Insurance companies assess various ‘risk factors’ in the determination of your insurance premium. These include where you drive; how far you drive annually and on a daily basis; personal factors such as your age, gender, and marital status; your driving record; and the kind of car you drive. It’s that last topic that concerns us here.
CLEAR is the Canadian Loss Experience Automobile Rating system, a mechanism for rating vehicles for insurance purposes. Most Canadian insurers now use this system, and Canadian consumers should be very happy that it is in place.
How does it work? Insurers take into account the claims experience of a particular vehicle (make and model) when they calculate your premium. This differs from the previous practice of using the manufacturer’s suggested retail price (MSRP) as the basis of your premium. What does this mean to you? It means that you can control your premium expense! Look at it from the point of view of the insurance company. Models that have fewer safety features, are stolen more often, or cost more to repair will cost more to insure.
Consider safety features such as air bags, anti-lock braking systems (ABS), d theft deterrent devices. While they can add substantially to the initial price of a vehicle, they may nonetheless translate into lower premiums for car owners, since these devices can help to reduce insurers’ claims costs.
For argument sake, let’s say that you and your neighbour both own cars that cost $35,000. Under the old system, both cars would be rated the same for insurance purposes. Easy enough to follow, yes, but not fair. If one of the cars is a model that is stolen more frequently, is less roadworthy and thus involved in more collisions, and/or costs more to repair, is it fair to charge each owner the same amount for their insurance? Clearly not, especially from the perspective of the owner of the safer car. The CLEAR system takes all these factors into account. Through it, motorists who drive safer vehicles that are less expensive to insure do not subsidize those driving vehicles with a higher loss experience.
So before you sign on the dotted line for that racy little number you’ve been eyeing, ask your insurer what the CLEAR system rating is for your dream car. It just may turn out that the insurance cost will be nightmarish. – G.P.N