GEICO entered the MA private passenger auto insurance market and wrote
its first policy on Monday, May 18, 2009. As soon as we were permitted by the
Division of Insurance to do so, MAIA obtained a copy of the filing — as we do
with every company filing — and began the tedious task of reviewing the forms,
endorsements and rules.
On “launch day,” your editor obtained a quote from the GEICO website. The
good news is that is was NOT cheaper! It was difficult to determine exactly how much MORE expensive the GEICO policy was because the quote included a $100 PIP deductible (??), NO Waiver of Deductible, NO Medical Payments and NO Substitute Transportation.
Our review of their filing revealed some interesting changes. GEICO has
made a number of changes to the Massachusetts Auto Policy (MAP). Most
notable is that the definition of YOUR AUTO does not include a motorcycle. In
addition, the following sentence has been added to the Trailer definition: “The
trailer must be pulled by your auto.”
GEICO has added the following exclusion to Part 4. Damage to Someone
Else’s Property: “In addition to the above exclusion for the business or selling,
servicing, repairing or parking autos, while anyone is using a vehicle in the
course of any business. This exclusion also applies to private passenger autos,
pick-up trucks, vans, and similar vehicles used for the delivery or transportation of goods or materials unless such use is incidental to your business of installing, maintaining, or repairing furnishings or equipment.”
Interestingly, the exception for delivery or transportation of goods which is incidental to your business of installing, maintaining, or repairing furnishing or equipment above seems to conflict with the second part of GEICO’s private passenger automobile definition in Rule PPA-01: B. utility vehicle of the pick-up, panel or van body type with a gross vehicle weight of 15,000 pounds or less, that is not used as a public or livery conveyance for passengers, but rather is used for personal and family pleasure, commuting and/or business purposes. A utility vehicle that is customarily used for wholesale or retail delivery or commercial transportation of property is excluded from the private passenger automobile definition.
GEICO has added the following language to Part 7. Collision, Part 8. Limited
Collision and Part 9. Comprehensive: “The cost to physically repair the auto is
limited to the prevailing competitive price, which is the price we can secure
from a competent repair facility conveniently located to you …”
GEICO has replaced Part 10. Substitute Transportation with Rental
Reimbursement and has defined when reimbursement of rental expenses ends:
“Reimbursement for rental charges and transportation expenses shall end the
earliest of when your auto has been: 1. Returned to you; 2. Repaired;
3. Replaced; or 4. If your auto is deemed by us to be a total loss, then seventy
two (72) hours after we pay the applicable limit of liability under Part 7, Part 8
or Part 9.
GEICO has replaced Towing and Labor with Part 11. Emergency Road Service. We have included the complete text of this new coverage in our online GEICO Executive Summary.
GEICO has made changes in the Cancellation and Renewal section of the policy. The first two reasons for cancellation of the entire policy in the Seventh and Eighth Edition MAP were retained; however, the following reasons were either replaced or added:
3. There is a suspension or revocation during the policy period of the operator’s license or motor vehicle registration of you or any other person residing in the same household as you and who usually operates a motor vehicle insured under the policy.
4. You fail to comply with a request for a motor vehicle safety inspection test for a vehicle that was previously totaled in a prior accident.
5. Your failure to complete and furnish us with a renewal application on a form prescribed by the Commissioner at least 30 days before the expiration of the previous policy period.
GEICO also added the following reasons for cancellation:
�� If the driver’s license or auto registration of anyone residing in your household who usually
operates your auto has been under suspension or revocation during the policy period, we may
suspend coverage for that person under any of the Optional Insurance Parts of the policy. We may also reduce the limits for that person under Bodily Injury Caused By An Uninsured Auto and Damage to Someone Else’s Property (Parts 3 and 4) to the minimum limits we are required to sell.
�� We can cancel Emergency Road Service (Part 11) for reasons other than those listed above if we do so within the first 90 days of the policy period.
�� We can cancel, for reasons other than those listed above if we do so within the first 90 days of the policy period, coverage limits which are higher than the limits we are required by law to sell you and any coverage designed to reduce the deductibles set by law.
�� Under the automatic policy termination clause, GEICO has removed the provision that the policy automatically terminates 30 days after you sell your vehicle and do not register another, leaving only the provision that your policy terminates automatically when you sell your auto and do not register another auto.
We are concerned that the GEICO website and all applications and questionnaires improperly require the applicant to submit the date of birth, sex and marital status of all drivers. We will express our concerns about this and other issues to the Commissioner of Insurance.
Some other random items contained in GEICO’s manual of rules include:
1. All cancellations and changes are pro-rata.
2. All coverages except Comprehensive can be suspended by the insured. Obviously, we are concerned about whether GEICO plans to report this to the RMV.
3. Rounding is to the nearest whole penny.
4. Under Driver Definitions, a “rated driver” is “any licensed driver listed on a policy who is not classified as cancelled, excluded, deceased, deployed, having other insurance, or having a learner’s permit.
5. The operator assignment rule provides:
�� Unless otherwise noted, the driver who primarily operates the automobile will be assigned to that auto.
�� Active military are not considered for assignment unless they customarily drives the auto.
�� Inexperienced drivers more than 100 miles away attending a recognized college or educational institution will not be rated unless they customarily drives the auto.
�� When a vehicle is used by both an experienced and an inexperienced operator, the inexperienced operator will be assigned to that vehicle if that is the vehicle the inexperienced driver primarily operates.
�� When there are more vehicles than drivers, excess vehicles will be assigned Class 15 provided that there is a Class 15 driver listed on the policy and all listed drivers have 6 or more years
experience. If there are no Class 15 drivers, Class 10 will apply to the excess vehicles.
�� A vehicle will be rated with the merit points from the operator assigned to that vehicle. Merit points for unassigned Rated Drivers are assigned to the car they operator the most. These merit points are added to the points from the assigned driver.
�� GEICO obtains merit rating information: the company’s own records, motor vehicle records,
applicant’s statements or insured’s statement on self-reporting forms, C.L.U.E., and current
carrier.
�� The GEICO plan includes a 5-year experience period—6 if earliest year is clean
�� Major and Minor accidents are defined the same as 2006 Plan
�� Major Violations include: Driving to Endanger or Reckless Driving; Leaving Scene of Accident
after Property Damage or Personal Injury and Death; Liquor and Narcotics, Operating Under the Influence; Liquor and Narcotics, Operating Under the Influence of and Reckless Operation Causing Serious Injury; Operating after Revocation of License; Operating after Suspension of Drivers License; Refusing to Stop for Officer; Vehicular Homicide; Manslaughter (only if by Motor Vehicle). Out-of-State Major Incidents: Operating under the influence of Liquor and/or narcotics; Vehicular Homicide. Additional Incidents (on or after 10/28/2005: OUI while License Suspended for OUI; Child endangerment while OUI; Manslaughter while OUI.
Additional Incidents (after 1/1/2006):
Permit Unlicensed Suspended Operator of Motor Vehicle; Permit Operation Without Ignition
Interlock; Operate Without Ignition Interlock; Tamper with Ignition Interlock; Bypass Ignition
Interlock for another. All other traffic convictions are minor violations.
�� GEICO’s merit rating plan also includes the following: “Convictions include those violations for
which the applicant or any Rated Driver of the vehicle has been convicted or paid a fine.
Convictions also include violations for which there have been a forfeiture of bail or collateral, a
plea of nolo contendere, or a prayer for judgment continued.”
�� Merit Point Calculation follows the 2006 Plan.
�� Finally, GEICO uses following characteristics: cancellation notices, convictions, current insurance status, days quoted in advance of current policy expiration, lending losses (accident while operated by unlisted driver), length of current residence, negligent accidents, non-negligent accidents, number of drivers, number of drivers added, number of vehicles, number of vehicles added, prior limits of liability, reissues, suspensions, theft/vandalism claims, years insured with current insurer, years licensed, and years with GEICO.
Feel free to visit massagent.com to review the entire GEICO filing or the filing of any other MA auto carrier. As always, you may contact Donna McKenna or Kathy Cormier by phone at 800.974.9312 or 508.634.3900 or by email at dmckenna@massagent.com or kcormier@massagent.com.
Tuesday, June 2, 2009
Friday, May 29, 2009
Progressive Agrees to Pay Massachusetts Fine
Progressive Direct Insurance Co., which has long compared its rates to competitors, agreed to pay the state $120,000 to settle charges that it inflated the rates for rival companies, Massachusetts Attorney General Martha Coakley announced today.
Specifically, Coakley's office accused Ohio-based Progressive, the nation's fourth largest automobile insurer, of inaccurately comparing its six-month rates to the 12-month rates offered by other companies, such as Arbella Mutual, Liberty Mutual, and Commerce Insurance. Progressive inaccurately listed all the rates on its web site as six-month prices.
Progressive, which started offering policies in Massachusetts on May 1, 2008, stopped quoting rivals' rates on its web site and through its call center late last year, and notified Coakley's office about the mistake.
“For competition to truly work in Massachusetts, consumers must be able to easily access accurate information about rates from insurance companies,” Coakley said. “Progressive’s failure to provide correct comparison quotes harmed consumers and harmed Massachusetts’ ability to introduce a competitive system in automobile insurance.”
In addition, Coakley's office said Progressive failed to follow its own official rate practices, filed with the state's Division of Insurance, by charging consumer to list additional drivers on their policies who already carried their own insurance. Progressive agreed to reimburse drivers who were improperly charged.
Coakley's office also complained that Progressive frequently failed to notify customers' former insurer when a customer switched auto insurance companies. That in turn led some insurers to cancel customers' policies for nonpayment - instead of just closing the accounts when customers switched to Progressive - potentially hurting customers' credit scores. Progressive agreed to help any customers who were affected.
Progressive spokeswoman Cristy Cote acknowledged the company mistakenly calculated the rates for some competitors when it began offering insurance in Massachusetts last May.
But the company noted that it shut down the service and notified state regulators and competitors after it discovered the errors. It also said it offered to pay the difference for customers who bought its policy when a competitor actually offered a lower rate, provided the customer wanted to switch to the other firm. The company said it also cooperated with Coakley's probe into the other issues.
"We understand that the attorney general’s role is to protect consumers and we wholeheartedly support that goal," Cote said in a written statement. "We are glad to put this matter behind us."
(By Todd Wallack, Globe staff)
Specifically, Coakley's office accused Ohio-based Progressive, the nation's fourth largest automobile insurer, of inaccurately comparing its six-month rates to the 12-month rates offered by other companies, such as Arbella Mutual, Liberty Mutual, and Commerce Insurance. Progressive inaccurately listed all the rates on its web site as six-month prices.
Progressive, which started offering policies in Massachusetts on May 1, 2008, stopped quoting rivals' rates on its web site and through its call center late last year, and notified Coakley's office about the mistake.
“For competition to truly work in Massachusetts, consumers must be able to easily access accurate information about rates from insurance companies,” Coakley said. “Progressive’s failure to provide correct comparison quotes harmed consumers and harmed Massachusetts’ ability to introduce a competitive system in automobile insurance.”
In addition, Coakley's office said Progressive failed to follow its own official rate practices, filed with the state's Division of Insurance, by charging consumer to list additional drivers on their policies who already carried their own insurance. Progressive agreed to reimburse drivers who were improperly charged.
Coakley's office also complained that Progressive frequently failed to notify customers' former insurer when a customer switched auto insurance companies. That in turn led some insurers to cancel customers' policies for nonpayment - instead of just closing the accounts when customers switched to Progressive - potentially hurting customers' credit scores. Progressive agreed to help any customers who were affected.
Progressive spokeswoman Cristy Cote acknowledged the company mistakenly calculated the rates for some competitors when it began offering insurance in Massachusetts last May.
But the company noted that it shut down the service and notified state regulators and competitors after it discovered the errors. It also said it offered to pay the difference for customers who bought its policy when a competitor actually offered a lower rate, provided the customer wanted to switch to the other firm. The company said it also cooperated with Coakley's probe into the other issues.
"We understand that the attorney general’s role is to protect consumers and we wholeheartedly support that goal," Cote said in a written statement. "We are glad to put this matter behind us."
(By Todd Wallack, Globe staff)
Wednesday, May 27, 2009
Massachusetts Senate Budget Bans Texting while Driving
The Massachusetts Senate approved an amendment banning all Internet use while driving as part of its version of the state's upcoming budget.
Drivers would be banned from sending text messages, e-mailing or reading the Internet while behind the wheel under the terms of the budget approved late Thursday night.
Senators stopped short of requiring handsfree devices for talking on a cell phone.
Bus, train, trolley and other public transit drivers would be banned from even holding a cell phone while driving. They could only carry one for emergency purposes.
Drivers would face a $75 fine and an insurance surcharge for violations. Transit drivers would face a $500 fine.
"We have a whole generation of drivers who think it's OK to text while driving. This is designed to send a message that it's not,'' said Sen. Steven Baddour, D-Methuen, co-chairman of the Joint Committee on Transportation and a co-sponsor of the amendment.
The amendment passed a day after an 18-year-old Central Catholic senior from Methuen was killed in a single-car accident as she drove to her high school for pre-graduation festivities. Police are investigating whether Rebecca Solomon was texting at the time.
The move also follows an MBTA Green Line accident in which a driver crashed his trolley into another, allegedly while sending a text message to his girlfriend.
The $27.35 billion budget now moves to a House-Senate conference committee.
Drivers would be banned from sending text messages, e-mailing or reading the Internet while behind the wheel under the terms of the budget approved late Thursday night.
Senators stopped short of requiring handsfree devices for talking on a cell phone.
Bus, train, trolley and other public transit drivers would be banned from even holding a cell phone while driving. They could only carry one for emergency purposes.
Drivers would face a $75 fine and an insurance surcharge for violations. Transit drivers would face a $500 fine.
"We have a whole generation of drivers who think it's OK to text while driving. This is designed to send a message that it's not,'' said Sen. Steven Baddour, D-Methuen, co-chairman of the Joint Committee on Transportation and a co-sponsor of the amendment.
The amendment passed a day after an 18-year-old Central Catholic senior from Methuen was killed in a single-car accident as she drove to her high school for pre-graduation festivities. Police are investigating whether Rebecca Solomon was texting at the time.
The move also follows an MBTA Green Line accident in which a driver crashed his trolley into another, allegedly while sending a text message to his girlfriend.
The $27.35 billion budget now moves to a House-Senate conference committee.
Friday, May 8, 2009
Technology Helps Parents Monitor Teen Drivers
RALEIGH (WTVD) -- A car that can't go faster than 80 mph may be a good thing for some, especially parents.
The new technology from Ford is called MyKey. The idea is to allow parents to set limits on teenage drivers.
It won't be available to the public until later this year, but ABC11's Tim Nelson was able to test it.
Each vehicle equipped with MyKey comes with two sets of keys. The goal is simple, according to David Bass who drives around the Triangle promoting MyKey.
"[It] allows the parent to have peace of mind as the teenage driver hits the road," Bass said.
The device still allows young drivers some freedom through settings that are controlled by parents.
Parents can use what is called the administrator key to program desired settings.
The main setting is speed. There is a top speed of 80 mph. Ford said it considered a lower max, but "On certain roadways you have to keep up with traffic," Bass explained. "That if you're going a little slower than that, that could also create a safety, hazard, so 80 is the maximum."
But other speeds can cause an alert. A chime can be set to go off when 45, 55 and 65 mph is reached.
And there's more. Another setting can make sure a driver doesn't do certain things behind the wheel. "This setting allows on or off to make sure the teenage driver doesn't spin the wheels, do doughnuts with the car," Bass said.
Once the desired settings are saved, the parent keeps the administrative key and the teen driver gets the MyKey.
ABC11 tested it and as we approached 80, we received a message that we were near top speed and would not be able to go faster.
Another feature of the MyKey technology deals with the radio. If somebody has their seatbelt off, it won't play. But plug the belt back in, and you get your tunes back.
This will allow teen to drive with their friends and listen to music, but with limits.
Ford's research shows 75 percent of parents like the MyKey idea and 67 percent of teens don't like it.
It debuts in the 2010 Ford Focus, which is set to hit car lots later this year. Then the technology will move into other Ford and Lincoln-Mercury cars.
The new technology from Ford is called MyKey. The idea is to allow parents to set limits on teenage drivers.
It won't be available to the public until later this year, but ABC11's Tim Nelson was able to test it.
Each vehicle equipped with MyKey comes with two sets of keys. The goal is simple, according to David Bass who drives around the Triangle promoting MyKey.
"[It] allows the parent to have peace of mind as the teenage driver hits the road," Bass said.
The device still allows young drivers some freedom through settings that are controlled by parents.
Parents can use what is called the administrator key to program desired settings.
The main setting is speed. There is a top speed of 80 mph. Ford said it considered a lower max, but "On certain roadways you have to keep up with traffic," Bass explained. "That if you're going a little slower than that, that could also create a safety, hazard, so 80 is the maximum."
But other speeds can cause an alert. A chime can be set to go off when 45, 55 and 65 mph is reached.
And there's more. Another setting can make sure a driver doesn't do certain things behind the wheel. "This setting allows on or off to make sure the teenage driver doesn't spin the wheels, do doughnuts with the car," Bass said.
Once the desired settings are saved, the parent keeps the administrative key and the teen driver gets the MyKey.
ABC11 tested it and as we approached 80, we received a message that we were near top speed and would not be able to go faster.
Another feature of the MyKey technology deals with the radio. If somebody has their seatbelt off, it won't play. But plug the belt back in, and you get your tunes back.
This will allow teen to drive with their friends and listen to music, but with limits.
Ford's research shows 75 percent of parents like the MyKey idea and 67 percent of teens don't like it.
It debuts in the 2010 Ford Focus, which is set to hit car lots later this year. Then the technology will move into other Ford and Lincoln-Mercury cars.
Wednesday, April 29, 2009
Competition Still Reigns In Healthy Personal Automobile Insurance Market
The personal auto market remains competitive across the country, even as rates begin to creep upward. Experts in the field said they expect competition to continue throughout the year and into 2010.
As with most other industries, the economy continues to be a factor in the personal auto market. Most observers said this is primarily being seen in the spending habits of consumers, as they forego the purchase of a new car or seek to save on insurance coverage.
In general, though, those in the industry said they have not seen any dramatic change in the marketplace compared to a year ago, and they predict only minor tweaking going forward, rather than any wholesale market shifts.
Insurers are seeing some deterioration in performance in terms of combined ratio, according to Robert Hartwig, president of the Insurance Information Institute, but “not extraordinarily so.” The deterioration, he said, is due to rising claims costs, which in some states has more than offset declining accident frequency.
Accident frequency is down, according to Mr. Hartwig, because people are driving less. Initially, he said this was due to high gas prices. But in the last six-to-nine months, Mr. Hartwig said the economy is the reason.
The economy has also caused consumers to stop buying as many new vehicles. Mr. Hartwig said growth in the personal auto insurance market will slow because the number of new vehicles sold is falling and there are more cars being taken off the road than put on.
Derek Ross, a spokesperson for the Independent Insurance Agents and Brokers of the West and vice president of CM Meirs Co., an independent agency in Woodland Hills, Calif., said he, too, has seen a reduced number of vehicles on the road. At the same time, he said, consumers who are buying are not replacing their old vehicles with vehicles of the same quality. “So we’re seeing a lot of downsizing in the quality” of the types of vehicles on the road.
Speaking to the declining number of vehicles on the road, Mr. Hartwig said, “This has not happened in decades.” He noted there may be a “pent-up demand” for new cars when the economy turns, and he added that insurers will be able to meet that demand when the time comes.
But while experts agree there are fewer new car purchases, not all agree that this necessarily translates to fewer cars on the road. Richard Luedke, spokesperson for State Farm, said people are not buying as many new vehicles, but they are holding onto the cars they have longer, so there is essentially the same number of cars to insure.
Agents have reported some changes in purchasing decisions among consumers because of the economy. James Berliner, vice president of the Professional Insurance Agents of Connecticut and president of Berliner-Gelfand & Co. Inc., a Bridgeport, Conn.-based agency, said consumers are shopping more for insurance and are paying more attention to pricing today.
Paul Monacelli, past president of PIA New Jersey and CEO of Cedar Knolls, N.J.-based ADP/Statewide Insurance Agencies, which writes personal auto in New Jersey, Pennsylvania and New York, said customers are also looking to reduce coverages to save money. They are taking higher deductibles on physical damage, he said.
Mr. Monacelli said he has responded to the shift in consumer buying habits by having longer conversations with customers to ensure they still have enough insurance to protect their assets.
Mr. Ross said he reviews customers who ask questions about reducing costs as if they were new submissions. He said he speaks to these customers about saving money by bundling coverages together and taking advantage of credits for certain levels of education achieved, or certain professions or professional designations.
Insurers are applying these types of credits more liberally than they used to, according to D. Scott Liebert, president of PIA New York and chairman of CLG Insurance, an agency in Nanuet, N.Y. For example, he said he is seeing companies apply credits for renewing coverage early, taking higher limits and owning a home.
Even with consumers shopping more and companies adjusting to compete for business, Mr. Luedke said he has not seen a change in the number of people canceling policies or letting coverage lapse. The lapse and cancellation rate, he said, is about the same it has been for two-to-four years.
Fraud is also a concern for insurers. Mr. Hartwig said there is anecdotal evidence that, because people are struggling financially today, fraud “give up” schemes are on the rise.
Auto theft is also believed to be on the rise, Mr. Hartwig said, particularly in border cities in the United States. He said problems associated with the drug trade in Mexico may be a reason for this rather than the economy.
Despite the economy looming, professionals in this field agreed the personal auto market is still healthy and competitive, with prices remaining relatively stable for the foreseeable future.
Mr. Hartwig characterized the market as “extremely competitive,” and noted a healthy personal auto market is important to the industry’s overall health.
“The number of carriers in some previously difficult-to-operate states is increasing,” such as Massachusetts, Mr. Hartwig said, and residual markets are “virtually depopulated” in many states.
Private passenger auto, he said, currently accounts for 34 percent of all premiums written in United States.
Mr. Monacelli said the market in areas where he writes coverage is “stabilizing.” Up until this year, he said, companies were doing whatever they could to get market share. “They were appointing a lot of agents; sometimes the quality of those agents didn’t meet the profile the companies had in the past,” Mr. Monacelli said.
Companies lived by the mantra that there is a price for every risk, Mr. Monacelli continued, but some of those risks were not necessarily being written at the right prices, casing a deterioration in combined ratios.
The newness of multivariate rating also led to some inappropriate pricing, Mr. Monacelli said. But companies have more experience with this type of rating now, he added, so rates should stabilize some.
Mr. Berliner said insurance company field representatives have warned him that there will be slight rate adjustments upward, but he said this is only being seen in certain regions, not across the board. While other lines are seeing pressure to increase pricing, this has not impacted personal auto, he said.
Rates have been essentially flat according to what Mr. Ross has seen, although he said there has been “some rumblings” about rates beginning to increase. He said he expects some slight increases over the next six months but does not see any landscape-change in the personal auto market.
“Any major changes will happen in baby steps,” he said.
Speaking to State Farm’s experience, Mr. Luedke said rates increased, but only by just under 1 percent.
Mr. Hartwig said the slight adjustment upward in rates is a response to “some underlying increases in costs.” He cited higher medical care costs as an example.
On the regulatory and legislative fronts, Mr. Hartwig said the possibility of some form of federal regulation stands above all other issues. Questions such as whether federal regulation will only be seen as a “systemic risk regulator,” or whether the states or feds will regulate rates, or whether federal regulation will be optional have yet to be answered, he said.
It is also unknown how such changes will affect big insurers versus small insurers, he noted.
Aside from federal regulation, credit scoring remains a “perennial concern,” Mr. Hartwig said. Some states are again talking about bans or restrictions.
Mr. Berliner said a bill has been introduced in his state of Connecticut to ban credit scoring.
Ultimately, Mr. Hartwig said it is incumbent on insurers to make the case for credit scoring and to show that banning the practice will result in an inferior rating system.
The personal auto market remains competitive across the country, even as rates begin to creep upward. Experts in the field said they expect competition to continue throughout the year and into 2010.
As with most other industries, the economy continues to be a factor in the personal auto market. Most observers said this is primarily being seen in the spending habits of consumers, as they forego the purchase of a new car or seek to save on insurance coverage.
In general, though, those in the industry said they have not seen any dramatic change in the marketplace compared to a year ago, and they predict only minor tweaking going forward, rather than any wholesale market shifts.
Insurers are seeing some deterioration in performance in terms of combined ratio, according to Robert Hartwig, president of the Insurance Information Institute, but “not extraordinarily so.” The deterioration, he said, is due to rising claims costs, which in some states has more than offset declining accident frequency.
Accident frequency is down, according to Mr. Hartwig, because people are driving less. Initially, he said this was due to high gas prices. But in the last six-to-nine months, Mr. Hartwig said the economy is the reason.
The economy has also caused consumers to stop buying as many new vehicles. Mr. Hartwig said growth in the personal auto insurance market will slow because the number of new vehicles sold is falling and there are more cars being taken off the road than put on.
Derek Ross, a spokesperson for the Independent Insurance Agents and Brokers of the West and vice president of CM Meirs Co., an independent agency in Woodland Hills, Calif., said he, too, has seen a reduced number of vehicles on the road. At the same time, he said, consumers who are buying are not replacing their old vehicles with vehicles of the same quality. “So we’re seeing a lot of downsizing in the quality” of the types of vehicles on the road.
Speaking to the declining number of vehicles on the road, Mr. Hartwig said, “This has not happened in decades.” He noted there may be a “pent-up demand” for new cars when the economy turns, and he added that insurers will be able to meet that demand when the time comes.
But while experts agree there are fewer new car purchases, not all agree that this necessarily translates to fewer cars on the road. Richard Luedke, spokesperson for State Farm, said people are not buying as many new vehicles, but they are holding onto the cars they have longer, so there is essentially the same number of cars to insure.
Agents have reported some changes in purchasing decisions among consumers because of the economy. James Berliner, vice president of the Professional Insurance Agents of Connecticut and president of Berliner-Gelfand & Co. Inc., a Bridgeport, Conn.-based agency, said consumers are shopping more for insurance and are paying more attention to pricing today.
Paul Monacelli, past president of PIA New Jersey and CEO of Cedar Knolls, N.J.-based ADP/Statewide Insurance Agencies, which writes personal auto in New Jersey, Pennsylvania and New York, said customers are also looking to reduce coverages to save money. They are taking higher deductibles on physical damage, he said.
Mr. Monacelli said he has responded to the shift in consumer buying habits by having longer conversations with customers to ensure they still have enough insurance to protect their assets.
Mr. Ross said he reviews customers who ask questions about reducing costs as if they were new submissions. He said he speaks to these customers about saving money by bundling coverages together and taking advantage of credits for certain levels of education achieved, or certain professions or professional designations.
Insurers are applying these types of credits more liberally than they used to, according to D. Scott Liebert, president of PIA New York and chairman of CLG Insurance, an agency in Nanuet, N.Y. For example, he said he is seeing companies apply credits for renewing coverage early, taking higher limits and owning a home.
Even with consumers shopping more and companies adjusting to compete for business, Mr. Luedke said he has not seen a change in the number of people canceling policies or letting coverage lapse. The lapse and cancellation rate, he said, is about the same it has been for two-to-four years.
Fraud is also a concern for insurers. Mr. Hartwig said there is anecdotal evidence that, because people are struggling financially today, fraud “give up” schemes are on the rise.
Auto theft is also believed to be on the rise, Mr. Hartwig said, particularly in border cities in the United States. He said problems associated with the drug trade in Mexico may be a reason for this rather than the economy.
Despite the economy looming, professionals in this field agreed the personal auto market is still healthy and competitive, with prices remaining relatively stable for the foreseeable future.
Mr. Hartwig characterized the market as “extremely competitive,” and noted a healthy personal auto market is important to the industry’s overall health.
“The number of carriers in some previously difficult-to-operate states is increasing,” such as Massachusetts, Mr. Hartwig said, and residual markets are “virtually depopulated” in many states.
Private passenger auto, he said, currently accounts for 34 percent of all premiums written in United States.
Mr. Monacelli said the market in areas where he writes coverage is “stabilizing.” Up until this year, he said, companies were doing whatever they could to get market share. “They were appointing a lot of agents; sometimes the quality of those agents didn’t meet the profile the companies had in the past,” Mr. Monacelli said.
Companies lived by the mantra that there is a price for every risk, Mr. Monacelli continued, but some of those risks were not necessarily being written at the right prices, casing a deterioration in combined ratios.
The newness of multivariate rating also led to some inappropriate pricing, Mr. Monacelli said. But companies have more experience with this type of rating now, he added, so rates should stabilize some.
Mr. Berliner said insurance company field representatives have warned him that there will be slight rate adjustments upward, but he said this is only being seen in certain regions, not across the board. While other lines are seeing pressure to increase pricing, this has not impacted personal auto, he said.
Rates have been essentially flat according to what Mr. Ross has seen, although he said there has been “some rumblings” about rates beginning to increase. He said he expects some slight increases over the next six months but does not see any landscape-change in the personal auto market.
“Any major changes will happen in baby steps,” he said.
Speaking to State Farm’s experience, Mr. Luedke said rates increased, but only by just under 1 percent.
Mr. Hartwig said the slight adjustment upward in rates is a response to “some underlying increases in costs.” He cited higher medical care costs as an example.
On the regulatory and legislative fronts, Mr. Hartwig said the possibility of some form of federal regulation stands above all other issues. Questions such as whether federal regulation will only be seen as a “systemic risk regulator,” or whether the states or feds will regulate rates, or whether federal regulation will be optional have yet to be answered, he said.
It is also unknown how such changes will affect big insurers versus small insurers, he noted.
Aside from federal regulation, credit scoring remains a “perennial concern,” Mr. Hartwig said. Some states are again talking about bans or restrictions.
Mr. Berliner said a bill has been introduced in his state of Connecticut to ban credit scoring.
Ultimately, Mr. Hartwig said it is incumbent on insurers to make the case for credit scoring and to show that banning the practice will result in an inferior rating system.
As with most other industries, the economy continues to be a factor in the personal auto market. Most observers said this is primarily being seen in the spending habits of consumers, as they forego the purchase of a new car or seek to save on insurance coverage.
In general, though, those in the industry said they have not seen any dramatic change in the marketplace compared to a year ago, and they predict only minor tweaking going forward, rather than any wholesale market shifts.
Insurers are seeing some deterioration in performance in terms of combined ratio, according to Robert Hartwig, president of the Insurance Information Institute, but “not extraordinarily so.” The deterioration, he said, is due to rising claims costs, which in some states has more than offset declining accident frequency.
Accident frequency is down, according to Mr. Hartwig, because people are driving less. Initially, he said this was due to high gas prices. But in the last six-to-nine months, Mr. Hartwig said the economy is the reason.
The economy has also caused consumers to stop buying as many new vehicles. Mr. Hartwig said growth in the personal auto insurance market will slow because the number of new vehicles sold is falling and there are more cars being taken off the road than put on.
Derek Ross, a spokesperson for the Independent Insurance Agents and Brokers of the West and vice president of CM Meirs Co., an independent agency in Woodland Hills, Calif., said he, too, has seen a reduced number of vehicles on the road. At the same time, he said, consumers who are buying are not replacing their old vehicles with vehicles of the same quality. “So we’re seeing a lot of downsizing in the quality” of the types of vehicles on the road.
Speaking to the declining number of vehicles on the road, Mr. Hartwig said, “This has not happened in decades.” He noted there may be a “pent-up demand” for new cars when the economy turns, and he added that insurers will be able to meet that demand when the time comes.
But while experts agree there are fewer new car purchases, not all agree that this necessarily translates to fewer cars on the road. Richard Luedke, spokesperson for State Farm, said people are not buying as many new vehicles, but they are holding onto the cars they have longer, so there is essentially the same number of cars to insure.
Agents have reported some changes in purchasing decisions among consumers because of the economy. James Berliner, vice president of the Professional Insurance Agents of Connecticut and president of Berliner-Gelfand & Co. Inc., a Bridgeport, Conn.-based agency, said consumers are shopping more for insurance and are paying more attention to pricing today.
Paul Monacelli, past president of PIA New Jersey and CEO of Cedar Knolls, N.J.-based ADP/Statewide Insurance Agencies, which writes personal auto in New Jersey, Pennsylvania and New York, said customers are also looking to reduce coverages to save money. They are taking higher deductibles on physical damage, he said.
Mr. Monacelli said he has responded to the shift in consumer buying habits by having longer conversations with customers to ensure they still have enough insurance to protect their assets.
Mr. Ross said he reviews customers who ask questions about reducing costs as if they were new submissions. He said he speaks to these customers about saving money by bundling coverages together and taking advantage of credits for certain levels of education achieved, or certain professions or professional designations.
Insurers are applying these types of credits more liberally than they used to, according to D. Scott Liebert, president of PIA New York and chairman of CLG Insurance, an agency in Nanuet, N.Y. For example, he said he is seeing companies apply credits for renewing coverage early, taking higher limits and owning a home.
Even with consumers shopping more and companies adjusting to compete for business, Mr. Luedke said he has not seen a change in the number of people canceling policies or letting coverage lapse. The lapse and cancellation rate, he said, is about the same it has been for two-to-four years.
Fraud is also a concern for insurers. Mr. Hartwig said there is anecdotal evidence that, because people are struggling financially today, fraud “give up” schemes are on the rise.
Auto theft is also believed to be on the rise, Mr. Hartwig said, particularly in border cities in the United States. He said problems associated with the drug trade in Mexico may be a reason for this rather than the economy.
Despite the economy looming, professionals in this field agreed the personal auto market is still healthy and competitive, with prices remaining relatively stable for the foreseeable future.
Mr. Hartwig characterized the market as “extremely competitive,” and noted a healthy personal auto market is important to the industry’s overall health.
“The number of carriers in some previously difficult-to-operate states is increasing,” such as Massachusetts, Mr. Hartwig said, and residual markets are “virtually depopulated” in many states.
Private passenger auto, he said, currently accounts for 34 percent of all premiums written in United States.
Mr. Monacelli said the market in areas where he writes coverage is “stabilizing.” Up until this year, he said, companies were doing whatever they could to get market share. “They were appointing a lot of agents; sometimes the quality of those agents didn’t meet the profile the companies had in the past,” Mr. Monacelli said.
Companies lived by the mantra that there is a price for every risk, Mr. Monacelli continued, but some of those risks were not necessarily being written at the right prices, casing a deterioration in combined ratios.
The newness of multivariate rating also led to some inappropriate pricing, Mr. Monacelli said. But companies have more experience with this type of rating now, he added, so rates should stabilize some.
Mr. Berliner said insurance company field representatives have warned him that there will be slight rate adjustments upward, but he said this is only being seen in certain regions, not across the board. While other lines are seeing pressure to increase pricing, this has not impacted personal auto, he said.
Rates have been essentially flat according to what Mr. Ross has seen, although he said there has been “some rumblings” about rates beginning to increase. He said he expects some slight increases over the next six months but does not see any landscape-change in the personal auto market.
“Any major changes will happen in baby steps,” he said.
Speaking to State Farm’s experience, Mr. Luedke said rates increased, but only by just under 1 percent.
Mr. Hartwig said the slight adjustment upward in rates is a response to “some underlying increases in costs.” He cited higher medical care costs as an example.
On the regulatory and legislative fronts, Mr. Hartwig said the possibility of some form of federal regulation stands above all other issues. Questions such as whether federal regulation will only be seen as a “systemic risk regulator,” or whether the states or feds will regulate rates, or whether federal regulation will be optional have yet to be answered, he said.
It is also unknown how such changes will affect big insurers versus small insurers, he noted.
Aside from federal regulation, credit scoring remains a “perennial concern,” Mr. Hartwig said. Some states are again talking about bans or restrictions.
Mr. Berliner said a bill has been introduced in his state of Connecticut to ban credit scoring.
Ultimately, Mr. Hartwig said it is incumbent on insurers to make the case for credit scoring and to show that banning the practice will result in an inferior rating system.
The personal auto market remains competitive across the country, even as rates begin to creep upward. Experts in the field said they expect competition to continue throughout the year and into 2010.
As with most other industries, the economy continues to be a factor in the personal auto market. Most observers said this is primarily being seen in the spending habits of consumers, as they forego the purchase of a new car or seek to save on insurance coverage.
In general, though, those in the industry said they have not seen any dramatic change in the marketplace compared to a year ago, and they predict only minor tweaking going forward, rather than any wholesale market shifts.
Insurers are seeing some deterioration in performance in terms of combined ratio, according to Robert Hartwig, president of the Insurance Information Institute, but “not extraordinarily so.” The deterioration, he said, is due to rising claims costs, which in some states has more than offset declining accident frequency.
Accident frequency is down, according to Mr. Hartwig, because people are driving less. Initially, he said this was due to high gas prices. But in the last six-to-nine months, Mr. Hartwig said the economy is the reason.
The economy has also caused consumers to stop buying as many new vehicles. Mr. Hartwig said growth in the personal auto insurance market will slow because the number of new vehicles sold is falling and there are more cars being taken off the road than put on.
Derek Ross, a spokesperson for the Independent Insurance Agents and Brokers of the West and vice president of CM Meirs Co., an independent agency in Woodland Hills, Calif., said he, too, has seen a reduced number of vehicles on the road. At the same time, he said, consumers who are buying are not replacing their old vehicles with vehicles of the same quality. “So we’re seeing a lot of downsizing in the quality” of the types of vehicles on the road.
Speaking to the declining number of vehicles on the road, Mr. Hartwig said, “This has not happened in decades.” He noted there may be a “pent-up demand” for new cars when the economy turns, and he added that insurers will be able to meet that demand when the time comes.
But while experts agree there are fewer new car purchases, not all agree that this necessarily translates to fewer cars on the road. Richard Luedke, spokesperson for State Farm, said people are not buying as many new vehicles, but they are holding onto the cars they have longer, so there is essentially the same number of cars to insure.
Agents have reported some changes in purchasing decisions among consumers because of the economy. James Berliner, vice president of the Professional Insurance Agents of Connecticut and president of Berliner-Gelfand & Co. Inc., a Bridgeport, Conn.-based agency, said consumers are shopping more for insurance and are paying more attention to pricing today.
Paul Monacelli, past president of PIA New Jersey and CEO of Cedar Knolls, N.J.-based ADP/Statewide Insurance Agencies, which writes personal auto in New Jersey, Pennsylvania and New York, said customers are also looking to reduce coverages to save money. They are taking higher deductibles on physical damage, he said.
Mr. Monacelli said he has responded to the shift in consumer buying habits by having longer conversations with customers to ensure they still have enough insurance to protect their assets.
Mr. Ross said he reviews customers who ask questions about reducing costs as if they were new submissions. He said he speaks to these customers about saving money by bundling coverages together and taking advantage of credits for certain levels of education achieved, or certain professions or professional designations.
Insurers are applying these types of credits more liberally than they used to, according to D. Scott Liebert, president of PIA New York and chairman of CLG Insurance, an agency in Nanuet, N.Y. For example, he said he is seeing companies apply credits for renewing coverage early, taking higher limits and owning a home.
Even with consumers shopping more and companies adjusting to compete for business, Mr. Luedke said he has not seen a change in the number of people canceling policies or letting coverage lapse. The lapse and cancellation rate, he said, is about the same it has been for two-to-four years.
Fraud is also a concern for insurers. Mr. Hartwig said there is anecdotal evidence that, because people are struggling financially today, fraud “give up” schemes are on the rise.
Auto theft is also believed to be on the rise, Mr. Hartwig said, particularly in border cities in the United States. He said problems associated with the drug trade in Mexico may be a reason for this rather than the economy.
Despite the economy looming, professionals in this field agreed the personal auto market is still healthy and competitive, with prices remaining relatively stable for the foreseeable future.
Mr. Hartwig characterized the market as “extremely competitive,” and noted a healthy personal auto market is important to the industry’s overall health.
“The number of carriers in some previously difficult-to-operate states is increasing,” such as Massachusetts, Mr. Hartwig said, and residual markets are “virtually depopulated” in many states.
Private passenger auto, he said, currently accounts for 34 percent of all premiums written in United States.
Mr. Monacelli said the market in areas where he writes coverage is “stabilizing.” Up until this year, he said, companies were doing whatever they could to get market share. “They were appointing a lot of agents; sometimes the quality of those agents didn’t meet the profile the companies had in the past,” Mr. Monacelli said.
Companies lived by the mantra that there is a price for every risk, Mr. Monacelli continued, but some of those risks were not necessarily being written at the right prices, casing a deterioration in combined ratios.
The newness of multivariate rating also led to some inappropriate pricing, Mr. Monacelli said. But companies have more experience with this type of rating now, he added, so rates should stabilize some.
Mr. Berliner said insurance company field representatives have warned him that there will be slight rate adjustments upward, but he said this is only being seen in certain regions, not across the board. While other lines are seeing pressure to increase pricing, this has not impacted personal auto, he said.
Rates have been essentially flat according to what Mr. Ross has seen, although he said there has been “some rumblings” about rates beginning to increase. He said he expects some slight increases over the next six months but does not see any landscape-change in the personal auto market.
“Any major changes will happen in baby steps,” he said.
Speaking to State Farm’s experience, Mr. Luedke said rates increased, but only by just under 1 percent.
Mr. Hartwig said the slight adjustment upward in rates is a response to “some underlying increases in costs.” He cited higher medical care costs as an example.
On the regulatory and legislative fronts, Mr. Hartwig said the possibility of some form of federal regulation stands above all other issues. Questions such as whether federal regulation will only be seen as a “systemic risk regulator,” or whether the states or feds will regulate rates, or whether federal regulation will be optional have yet to be answered, he said.
It is also unknown how such changes will affect big insurers versus small insurers, he noted.
Aside from federal regulation, credit scoring remains a “perennial concern,” Mr. Hartwig said. Some states are again talking about bans or restrictions.
Mr. Berliner said a bill has been introduced in his state of Connecticut to ban credit scoring.
Ultimately, Mr. Hartwig said it is incumbent on insurers to make the case for credit scoring and to show that banning the practice will result in an inferior rating system.
Tuesday, April 21, 2009
Auto Insurance Fraud on the Rise, officials say
Investigators know the tricks of insurance fraud trade
Insurance officials say they have noticed an increase in fraud as people become desperate in the tough economy.
By Laura A. Bischoff
Staff Writer
Insurance fraud investigators weren’t born yesterday. They know the difference between when an amateur and a professional thief dumps a car.
The professional removes the global positioning system, airbag, high-end stereo and other valuable parts before setting a stolen car ablaze or rolling it into a pond or lake.
The amateur leaves those items inside the car. And sometimes the rookie makes other mistakes, such as torching the vehicle in view of a surveillance camera, or reporting the car stolen with eyebrows singed.
Joel Demory, fraud chief with the Ohio Department of Insurance, said investigators see plenty of “boneheaded” moves by people looking to dump their cars for insurance payouts.
State insurance officials say they have noticed that insurance fraud, through staged thefts, is on the rise as people become desperate in the troubled economy.
The state fire marshal reports that between 2004 and 2007, Ohio saw a 62.3 percent increase in vehicle arsons.
Other states have reported measurable increases in auto give-ups in recent years. New York reported a 25 percent increase between 2007 and 2008, New Jersey saw a 59 percent increase in suspected vehicle arsons between 2004 and 2007, and California reported a 40 percent increase in vehicle give-ups in fiscal year 2008 compared with fiscal year 2007.
“If it looks like a fake car theft, acts like a fake car theft and quacks like a fake car theft, then it’s probably a fake car theft,” said James Quiggle, spokesman for the Coalition Against Insurance Fraud, a consumer and insurance interest group.
Investigators consider whether the owner was behind on the payments, if they claimed high-end equipment was in the car, whether they recently checked on their insurance coverage, whether the owner has all the keys and if there are signs of forced entry on the car.
They also talk to neighbors and review surveillance camera footage from where a car was reported stolen and where it was found.
Sometimes it can take six months to investigate and prosecute an insurance fraud case, according to Demory.
But an insurance fraud conviction for dumping a car worth more than $5,000 carries a maximum penalty of 18 months in prison and a $5,000 fine in Ohio.
Quiggle said a recent survey found that during the last decade, American’s attitudes toward insurance fraud have become more tolerant. People see bilking big insurance companies out of a few thousand dollars as harmless, he said.
“Morally, these people find it easy to rationalize torching their car, because they don’t view insurance fraud as a real, live crime,” Quiggle said.
“They don’t consider the cost of these crimes are being passed on to all the policyholders in the form of higher premiums.”
Insurance officials say they have noticed an increase in fraud as people become desperate in the tough economy.
By Laura A. Bischoff
Staff Writer
Insurance fraud investigators weren’t born yesterday. They know the difference between when an amateur and a professional thief dumps a car.
The professional removes the global positioning system, airbag, high-end stereo and other valuable parts before setting a stolen car ablaze or rolling it into a pond or lake.
The amateur leaves those items inside the car. And sometimes the rookie makes other mistakes, such as torching the vehicle in view of a surveillance camera, or reporting the car stolen with eyebrows singed.
Joel Demory, fraud chief with the Ohio Department of Insurance, said investigators see plenty of “boneheaded” moves by people looking to dump their cars for insurance payouts.
State insurance officials say they have noticed that insurance fraud, through staged thefts, is on the rise as people become desperate in the troubled economy.
The state fire marshal reports that between 2004 and 2007, Ohio saw a 62.3 percent increase in vehicle arsons.
Other states have reported measurable increases in auto give-ups in recent years. New York reported a 25 percent increase between 2007 and 2008, New Jersey saw a 59 percent increase in suspected vehicle arsons between 2004 and 2007, and California reported a 40 percent increase in vehicle give-ups in fiscal year 2008 compared with fiscal year 2007.
“If it looks like a fake car theft, acts like a fake car theft and quacks like a fake car theft, then it’s probably a fake car theft,” said James Quiggle, spokesman for the Coalition Against Insurance Fraud, a consumer and insurance interest group.
Investigators consider whether the owner was behind on the payments, if they claimed high-end equipment was in the car, whether they recently checked on their insurance coverage, whether the owner has all the keys and if there are signs of forced entry on the car.
They also talk to neighbors and review surveillance camera footage from where a car was reported stolen and where it was found.
Sometimes it can take six months to investigate and prosecute an insurance fraud case, according to Demory.
But an insurance fraud conviction for dumping a car worth more than $5,000 carries a maximum penalty of 18 months in prison and a $5,000 fine in Ohio.
Quiggle said a recent survey found that during the last decade, American’s attitudes toward insurance fraud have become more tolerant. People see bilking big insurance companies out of a few thousand dollars as harmless, he said.
“Morally, these people find it easy to rationalize torching their car, because they don’t view insurance fraud as a real, live crime,” Quiggle said.
“They don’t consider the cost of these crimes are being passed on to all the policyholders in the form of higher premiums.”
Wednesday, April 8, 2009
Mass. Ranks Last Again in US For Use of Seat Belts
By Michael Levenson, Globe Staff | April 7, 2009
Massachusetts ranked last among the states in its rate of seat belt use last year, extending a dismal trend that has prompted renewed calls for a tougher seat belt law.
The rate, 66.8 percent, was down 1.9 percent from 2007 and well below the national average of 83 percent, according to the National Highway Traffic Safety Administration. Massachusetts' rate, which has been last or near last for years, has improved from a rate of 56 percent in 2001.
Massachusetts is one of 22 states that do not allow police officers to stop motorists for not a wearing seat belt. State law allows police to ticket drivers for the offense, but only if the drivers are stopped for another reason first.
Efforts to pass a "primary enforcement" law have repeatedly failed in the Legislature, defeated by critics who argue the law would give police too much power to stop drivers. Some have also raised concerns that minorities would be unfairly targeted.
A "primary enforcement" bill has been filed in the Legislature again this year, but has not gained traction, legislators said. Proponents say the bill will not only save lives, but bring Massachusetts $13.6 million in federal transportation funds if it passes before June 30.
"It's really the only thing that's proven to bring up the usage rate," said Arthur Kinsman of the American Automobile Association of Southern New England. But opponents, like Senator Robert L. Hedlund, say the bill is "an intrusive, big government move."
Hedlund, a Weymouth Republican, said: "Common sense dictates you should wear your seat belt, whether or not there's primary enforcement."
Massachusetts ranked last among the states in its rate of seat belt use last year, extending a dismal trend that has prompted renewed calls for a tougher seat belt law.
The rate, 66.8 percent, was down 1.9 percent from 2007 and well below the national average of 83 percent, according to the National Highway Traffic Safety Administration. Massachusetts' rate, which has been last or near last for years, has improved from a rate of 56 percent in 2001.
Massachusetts is one of 22 states that do not allow police officers to stop motorists for not a wearing seat belt. State law allows police to ticket drivers for the offense, but only if the drivers are stopped for another reason first.
Efforts to pass a "primary enforcement" law have repeatedly failed in the Legislature, defeated by critics who argue the law would give police too much power to stop drivers. Some have also raised concerns that minorities would be unfairly targeted.
A "primary enforcement" bill has been filed in the Legislature again this year, but has not gained traction, legislators said. Proponents say the bill will not only save lives, but bring Massachusetts $13.6 million in federal transportation funds if it passes before June 30.
"It's really the only thing that's proven to bring up the usage rate," said Arthur Kinsman of the American Automobile Association of Southern New England. But opponents, like Senator Robert L. Hedlund, say the bill is "an intrusive, big government move."
Hedlund, a Weymouth Republican, said: "Common sense dictates you should wear your seat belt, whether or not there's primary enforcement."
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