Many times people are shocked when they hear what the cost of their license plates are going to be over the course of a year. The most common question asked is “this is an old _____________ that is only worth _____________! Why are the plates ______________?”
There are a lot of factors that go into determining the cost of license plates (which include basic insurance in Saskatchewan), and while there isn’t a way to touch on every unique scenario, here are a few factors that play into the cost of insuring your vehicle with SGI Auto Fund.
The first (and likely largest) factor in determining a rate for insurance on any vehicle is claims. The process of determining claims and how much they cost is done by measuring two components- the frequency and the severity of the claims typically associated with a specific make and model of vehicle. Generally, a brand new vehicle wont be much more expensive to plate than one that is a few years old, simply because that year, make and model of vehicle doesn’t have a long list of claim data associated with it. That’s not to say that SGI Auto Fund has no idea what kind of claims will arise from a 2020 Dodge Ram (the can extrapolate data from previous years for that vehicle), but the new 2020’s wont have a large amount of claims associated with them simply because there wont be that many on the road until they are actually purchased by the consumer.
Continuing on the claims talk, if the same method is to be applied to a 2005 Honda Civic, changes are good that in the last 15 years there has been a number of claims, and SGI Auto Fund (SAF hereafter) has enough data on file to know exactly what that year, make and model of vehicle is going to cost them. As a result, SAF will price the cost of plate insurance accordingly to cover their losses and remain profitable as an organization. This ensures stable rates for drivers across the province with no major influx on pricing. Even though a 2005 Honda Civic is worth substantially less than a new Dodge Ram, the data shows that there are more of these types of vehicles on the road, and there is sufficient data showing what the vehicles will experience for claims. Similarly, a 1970 Dodge 1 Ton truck will likely be a lot more affordable to insure as the frequency and severity of claims associated with these vehicles is reduced as there are far fewer of them left on the road, and their day to day use is likely limited as well.
The person behind the wheel also has a large bearing on what plates cost. An individual with a poor driving record with multiple claims and infractions poses a larger risk to the SAF. Chances are good that a poor driver will incur more claims and will generate more losses than an individual with a good driving record. For this reason, SAF introduced a points system for drivers which rewards a safe driving record with a discount on their registrations and insurance, and poor drivers actually see surcharges on their drivers license for being in the negative with their record. This also helps to stabilize rates for the whole of the province, while individually assessing the driving habits of each person and associating a rate in accordance to their trends.
This factor was touched on in the first point (see claims), but it is important to point out that the general operating budget also determines the cost of licenses in the province. If SAF is losing money, and operating a deficit, the only way to correct this is to trim budget, and increase premiums to ensure that the corporate entity remains strong and is able to continue to pay the claims that are incurred. If a deficit is recorded, and that trend continues, it is likely that claim payments could be stalled completely, and the process of getting a vehicle back on the road in a timely manner affected greatly. Typically,the term “profits” carries a negative connotation and the temptation arises to think of corporate greed and excess, however this is not the case here. Profits ensure stable plate prices, timely claim settlements, and happy drivers. Any excess profits are simply rolled into the provincial budget, and those funds then get used for claim reserves, or infrastructure initiatives.
Motorcycles are notorious for generating costly bodily injury claims. This is a huge factor in determining the cost of insurance for these types of vehicles. Because a rider is more exposed to the environment around them and there is less protection, bodily injury claims are much more of a factor, and the cost associated with them high as well. The premiums associated with these vehicles are typically higher for this reason. One other factor to note with motorcycles is the shortened season we have in Saskatchewan. Riders typically can only be on their bikes from May through to September, and it is usual to only plate a motorcycle for the months in which it is being utilized. This means that while SAF continues to play claims arising from the use of motorcycles all year, they only have a small window of time every year to collect adequate premiums to pay for the associated claims.
There aren’t too many individuals that enjoy paying insurance premiums, and that is understandable. Premiums are pricey and are a definite factor for the average house hold in their purchase decisions, however there is no doubt that when a claim occurs, one is thankful for the service and the ability to have their ride back in the condition it was in prior to the loss, and at a reduced cost to the owner as well.
If there is a desire to have increased protection on your ride, talk to your broker about additional coverage that can be purchased to further protect you from the cost of claims.