Recently, the National Insurance Institute (INS) made changes to its automobile policy premium rates; this analysis thereof may be of interest to my readers. The rates went up – quite surprisingly, in view of the fact that competition to INS is expected in the next few months.
It is quite complicated to calculate auto insurance premiums. It would seem logical to have an “average” rate for broadly similar types of vehicle, but INS charges differently according to the type of vehicle, the kind of fuel, the use, the age of the vehicle, its market value, etc.
Until recently, INS would differentiate between vehicles owned by corporations and those owned by individual drivers. No longer – now the rates differ depending on the use of the vehicle, whether personal, commercial, personal/commercial, rental or other.
The rates are different for gasoline-powered vehicles and diesel-powered ones. This differential has been greatly reduced and is now so slight that it should not influence the decision as to the type of vehicle to have.
For passenger vehicles, incredibly, the rates rise as the car gets older. INS justifies this by saying that older vehicles tend to crash more often, and that, because of the difficulty in finding spare parts, body shops tend to take longer repairing them and therefore charge more. This would be more believable if an age differential were made in the premium rates for non-passenger vehicles – but it isn’t.
Vehicles for personal use get the best rates of all – except pickups. If for commercial use exclusively, the rates are a tad higher – except for pickups. The highest rates are for vehicles used for personal/commercial use – especially pickups!
In general, the rates are higher for pickups, which are popular for personal use when, for example, a family has a boat, ATV or motorcycles to drag or carry around.
The justification for this is grossly outdated, showing that little thought has been applied to the auto insurance rates for a long time.
In the ’70s and early ’80s, import duty on cars was prohibitive – I have heard 400 percent ad-valorem – and this pushed up the value of cars, so the market inclined toward pickups, even for personal use. An example: Suppose an upper-middle-class family needed to buy Junior a car to go to university; they would buy a small pickup, and Junior would use it for the piques (street racing) on Saturday nights, occasionally colliding with lampposts and other unyielding obstacles.
This gave pickups a bad reputation, so INS punished them with higher rates. My spies tell me that nowadays no pickups are used in the piques – but the insurance rate differential has not been reduced.
Accompanying this article is a table comparing the rates for six months of insurance, full coverage, including sales tax, for two types of vehicles: cars (including SUVs) and pickups (vehicles whose license plates have the letters CL before the number). Two market values have been considered, ¢5 million (about $9,000) and ¢10 million ($18,000), and three types of use, personal, commercial and personal/commercial. You will see that the lowest rate is for cars a year old with a market value of ¢10 million, for personal use. The highest rate is for pickups, regardless of age, with a market value of ¢5 million, for mixed personal/commercial use.
Naturally, this table does not take into account discounts or surcharges that may apply to premiums of vehicles whose owners have good or bad claim records with INS.
On a separate subject, for several years I have been telling people that INS’s home theft policy is hardly worthwhile, because the claim process is very complicated and full of loopholes that allow INS to deny payment. I have noticed that nowadays – probably because competition is just around the corner – INS is being more accommodating with other types of claims. However, because my office has not sold home theft insurance in a coon’s age, we are unable to see if INS’s new flexibility also applies to theft claims. I want to ask my kind readers to let me know if they have had any recent good experiences with home theft claims. If so, please contact me at the number or e-mail address below, or write to The Tico Times. Many thanks – I’ll put you on my list of nice people.
Contact David Garrett at 2233-2455 or david @insurancecostarica.info. The purpose is to give the reader a better understanding of insurance in Costa Rica. The opinions and viewpoints expressed are those of the writer, and do not necessarily represent the official position of INS.