I Wanna Go Fast !!!

I Wanna Go Fast !!!

707 horsepower.  Chrysler calls the 2015 Dodge Challenger SRT with optional Hellcat engine “the most powerful muscle car ever”.  It’s so bad, Dodge engineers had to punch out a headlight to funnel more air under the hood.  With the Hellcat, Chrysler has a model to compete with Ford’s Mustang Shelby GT500 (662 hp), and GM’s Camaro ZL1 (580 hp).  By comparison, Honda’s Accord V-6 produces a completely adequate 278 hp, and Toyota’s Prius whines out a smug 134 hp.

All of which got me thinking about the insurance implications of a 200 mph street-legal racer with three headlights and an aluminum hood.  Who could sit on top of all that power and resist the temptation to burn the tires off?  Is there a symbol high enough to capture the risk?  With a limited production run, there are probably not even enough of these high end vehicles to yield credible loss experience.

Maybe this is a good time to just say no.  Ineligible.  We won’t insure it.
Or maybe it’s more about the driver than the car.  To have the $55,000+ that it will take to drive one home, a guy will need some capacity.  Some credit score.  At 15 mpg (or maybe 8-10 mpg when operated with spirit), the Hellcat will be an expensive daily driver.  I expect that most of these cars will spend a lot of time parked in 3-car garages on leafy streets for their first few years.  Taken out early on Sunday morning to “blow the carbon out”.  Not much to worry about.

But after five or ten years, and two or three owners, some of these muscle cars will find their way into more regular use.  Maybe not the limited-production top-end models, which will remain collectible.  But surely the garden variety 350hp Challenger R/Ts and Mustang GTs will be on the road plenty.  That’s when the driver and the household become really important.   Is this hot rod an extra car, or one that is driven daily?  What are the ages and driving records of the household?  How about credit score and tier?  Or other behavioral characteristics?  The big national carriers, with their big data scientists, might have enough exposures to do some analysis.  But most auto insurance carriers will never see enough of these high performance autos to be able to analyze their experience.  Which brings us back to good old -fashioned underwriting.  As much as I hate to say it, sometimes “no” is the best answer. 

Small and mid-sized insurers, how well do your pricing analysis, rating tables, eligibility rules, quoting processes and risk evaluation work together?  Can you figure out the right price as often as possible, and be ready to say “no” when you can’t?

I wanna go fast !!      http://www.youtube.com/watch?v=gnA1Q2JvvJo