Insurers have traditionally operated on the principle of solidarity and risk spreading.
The Netherlands is known for its extensive cycling culture. In fact, a quarter of all trips in the country are made by bicycle. But as bicycle use rises, there are also growing concerns about bicycle theft, especially for expensive models such as e-bikes and speed pedelecs. This trend has shaken up the insurance market, but questions have been raised about how insurers price their policies.
The trend for insurers to use segmentation techniques to determine insurance premiums stems from the ability to process large amounts of data. These data analysis methods make it possible for them to identify patterns and thus draw up risk profiles.
In practice, this means that if someone lives in a neighborhood with a high rate of bike theft, their premium will likely be higher than someone in a lower-risk area. But this raises ethical questions. Is it fair that someone living in a risk area – often not by choice, but due to socio-economic circumstances – has to pay more for the same protection?
risk spreading
Insurers have traditionally operated on the principle of solidarity and risk-spreading: everyone pays a little so that a few can be compensated in times of need. However, modern technology and data analysis have made segmentation possible. Using these techniques, insurers now calculate premiums based on individual risks, such as the place of residence of the policyholder.
In regions with higher rates of theft and crime, bike owners can pay up to 50% more for the same theft and damage insurance than in other areas. This approach seems to contradict the traditional idea of solidarity behind insurance.
With bikes costing between $2000 and $9000, it's no surprise that many feel the need to insure against theft and damage. These high prices have made property damage and theft insurance increasingly popular, meaning a lot of money is at stake for insurers and bike owners alike.
Some insurers have found that certain bicycles, such as speed pedelecs, are simply too risky to insure. They are considered too expensive, with an unfavorable relationship between premium income and potential payouts.
This situation is further complicated by changes in consumer behaviour. A study by the Ministry of Infrastructure and Water Management shows that many people, with the right motivation, are prepared to replace short car journeys with cycling trips. This could lead to a further increase in bicycle use, which in turn could lead to more thefts and thus increased demand for insurance.
“Short ride? That's so cycled!”
De the countryside encouraging cycling for short trips has a twofold impact. On the one hand this can lead to a healthier, more environmentally friendly society, but on the other hand it can increase the risks of bicycle theft. If more people take bicycles for short trips, this means more bicycles parked in public places, which can provide more opportunities for thieves.
Given the challenges and concerns mentioned, one wonders if there are alternative insurance models that can serve both consumer and insurer needs. Collective insurance or community-based initiatives can offer a solution, where groups of people work together to insure themselves against theft or damage.
