid back. Which essentially means that the term insurance is not an investment, rather a pure risk covering Insurance agreement.
So, is a Term Insurance advantageous?
It depends, but on a general note, any middle aged family member having dependents like wife,sons & daughters should have a term insurance included in his portfolio. The advantage is simple. Term insurance is cheap. Its much cheaper than a conventional life insurance designed to give a guaranteed return, based on the principal and interest accumulation. It is cheap but with no definite returns. But is essential.
A perfect analogy for a term insurance ,would be a Vehicle insurance. Does any body question, why we are not getting any definite returns from a Car insurance? then why do you question a term insurance? A lot of us are safe drivers ,and never actually face an accident, but still we are paying premiums annualy, just to keep ourselves in a bailable space in case of an unfortunate event. The same is the case with term insurance, it helps your family in distress.
There is also this psychological factor affiliated to it. Why would some one think about his/her death when he/she is actually alive and healthy? But ,things are changing, people are changing, in a slower yet consistent pace. Soon, each one of us will realize the need for a Term insurance in our portfolio.
Insurance Notepad 