16 November 2009

Bike Theft Profiteering

Dont Steal This Bike
Hi-tech protection. It reads: "Fingerprint scanner" - on the wheel lock - "Theftproof", "GPS Monitoring", "Neighbourhood Watch".

Bicycle theft is a hot topic at the moment in Copenhagen. There has been an increase this year in the number of bicycles stolen in Denmark. 7000 more bicycles have been nicked in the year's first three quarters than at the same time last year.

Actually, 222 bicycles are stolen in this country every day.

Two students from Denmark's Technical University [DTU] have, in their thesis, described how Danish insurance companies profit from bicycle theft and do little to stop it. It's great business for them.

First, a bit of background. In Denmark, bicycles are covered under your household insurance. If you have storm damage on your house, break a vase or get your bike stolen somewhere in the city, it's the same policy that covers it. You may have to pay an extra fee for bicycle insurance, but it's not excessive.

When I buy a bike, the bike shop registers the frame number and my name into the system and my insurance company thereafter registers it in their system.

If my bike gets stolen, I register the theft on the police website - takes a couple of minutes - and then call or email my insurance company. I'll usually get a pay-out within the week. It's quite a fluent system.

On the other side of the coin, if I get caught stealing a bike, I am required to pay a fine of 1400 kroner [$280 / €186]. Not that anyone is looking for the perps. In 2008, the police caught the thief in 0.46% of all cases.

Fair enough, when you have so many bicycles in a country or city, the police can hardly be expected to run around looking for the stolen ones. There's more important things for them to do.

What is rather odd is that the insurance industry is not all hot and bothered about the many bike thefts in Denmark.

As twisted as it may sound, bicycle theft is profitable for them. Sure, back in 1993 the insurance industry was involved in implementing rules regarding approved locks on all new bicycles sold - the wheel locks that most of us use in Denmark - which caused a massive fall in the number of bicycle thefts. But the industry is not active in working towards reducing the number of stolen bicycles.

Why? Bicycles are covered by household insurance policies. Many young people don't bother with household insurance but the insurane companies, for obvious reasons, wish they did. Funnily, they are active in sending out press releases that hype the rise in bike theft and one company, for example, published a brochure in August with the title "School start is high season for bike thieves". They wrote a list of preventive steps to take to avoid bike theft and one of them was, not surprisingly, "Cover your bicycle with household insurance".

Insurance industry pay-outs for stolen bikes make up 5.6% of all pay-outs on household insurance cases. Bike theft costs the industry 170 million kroner [$34 mil. / €23 mil] a year in pay-outs. The average pay-out is only 3,356 kroner [$670 / €450]. In comparison, the average pay-out for a burglary is 23,360 kroner [$4700 / €3100] - seven times greater.

Apart from selling household insurance policies, pay-outs for bike theft are great for customer service and customer loyalty. A quick, efficient pay-out for a stolen bike is something that people appreciate.

Paying for stolen bikes is a small amount compared to storm damage on houses so insurance companies are happy to do it. Especially since it's profitable. Crime pays.

If you look further along the food chain, bike shops profit from stolen bikes, too. They sell new ones and they buy stolen ones cheap from police auctions.

The people behind the City of Copenhagen's current test of RFID chips that will help in tracing stolen bikes were hoping for support from the insurance industry, but they were disappointed.

Via: Politiken


April Streeter, Gothenburg, Sweden said...

hey, mikael:

I was really happy to see this article as I've been obsessed with bike theft lately - where are all the bike thieves, for example? With all the bikes stolen in big cities we must pass them several times daily on the street!
I had long suspected that bike theft was not being properly averted by the industries. But I don't see how this article demonstrates that theft pays. Of course it pays for the thieves, but the insurance industry still has to pay out - less than for burglaries, to be sure, but it's still cash out of their pockets. What am I missing?

Anonymous said...

Could you elaborate on the frame number registration? Is it a national database or do you still have to give the number to your insurance company yourself?

Kim said...

I am interested to see that you have about 81030 bikes stolen a year, where do all these bikes end up?

Still it puts the situation here into perspective where in 2006 (the last year I can get figures for) 22211 were stolen. Maybe that is just because we have fewer bikes in circulation.

Either way I am impressed by your police registration scheme and RFID chips scheme, how is that going by the way?

sheffield cycle chic said...

British insurance companies will add your bike to your standard houshold insurance too. My bike had to be put my policy as a "named item" (at no extra cost)and I had to give the frame no. to the company over the phone. If it had been a cheap bike it would've been covered anyway.

But where do all the bikes in CPH go? Is there a big market on ebay in Denmark or lots of shady deals going on "down the market" or in "pub carparks" like in the UK?

Or is it more of a "joy rider" problem - the bikes are nicked for a short ride and then dumped and hence the large numbers recovered by the police? Are there any difference in the numbers stolen between women's bikes and men's?

As for technology I'm not convinced that any small gains in the retreval of bikes wouldn't be soon outweighed by the civil liberties disadvantages that this could ultimately lead to. Unfortunately, history tells us that no matter how benign the intention of the original invention it will always be abused.

James said...

April, I think what Mikael is saying is that the revenue for new insurance customers is higher than the amount paid out.

e.g. if an insurance company recruits 5000 new household clients paying $500/year for example, it will generate $2.5 million a year in extra revenue.

Let's say 10% of bikes are stolen with an average payout of $670, then it is costing them $335,000, so they are netting $2.165 million/year in addition to making their customers happy by buying them new bikes.

By instilling fear in society that your bike will be stolen, it encourages people (who would otherwise have no insurance) to purchase household insurance plans (especially students) - thus profiting the insurance companies.

Once they get all these new customers, then they can focus on improving their bottom line by mandating specific types of locks for their customers, etc.

Mikael said...

april: bikes here are stolen by regular people. drunk on their way home on a saturday night, or whatever.

l' homme au velo said...

This is interesting,this Topic came up at a Dublin Cycling Campaign Meeting recently they are interested in something like this being used in Ireland.
I mentioned about Denmark doing a Test of these and putting them in the Reflector. We have a lot of Bicycle Theft lately with Bikes being stolen to Order. But it would have to be hidden away Internally in the Bike. I cannot see the Police being interested in Tracking down Bike Thieves very low down the scales in interest unless they Recover the Bike somewhere Dumped.

Kim said...

Reading the other post, I see that the system is passive rather than active:

"So... how does it work? If your chip-equipped bicycle gets nicked you do what you'd do anyway. Report it stolen on the police website and inform your insurance company. Easy. If you're taking part in the chip program you can now also report it stolen to the City, on their website.

There is a small army of people walking about the city everyday with the enviable job of irritating motorists. We call them Parking Attendents. :-) They are on the sidewalks of the city writing out parking tickets anyway so they will now be equipped with an RFID scanner so they can walk past parked bicycles, scanning happily as they go.

If their GPS-equipped scanner registers a stolen bicycle, you will immediately recieve an email with a map featuring a red dot where your bicycle was found."

The Parking Attendents aren't seeking out stolen bikes, they are mearly carrying the equipment with them, the rest happens automatically, they don't have to do anything. I think it is an excellent idea, if you bike has just been "borrowed" by someone trying to get home, you then know where to go pick it up.

Yokota Fritz said...

Bikes are covered under household insurance in the USA also, though you may need to a rider for your bike if it's worth more than about $1000 or so. In the USA, there's also a hefty deductible that may amount to a significant fraction of the bike's value, and most American policies are not replacement value but "Actual Cash Value" policies.

Jonathan Dickerson said...

Mikael said...
april: bikes here are stolen by regular people. drunk on their way home on a saturday night, or whatever.


True. But I just had some friends return from Copenhagen with a very nice story about a couple of local young drunks running for shelter in the pouring rain who actually stopped to pick up fallen bikes and place them safely upright. Chivalry is not dead!

Melbourne Cyclist said...

Jonathon - nice story, thanks :-)

I've taken to standing up fallen over bikes here in Melbourne - people tend to use chain or D-locks, and actually lock the bike to something physical, preferably a bike hoop, but often a signpost because all the hoops are taken. Also, a lot of bikes lack kick-stands (mine's got one though, yay!). So, you quite often see chained-to-signpost bikes fallen over, which is bad for everyone - blocks the footpath, probably upsets the cyclist when they get back and find their bike fallen. Picking them up is my way of being nice to a complete stranger (and getting weird looks in the process, although most people smile once they figure out it's not my bike).

Adrienne Johnson said...

April- it is unlikely that your home will be destroyed by fire or natural disaster. Every month you pay for your home insurance and do not need to use it is pure profit for the insurance agency. If 100 people sign up for insurance(who had not previously) on their home (bike included) and none of the homes are damaged but 10% of policy owners have a bicycle stolen, the net profit for the insurance company is very high. That is how that works.

Benzoli said...

Insurance profitable!?! No! You're kidding.

Nicolaj said...

sxgps.dk will find your bike with RFID tags.

Erik Sandblom said...

Mikael: "bikes here are stolen by regular people. drunk on their way home on a saturday night, or whatever."

It seems unlikely someone would steal a locked bike just to get home. You need a hacksaw or some way to break the lock. If you're going to do all that, you may as well get a taxi or walk... or bring your own bicycle when you go out.

It's also not unproblematic to keep a stolen bike, because the registry of frame numbers makes it easy for repair shops to identify stolen bikes.

So I don't know... it seems you need to be more motivated than just "drunk on your way home" to steal a locked bike.

Mikael said...

erik, i'm not saying people carry hacksaws with them when out drinking but people do walk around looking for bikes that aren't locked and then nick them.

even the City of Copenhagen will tell you that most thefts are committed by regular citizens who need a bike right then and there.