Leave it to the experts

Those who cannot tell their end cans or huggers from their elbows would have a hard time trying to make sense of the motorcycle insurance market.

Bikers are sophisticated consumers who expect brokers and insurers to be as passionate about their machines as they are.

"Specialist knowledge is crucial," says William Hughes, operations director, Devitt Insurance Services. "Our customers know a lot about their bikes and expect us to know as much, if not more. They have their own jargon and when they phone to talk about insurance they expect people to know what they are talking about, otherwise they lose confidence."

To offer customers the level of service they expect many insurance providers employ bikers or pay for their staff to undergo the compulsory basic test for motorcycles.

There are more than 1.3 million motorcyclists in the UK, compared to more than 25 million drivers. And, although a basic motor policy is virtually the same for both cars and motorcycles, the similarities end there.

There are key differences in terms and conditions. For example, while personal accident is part of standard car insurance - providing cover up to £5,000 - bikers usually buy personal accident cover separately.

- They can also choose to insure their gear such helmets and leather clothes.

Apart from scooters and mopeds, the majority of motorbikes are not used for daily transport. And those who have classic, sports or off-road bikes, for example, may have different insurance needs.

Warren Dickson, marketing director for Carol Nash explains that while some customers such as collectors would need a multi-bike policy, others would require a special level of insurance to cover a bike that has been customized to the extent that its market value no longer reflects its worth.

"Those who spend hours in the workshop looking after their bikes don't want just market value," he says.

According to Dickson, pricing is still a factor motorcyclists will take into consideration when choosing their cover, but word of mouth is what makes or breaks the reputation of a broker or insurance company.

"Bikers have meetings and riding groups and many follow what their peers are saying. If you upset one biker it will certainly have a ripple effect, as they will pass the negative feedback on."

Expert knowledge is crucial from point-of-sale through to claims resolution. But the fact that the motorcycle market is so much smaller than the car market means that a network of specialist engineers and repairers may not be readily available.

Also there is a far higher possibility of motorcycles being modified or of additional 'kits' being fitted than with private cars.

Not all modifications will affect the insurance risk but intermediaries need to be able to identify those that will and to ensure that the insurer is fully aware of any modifications - failure to do so could invalidate claims. Replacement exhaust systems are a prime example - there are a number that are not regarded as 'road legal' by insurers.

"We do reach a conclusion, but the claims process costs more money and more time because of the inefficiencies of the process. And ultimately customer satisfaction is very poor, which affects retention," explains Andrew Jones, director of claims company Bankstone.

He adds that the solution for insurers is to outsource claims handling to experts who have the ability to consolidate the expertise and capacity.

And this is a specialist market with only a few players. According to Jones, only a handful of brokers have 70% of the market.

Andrew Hill, motorcycle class underwriter at Equity Red Star, agrees that this is a highly specialised market, heavily dominated by brokers.

He adds that, with the inherent potential of large bodily injury claims, insurers also need to be able to bring a high level of expertise into play when handling motorcycle risks.

"From an underwriting perspective for example, we are very careful in relating the cover to high performance of bikes," he explains.

"As it stands, someone could pass an accelerated riding test and, with extremely limited experience, legally ride a super-bike. That is quite a risk, not only for the insurer but for the customers as well."

Insurers also need to keep up with developments in new technology and how they affect the market.

Andy Goldby, director of motor at Groupama, points out technological developments mean that motorcycles are becoming obsolete quickly, with insurers seeing an increase in total loss claims. On the other hand, third party injury and damage claims are considerably less for bikes than cars, as there are more non-fault claims.

Despite the high risks, rates are softening at the present. Hill says: "It appears some insurers, without fully understanding the risks, are saying: 'Let's write some bike business', which combined with some new entrants to the market is pushing prices down."

Prices may be going down but Andy Boyd, motor product development manager at Norwich Union, says he does not see the market becoming as commoditised as the car market.

"It is a specialist sector and fewer insurance companies are willing to write this type of business." But he adds that there has been a growth in white label products via well-known brands such as Honda or Suzuki.

The number of bikers on the road has risen by about 5% a year over the last few years, which can only be good news for insurers and brokers.

The scooter market alone increased 40% between 1999 and 2003.

But it seems that price alone will not win over such demanding clientele.

And only those who know their bikes inside out (and that an end can is an exhaust and a hugger is a mud guard placed over the rear wheel) may stand a chance.

As Hill concludes: "Those who succeed in this market tend to be the specialists with enough experience to understand the different requirements of their customers - who can be looking to insure anything ranging from a scooter or a super-bike through to a classic model."