NU Online News Service, Dec. 8, 11:43 a.m. EST
The insurance industry will undergo increasing consolidation as part of the fallout from government intervention and potential tax law changes following the financial crisis, a consulting firm is advising.
And insurance industry stability and certainty may not return for a few years as insurers react to regulatory reform, PricewaterhouseCoopers LLP said.
PwC projects in a report that within five years the industry landscape could look markedly different and Americans may find their insurance policies underwritten by a handful of large, well-capitalized firms that can demonstrate financial strength and economies of scale.
Titled “Emerging from the Storm: The Day After Tomorrow for Insurance,” the PwC analysis outlines nine key developments the firm said are expected to reshape the insurance industry and their strategic implications during the next five years.
The most significant of these developments for U.S. insurers, PwC said, will likely be sweeping regulatory changes resulting from proposed legislation to reform health insurance and increase federal oversight of the insurance and financial industries.
Creation of a Federal Insurance Office could provide federal policymakers with the information and resources to better respond to crises, mitigate systemic risks and help ensure a well-functioning financial system, but it could also lead to dual regulation at both the state and federal levels, according to the report.
Bill Chrnelich, PwC insurance sector partner, said, “Insurers are in the business of managing risk and measuring probability. They don’t like uncertainty, yet they are facing two massive reform initiatives, the outcomes of which are unknown but could alter their destiny.”
He noted, “Some insurers are taking a cautious wait-and-see approach, while others see this period as a once-in-a-generation opportunity to shape their future.”
According to PwC, the insurers most likely to succeed once regulatory changes are enacted are those that closely monitor developments and create business strategies that anticipate the most likely possibilities for reform.
PwC said the U.S. insurance market remains highly fragmented, and there is a strong underlying rationale for consolidation and restructuring, which means merger and acquisition activity may be set to accelerate rapidly.
This could particularly occur, according to the firm, as larger, better-capitalized firms consume smaller firms.
The report said consolidation is expected to help deliver the capital stability and economies of scale that will be important in attracting customers and demonstrating financial strength, not only to ratings agencies but also to third-party distributors whose “ownership of the customer” makes them a key determinant of an insurers’ fate.
PwC found that the faith of investors, who had become accustomed to high yields but were unaware of the related risks, “appears to have given way to shock, disillusionment and caution.”
A pursuit of innovation, said PwC, appears to have been displaced by a focus on stability, risk management and demand for simpler, more straightforward and transparent policies and investment products such as index-linked investments.
As an example of this, the firm mentioned the recent resurgence in demand for whole life insurance.
But it cautioned that the apparent desire for guarantees could create dilemmas for insurance companies that want to scale back such products as they seek to limit risk.
Potentially higher costs of risk and guarantees, along with what may be higher commission payments to distributors, could change product economics, and insurers will need to better understand component costs, pricing and profit profiles, the report advised.
PwC predicted that governments will be looking closely at insurance companies’ tax status as the industry is a major source of potential tax receipts and has moved significant business capacity to other jurisdictions in recent years.
Insurers, PwC said, can expect renewed scrutiny of their tax planning techniques, as well as more stringent requirements for transparency and information exchange relating to clients.
As a result of the financial crisis, the consultants noted, many insurers have been forced to raise prices, restrict the pursuit of new business, or withdraw from high risk and peripheral markets.
It forecasted that as insurers withdraw from some of their geographic markets and scale back particular lines of business, the market shares and opportunities for those that remain could sharply increase, leading to a significant reconfiguration in the list of leading players.
Companies with a better understanding of their risks, said PwC, are likely to be in a stronger position to capitalize on potential openings that less-informed and less-assured competitors may miss.
PwC warned that without an industry consensus on a genuinely relevant, intelligible and comparable basis of accounting and disclosure, insurers may find it increasingly difficult to compete for capital.
Further, with funds constrained, many portfolio investors could simply choose to put their money elsewhere, leaving the insurance industry with major challenges, according to the firm’s analysis.
PwC said in a statement that “it seems imperative that the industry come together to develop a basis of relevant disclosures that reflect the nuances of their business and satisfy analyst and investor demands.”
As the government exerts a stronger influence over the insurance market as a result of bailouts, regulatory reform and greater control over pensions, health care, trade credit and mortgage support, the relationship between the public and private sectors could change, PwC suggested.
With the appointment of the Special Master for Troubled Asset Relief Program Executive Compensation in the United States, insurers are likely to base much more of their performance-related pay on risk-adjusted measures aligned to their business strategy. They also are expected to face tougher regulation over how compensation is governed, said PwC.
The firm also found that for reinsurers, while demand is likely to increase within emerging markets, this is unlikely to offset the decline in reinsurance buying in developed markets and may force many reinsurers to rethink how they sustain profitability and growth.
The trend toward higher retention of straightforward risks could accelerate. As companies become more risk-aware through advances in enterprise risk management, they will be better able to choose what risks to retain and which to reinsure, PwC said.
Mr. Chrnelich said the coming changes mean the competitive landscape will be very different in five years from what exists today. “This will jeopardize some insurers' business, but it should also enable those who are better prepared to excel in a new environment.”
Wednesday, December 9, 2009
Friday, November 13, 2009
Consumers Missing Out on Discounts
Insurance Networking News, November 12, 2009
Americans are not utilizing all of the discounts that may be available to them in their homeowner and auto insurance, according to a new national survey conducted for Trusted Choice and the Independent Insurance Agents & Brokers of America (IIABA).
The survey queried home and auto owners about whether they are taking full advantage of all the discounts they qualified for on their homeowners and auto insurance policies. The study found 34% of respondents, representing 53 million households, admitting they are probably not taking advantage of all homeowners insurance discounts or indicating that they simply didn’t know. The results were largely similar with auto coverage, with more than 20% of car owners either not knowing or employing all the discounts available to them.
“The latest survey shows what we suspected: many Americans could be foolishly throwing money away because they fail to ask about insurance discounts for which they may qualify,” says Madelyn Flannagan, IIABA VP of agent development, education and research. “Companies often offer some unique, regional, very specific and, at times, quirky discounts. In these economic times, every dollar counts—some consumers may be able to nickel and dime their way to big savings.”
Robert Rusbuldt, IIABA president & CEO, says the results underscore the value proposition of insurance agents.
“One of the biggest advantages to using an independent insurance agent is that they can explore the various companies and find the best possible coverage for each individual family or business,” says. “Finding specific discounts can be time-consuming and confusing, so we advise consumers to consult with their Trusted Choice independent insurance agent and ask questions.”
Americans are not utilizing all of the discounts that may be available to them in their homeowner and auto insurance, according to a new national survey conducted for Trusted Choice and the Independent Insurance Agents & Brokers of America (IIABA).
The survey queried home and auto owners about whether they are taking full advantage of all the discounts they qualified for on their homeowners and auto insurance policies. The study found 34% of respondents, representing 53 million households, admitting they are probably not taking advantage of all homeowners insurance discounts or indicating that they simply didn’t know. The results were largely similar with auto coverage, with more than 20% of car owners either not knowing or employing all the discounts available to them.
“The latest survey shows what we suspected: many Americans could be foolishly throwing money away because they fail to ask about insurance discounts for which they may qualify,” says Madelyn Flannagan, IIABA VP of agent development, education and research. “Companies often offer some unique, regional, very specific and, at times, quirky discounts. In these economic times, every dollar counts—some consumers may be able to nickel and dime their way to big savings.”
Robert Rusbuldt, IIABA president & CEO, says the results underscore the value proposition of insurance agents.
“One of the biggest advantages to using an independent insurance agent is that they can explore the various companies and find the best possible coverage for each individual family or business,” says. “Finding specific discounts can be time-consuming and confusing, so we advise consumers to consult with their Trusted Choice independent insurance agent and ask questions.”
Wednesday, November 4, 2009
Patriot Ledger: Keep senior driver discount but make sure it's earned
QUINCY — .It’s frustrating that a generous insurance discount for the state’s oldest drivers means higher rates for the rest of us, but addressing that injustice now would further weaken the push for tougher testing standards for this accident-prone group.
The Legislature would be wise to leave that plum untouched and stay focused on making sure drivers old enough to qualify for the discount deserve to be on the road at all.
The Automobile Insurers Bureau of Massachusetts recently released accident data that bolsters the push for tougher standards for older drivers. It shows those over 75 – while not the deadly drivers they are sometimes made out to be – get in more accidents and file significantly more property damage claims than all other drivers except inexperienced, youthful ones.
The document suggests that while some “senior discount” may be warranted, the 25 percent break enjoyed for more than 30 years is probably excessive.
“Whoever is getting the discount is going to be subsidized by others,” said Bob Passmore of the Property Casualty Insurers Association of America. Passmore said the Massachusetts senior discount is the largest in the nation and one of only a handful that are based solely on age. In most other states, the discount is contingent on the driver passing a defensive driving course.
“Many seniors expect a discount. They go into Dunkin’ Donuts and get a discount. They go into McDonald’s and get a discount,” said Frank Mancini, president of the Massachusetts Association of Insurance Agents. “But if competition is going to work and it’s going to be fair, then subsidies have to come out.”
While we tend to agree, the politics involved necessitate a different approach.
For the past five years, Sen. Brian Joyce, D-Milton, has been pushing a bill that would require drivers 85 and older to pass cognitive and reflex tests to renew their licenses. The version now being considered – which next goes before the Legislature’s Joint Transportation Committee – would apply to drivers 75 and older.
The bill gained traction earlier this year during a spate of deadly accidents involving drivers in their 70s and 80s but the uproar has died down and efforts to defeat the bill have not eased.
It is opposed by some senior citizen advocates who say it should be based on ability rather than age.
The bill, which is already seen as a threat to the independence of older drivers, would like lose essential support if it became tangled in discussions of taking a bigger chunk out of seniors’ fixed income.
It would be better to simply stick to the goal of making sure, through more aggressive testing, that those on the road in their later years belong there.
Doing so would, by default, reduce the number of older drivers whose declining road skills end up translating into higher insurance rates for the rest of us.
The Legislature would be wise to leave that plum untouched and stay focused on making sure drivers old enough to qualify for the discount deserve to be on the road at all.
The Automobile Insurers Bureau of Massachusetts recently released accident data that bolsters the push for tougher standards for older drivers. It shows those over 75 – while not the deadly drivers they are sometimes made out to be – get in more accidents and file significantly more property damage claims than all other drivers except inexperienced, youthful ones.
The document suggests that while some “senior discount” may be warranted, the 25 percent break enjoyed for more than 30 years is probably excessive.
“Whoever is getting the discount is going to be subsidized by others,” said Bob Passmore of the Property Casualty Insurers Association of America. Passmore said the Massachusetts senior discount is the largest in the nation and one of only a handful that are based solely on age. In most other states, the discount is contingent on the driver passing a defensive driving course.
“Many seniors expect a discount. They go into Dunkin’ Donuts and get a discount. They go into McDonald’s and get a discount,” said Frank Mancini, president of the Massachusetts Association of Insurance Agents. “But if competition is going to work and it’s going to be fair, then subsidies have to come out.”
While we tend to agree, the politics involved necessitate a different approach.
For the past five years, Sen. Brian Joyce, D-Milton, has been pushing a bill that would require drivers 85 and older to pass cognitive and reflex tests to renew their licenses. The version now being considered – which next goes before the Legislature’s Joint Transportation Committee – would apply to drivers 75 and older.
The bill gained traction earlier this year during a spate of deadly accidents involving drivers in their 70s and 80s but the uproar has died down and efforts to defeat the bill have not eased.
It is opposed by some senior citizen advocates who say it should be based on ability rather than age.
The bill, which is already seen as a threat to the independence of older drivers, would like lose essential support if it became tangled in discussions of taking a bigger chunk out of seniors’ fixed income.
It would be better to simply stick to the goal of making sure, through more aggressive testing, that those on the road in their later years belong there.
Doing so would, by default, reduce the number of older drivers whose declining road skills end up translating into higher insurance rates for the rest of us.
Friday, October 30, 2009
Flu Cases Could Spur Homeowner Claims, Lawyer Says
Property and casualty insurers can expect to be hit by a swirl of claims arising from swine flu that include actions against homeowners and businesses, a medical malpractice defense attorney is predicting.
Charles Kutner, whose New York-based law firm defends individuals and institutions in the health industry, said he believes that p&c insurers may have to modify coverage to limit liability.
As hypothetical examples of the kind of legal action the illness could create, Mr. Kutner suggested that a suit could arise if a guest contracted flu after attending a cocktail party where the host did not warn that their child had the illness.
Similarly, a homeowner could be at risk of becoming a defendant if they failed to vaccinate their child against flu and the youngster passed on that illness to children invited for a play date--one of whom sickens and dies.
“The exposure is there [and] you’ve got a lawsuit on your hands,” he warned.
Mr. Kutner said he thought malpractice actions could arise because of a lack of availability of flu vaccine, but he doubted they would be found to have merit.
There are also possible actions from medical complications arising from a flu shot, because “invariably there are complications from vaccines and lawsuits.”
Employees, he said, can be encouraged to get flu shots, but, “Can you force employees to get flu shots? Probably not.”
On the other hand, Mr. Kutner said that he believed an employer could be held liable “if you knew an employee was diagnosed with flu and you didn’t tell everyone else on the staff.”
To prevent against that sort of liability, he noted, universities make it a point to announce it to everyone at their institution when a student has contracted a communicable illness such as meningitis.
The key to a defense, he said, is putting third parties on notice when you have information. When a suit is brought, Mr. Kutner explained, the key issues are “What did you know? When did you know? And, what did you do about it.”
In New York, Mr. Kutner noted there is a pending $40 million lawsuit brought by the family of school principal Mitchell Weiner against the city, claiming the Board of Education failed to alert the principal that he had been in contact with children who had tested positive for the virus; that it did not act quickly enough to stop the transmission of the disease; that it did not disseminate adequate information about health conditions that would increase the risks of the virus; and that it did not provide a safe working environment for Mr. Wiener and other school employees, among other allegations.
Mr. Kutner suggested that with so much exposure, insurers “are going to have to start thinking about homeowner policies and these big general liability policies.”
“If there is a pandemic, it’s potentially a major casualty loss,” he said.
NU Online News Service, Oct. 29, 1:20 p.m. EDT
By DANIEL HAYS
Charles Kutner, whose New York-based law firm defends individuals and institutions in the health industry, said he believes that p&c insurers may have to modify coverage to limit liability.
As hypothetical examples of the kind of legal action the illness could create, Mr. Kutner suggested that a suit could arise if a guest contracted flu after attending a cocktail party where the host did not warn that their child had the illness.
Similarly, a homeowner could be at risk of becoming a defendant if they failed to vaccinate their child against flu and the youngster passed on that illness to children invited for a play date--one of whom sickens and dies.
“The exposure is there [and] you’ve got a lawsuit on your hands,” he warned.
Mr. Kutner said he thought malpractice actions could arise because of a lack of availability of flu vaccine, but he doubted they would be found to have merit.
There are also possible actions from medical complications arising from a flu shot, because “invariably there are complications from vaccines and lawsuits.”
Employees, he said, can be encouraged to get flu shots, but, “Can you force employees to get flu shots? Probably not.”
On the other hand, Mr. Kutner said that he believed an employer could be held liable “if you knew an employee was diagnosed with flu and you didn’t tell everyone else on the staff.”
To prevent against that sort of liability, he noted, universities make it a point to announce it to everyone at their institution when a student has contracted a communicable illness such as meningitis.
The key to a defense, he said, is putting third parties on notice when you have information. When a suit is brought, Mr. Kutner explained, the key issues are “What did you know? When did you know? And, what did you do about it.”
In New York, Mr. Kutner noted there is a pending $40 million lawsuit brought by the family of school principal Mitchell Weiner against the city, claiming the Board of Education failed to alert the principal that he had been in contact with children who had tested positive for the virus; that it did not act quickly enough to stop the transmission of the disease; that it did not disseminate adequate information about health conditions that would increase the risks of the virus; and that it did not provide a safe working environment for Mr. Wiener and other school employees, among other allegations.
Mr. Kutner suggested that with so much exposure, insurers “are going to have to start thinking about homeowner policies and these big general liability policies.”
“If there is a pandemic, it’s potentially a major casualty loss,” he said.
NU Online News Service, Oct. 29, 1:20 p.m. EDT
By DANIEL HAYS
Wednesday, October 7, 2009
Insurance Covers Fantasy Football Nightmares
It is a common fear of fantasy football players: If my No. 1 pick goes down with an injury in the first game, the whole season—and my $50 entry fee—could be lost.
Not to worry—there’s insurance for that.
Intermarket Insurance recently launched its Fantasy Sports Insurance, allowing fantasy football players to insure up to three top players against the risk of injury. FSI is a player disability coverage that will protect your fantasy league investment, said Anthony Giaccone, president of Huntington, N.Y.-based Intermarket.
In fantasy football, players draft a team of real National Football League players, whose stats determine the success of the fantasy teams.
The insurance policy allows injury-plagued fantasy owners to recoup their league investment and continue with the season, while cushioning the blow of losing the team’s top performer. The idea, Mr. Giaccone said, stemmed from one of his co-workers last football season losing All-Pro New England Patriots quarterback Tom Brady for the year in the first game.
Intermarket offers a policy with an average of $150 coverage limits for a premium of $16, he said. In the event of a season-ending injury, FSI will reimburse the policyholder for the his or her league entry and for products such as draft guides.
This year, Mr. Giaccone said, Tom Brady is the most insured player.
“Coming back from knee surgery, and he tweaked his shoulder in the preseason. You bet a lot of people out there are concerned,” he said.
Copyright 2009 Crain Communications Inc. All Rights Reserved.
September 18, 2009
Not to worry—there’s insurance for that.
Intermarket Insurance recently launched its Fantasy Sports Insurance, allowing fantasy football players to insure up to three top players against the risk of injury. FSI is a player disability coverage that will protect your fantasy league investment, said Anthony Giaccone, president of Huntington, N.Y.-based Intermarket.
In fantasy football, players draft a team of real National Football League players, whose stats determine the success of the fantasy teams.
The insurance policy allows injury-plagued fantasy owners to recoup their league investment and continue with the season, while cushioning the blow of losing the team’s top performer. The idea, Mr. Giaccone said, stemmed from one of his co-workers last football season losing All-Pro New England Patriots quarterback Tom Brady for the year in the first game.
Intermarket offers a policy with an average of $150 coverage limits for a premium of $16, he said. In the event of a season-ending injury, FSI will reimburse the policyholder for the his or her league entry and for products such as draft guides.
This year, Mr. Giaccone said, Tom Brady is the most insured player.
“Coming back from knee surgery, and he tweaked his shoulder in the preseason. You bet a lot of people out there are concerned,” he said.
Copyright 2009 Crain Communications Inc. All Rights Reserved.
September 18, 2009
Wednesday, September 2, 2009
Friday humor - insurance ads from the Netherlands
The Dutch insurance company Centraal Beheer is well known in Europe for their humorous TV commercials in which the characters are put in precarious positions - the implied message being "Is your insurance up to date? Call us." You can learn more about the company and the commercials on the Wikipedia page for Centraal Beheer's. Here's a sampling of a few commercials:
For Congress, Massachusetts Serves as Model and Warning
As Congress jousts over how to reform the nation’s health care system, many experts say that the Massachusetts model, which has reduced the state’s uninsured rate to the lowest in the nation, is a good place to start. Yet those reforms, while doing wonders for coverage, don’t tackle the longer-term issue of cost-containment, which is largely the reason federal policymakers are pushing for reform this year.
With the White House insisting that any national reform proposal address both cost and coverage simultaneously, the lessons from Massachusetts will be limited. Indeed, the funding issue is expected to be the thornier topic. Democratic leaders — who hope to include several key elements of the Massachusetts plan into their own health reform proposal — will also have to come up with more creative ways of paying for it. The Massachusetts’ experiment can offer some guidance, experts say, but it also serves as a warning that coverage expansion and cost reduction don’t often go hand in hand.
James Mongan, president and CEO of Partners Health Care, a Boston-based managed care nonprofit, said the cost issue has thwarted federal stabs at health reform for decades. “This discussion has never been a discussion about health care,” Mongan said Tuesday during a health reform discussion in Washington hosted by the Kaiser Family Foundation. “It’s always been a discussion about financing and who’s going to pay for it. And that’s how we’ve been stuck as a nation for the last 30 years.”
The comments arrive as congressional Democrats are struggling to craft a comprehensive health reform proposal capable of squeaking through the Senate, where 60 votes will likely be required to elude a GOP filibuster. A House proposal, passed by three separate committees before the August recess, adopts a number of the Massachusetts provisions, including an individual insurance mandate, a broad expansion of Medicaid, and the requirement that all insurers offer a minimum menu of benefits. The proposal likely to be taken up in the Senate is still being crafted by select members of the Senate Finance Committee.
Launched in 2006, the Massachusetts reform model requires residents to have insurance while offering generous subsidies for low- and moderate income residents. Larger employers, under the plan, must contribute to their employees health insurance costs or pay the state $295 per employee per year — “fair share” funds the state uses to subsidize the low-income coverage. The legislation also created something called the Commonwealth Health Insurance Connector Authority, which administers the subsidies and oversees the exchange of private insurance plans by individuals and employers alike. For good measure, the model also expanded SCHIP and Medicaid eligibility to reach larger segments of the uninsured population. In the eyes of the officials running the show, the “experiment” has been a smashing success.
“The model in terms of shared responsibility, and insurance reform and exchanges really is based on something that works,” said Jon Kingsdale, executive director of the Commonwealth Health Insurance Connector Authority. “We do not consider this an experiment in Massachusetts any longer.”
The numbers support Kingsdale’s claims — as least as they pertain to coverage. In 2006, before the reform plan took effect, Massachusetts had roughly 600,000 uninsured residents, or 10 percent of the state population. Three years later, an estimated 430,000 of those folks have gained coverage, lowering the uninsured rate to 2.6 percent — the lowest in the country.
Still, Kingsdale conceded that state lawmakers and health officials still have left to tackle “the tough, tough issue of cost containment,” something he deemed “a separate question.”
Congress, charged with addressing the coverage and cost containment issues simultaneously, won’t have the same privilege.
Critics have blasted the Massachusetts reform model from numerous angles, not least of all with the charge that its cost will break the state’s budget. In a June report, the libertarian Cato Institute estimated that the strategy has led to a spike in overall health care spending in Massachusetts. “With the ‘Massachusetts model’ frequently cited as a blueprint for health care reform, it is important to recognize that giving the government greater control over our health care system will have grave consequences for taxpayers, providers, and health care consumers,” the report warns.
Others sharply disagree that the Massachusetts strategy — or the national reforms being debated — are unaffordable. A recent report from the Massachusetts Taxpayers Foundation, a business-funded budget watchdog, found that the additional cost to fund the 2006 reforms will be roughly $700 million through fiscal year 2010, with the federal government picking up half the tab. Those costs, said Michael Widmer, president of the budget group, are “very much in line with the anticipated cost increases around reform.”
Rather, Widmer and other experts say the nationwide trend of skyrocketing health care costs, not the reform efforts, is fueling criticisms like Cato’s.
Still, Widmer also warned that the Massachusetts experience is no indication that the same model would work on a national level. Massachusetts, for one thing, has the advantage of having a high number of people enrolled in employer-sponsored plans — something not every state enjoys. Also, the state can defray subsidy costs with its “fair share” system.
“We can’t conclude at a national level that the additional cost [of health reform] is insignificant,” he said.
And, of course, congressional lawmakers don’t have the same privilege of looking to Washington for help paying for their reforms, as Massachusetts did to jump-start its model. With the Democrats’ bills tickling the $1 trillion mark, much of the opposition has been over the source of the funding — a thorny issue in any environment, but even more so considering the current partisan bickering that practically defines Washington politics these days. Not to mention the difficulty of passing tax hikes in recent years.
Citing “a thorough triumph of the anti-tax forces” in recent decades, Mongan predicted a diluted health reform bill this year, with additional reforms for years to come.
“The best thing to do is to pass what we can pass,” Mongan said. “But this will not be over for a number of legislative cycles.”
With the White House insisting that any national reform proposal address both cost and coverage simultaneously, the lessons from Massachusetts will be limited. Indeed, the funding issue is expected to be the thornier topic. Democratic leaders — who hope to include several key elements of the Massachusetts plan into their own health reform proposal — will also have to come up with more creative ways of paying for it. The Massachusetts’ experiment can offer some guidance, experts say, but it also serves as a warning that coverage expansion and cost reduction don’t often go hand in hand.
James Mongan, president and CEO of Partners Health Care, a Boston-based managed care nonprofit, said the cost issue has thwarted federal stabs at health reform for decades. “This discussion has never been a discussion about health care,” Mongan said Tuesday during a health reform discussion in Washington hosted by the Kaiser Family Foundation. “It’s always been a discussion about financing and who’s going to pay for it. And that’s how we’ve been stuck as a nation for the last 30 years.”
The comments arrive as congressional Democrats are struggling to craft a comprehensive health reform proposal capable of squeaking through the Senate, where 60 votes will likely be required to elude a GOP filibuster. A House proposal, passed by three separate committees before the August recess, adopts a number of the Massachusetts provisions, including an individual insurance mandate, a broad expansion of Medicaid, and the requirement that all insurers offer a minimum menu of benefits. The proposal likely to be taken up in the Senate is still being crafted by select members of the Senate Finance Committee.
Launched in 2006, the Massachusetts reform model requires residents to have insurance while offering generous subsidies for low- and moderate income residents. Larger employers, under the plan, must contribute to their employees health insurance costs or pay the state $295 per employee per year — “fair share” funds the state uses to subsidize the low-income coverage. The legislation also created something called the Commonwealth Health Insurance Connector Authority, which administers the subsidies and oversees the exchange of private insurance plans by individuals and employers alike. For good measure, the model also expanded SCHIP and Medicaid eligibility to reach larger segments of the uninsured population. In the eyes of the officials running the show, the “experiment” has been a smashing success.
“The model in terms of shared responsibility, and insurance reform and exchanges really is based on something that works,” said Jon Kingsdale, executive director of the Commonwealth Health Insurance Connector Authority. “We do not consider this an experiment in Massachusetts any longer.”
The numbers support Kingsdale’s claims — as least as they pertain to coverage. In 2006, before the reform plan took effect, Massachusetts had roughly 600,000 uninsured residents, or 10 percent of the state population. Three years later, an estimated 430,000 of those folks have gained coverage, lowering the uninsured rate to 2.6 percent — the lowest in the country.
Still, Kingsdale conceded that state lawmakers and health officials still have left to tackle “the tough, tough issue of cost containment,” something he deemed “a separate question.”
Congress, charged with addressing the coverage and cost containment issues simultaneously, won’t have the same privilege.
Critics have blasted the Massachusetts reform model from numerous angles, not least of all with the charge that its cost will break the state’s budget. In a June report, the libertarian Cato Institute estimated that the strategy has led to a spike in overall health care spending in Massachusetts. “With the ‘Massachusetts model’ frequently cited as a blueprint for health care reform, it is important to recognize that giving the government greater control over our health care system will have grave consequences for taxpayers, providers, and health care consumers,” the report warns.
Others sharply disagree that the Massachusetts strategy — or the national reforms being debated — are unaffordable. A recent report from the Massachusetts Taxpayers Foundation, a business-funded budget watchdog, found that the additional cost to fund the 2006 reforms will be roughly $700 million through fiscal year 2010, with the federal government picking up half the tab. Those costs, said Michael Widmer, president of the budget group, are “very much in line with the anticipated cost increases around reform.”
Rather, Widmer and other experts say the nationwide trend of skyrocketing health care costs, not the reform efforts, is fueling criticisms like Cato’s.
Still, Widmer also warned that the Massachusetts experience is no indication that the same model would work on a national level. Massachusetts, for one thing, has the advantage of having a high number of people enrolled in employer-sponsored plans — something not every state enjoys. Also, the state can defray subsidy costs with its “fair share” system.
“We can’t conclude at a national level that the additional cost [of health reform] is insignificant,” he said.
And, of course, congressional lawmakers don’t have the same privilege of looking to Washington for help paying for their reforms, as Massachusetts did to jump-start its model. With the Democrats’ bills tickling the $1 trillion mark, much of the opposition has been over the source of the funding — a thorny issue in any environment, but even more so considering the current partisan bickering that practically defines Washington politics these days. Not to mention the difficulty of passing tax hikes in recent years.
Citing “a thorough triumph of the anti-tax forces” in recent decades, Mongan predicted a diluted health reform bill this year, with additional reforms for years to come.
“The best thing to do is to pass what we can pass,” Mongan said. “But this will not be over for a number of legislative cycles.”
Monday, August 31, 2009
Court: Homeowner's Policy Won't Pay Damages for Overdose Death
A homeowner's policy will not pay damages to the mother of a teenager who died after overdosing on painkillers he stole from the man with whom he and his mother lived, a panel of justices from the Massachusetts Appeals Court has ruled.
The teenager, Stephen McMaster, 18, died of an apparent suicide in April 2001 after overdosing on the painkiller propoxyphene. At the time, McMaster and his mother, Nichole Gallagher, were living in the home of another man, John Scaduto. Scaduto had purchased the painkiller after a doctor prescribed it to him.
The Massachusetts Property Insurance Underwriting Association (MPIUA) insured Scaduto's home. After her son's death, Gallagher sued Scaduto, claiming that he was negligent in her son's death because he had left the drugs in an accessible place despite knowing that her son was in a fragile emotional state.
When Scaduto demanded that MPIUA pay the claim on his behalf, the insurer denied his request, citing common policy language that excludes bodily injury claims arising out of the use of a controlled substance.
A Massachusetts Superior Court has already ruled in favor of the insurer, stating that the death and Scaduto's negligence fell within the exclusion.
Gallagher, however, appealed that decision, arguing to the Appeals Corurt that her son's death arose out of Scaduto's legitimate use of the painkillers and was therefore an exception to that exclusion. It was an argument that Justice Mark Green wrote "was not entirely without persuasive force."
However, Green wrote in rejecting Gallagher's appeal, "the argument is flawed… as it overlooks… McMaster's own use" of the drug. "The excluded use (of the drug by McMaster) stands as the immediate cause of his death; whatever causal contribution Scaduto's use may have furnished was decidedly more remote."
The teenager, Stephen McMaster, 18, died of an apparent suicide in April 2001 after overdosing on the painkiller propoxyphene. At the time, McMaster and his mother, Nichole Gallagher, were living in the home of another man, John Scaduto. Scaduto had purchased the painkiller after a doctor prescribed it to him.
The Massachusetts Property Insurance Underwriting Association (MPIUA) insured Scaduto's home. After her son's death, Gallagher sued Scaduto, claiming that he was negligent in her son's death because he had left the drugs in an accessible place despite knowing that her son was in a fragile emotional state.
When Scaduto demanded that MPIUA pay the claim on his behalf, the insurer denied his request, citing common policy language that excludes bodily injury claims arising out of the use of a controlled substance.
A Massachusetts Superior Court has already ruled in favor of the insurer, stating that the death and Scaduto's negligence fell within the exclusion.
Gallagher, however, appealed that decision, arguing to the Appeals Corurt that her son's death arose out of Scaduto's legitimate use of the painkillers and was therefore an exception to that exclusion. It was an argument that Justice Mark Green wrote "was not entirely without persuasive force."
However, Green wrote in rejecting Gallagher's appeal, "the argument is flawed… as it overlooks… McMaster's own use" of the drug. "The excluded use (of the drug by McMaster) stands as the immediate cause of his death; whatever causal contribution Scaduto's use may have furnished was decidedly more remote."
Thursday, July 16, 2009
DOI Issues Executive Summary: Results of the Survey of the Auto Insurance Market After One Year of Managed Competition...
On April 1, 2008, the Massachusetts Division of Insurance inaugurated the change to a more competitive auto insurance market. In doing so, the state transformed from a fixed rate setting by state regulators to “managed competition.” Massachusetts is the last state in the country to move from state-set auto insurance rates to a competitive rating system.
Under managed competition, insurance companies may propose competitive rates, offer new and different products, and provide new services to consumers. Consumers can benefit from shopping for the best price, coverage and service options for themselves. In order to review the impact of the changes on consumers over the first year, the Division of Insurance commissioned a study, measuring such variables as premium levels and consumer attitudes and experiences with the new system of purchasing automobile insurance. The study covers the time period from April 2008 to April 2009.
The changeover to managed competition began in April 2008 after many decades during which state regulators set the insurance rates that all automobile insurance companies in Massachusetts were permitted to charge. Since the early 1990s, Massachusetts witnessed a decline in the number of companies offering private passenger auto insurance here from 35 to 19 in 2008. In the first year of managed competition, nine new companies entered the Massachusetts auto insurance market. Under the new system, consumers can benefit because companies can compete against one another for market share by charging different rates, offering innovative discounts and other incentives, and increasing their efficiency.
The survey included nine focus groups with consumers held around the Commonwealth, a preliminary survey of 1,100 consumers, a comprehensive 30-minute survey of more than 4,500 drivers and one-on-one interviews with over 50 insurance agents and executives. Minorities and drivers in urban areas were over-sampled to ensure that their experiences were accurately reflected and then weighted to represent their overall incidence on the insured driving population. The results, which are statistically valid and reliable with a confidence rate of 95 percent, showed the following:
1. Massachusetts consumers saved over $270 million in insurance premiums in the first year of managed competition. This data wasdetermined from an analysis of survey responses on the premiums drivers paid for their automobile insurance.
2. Average premiums per vehicle dropped 8.2 percent during the first year under managed competition; previously in 2006-07, premiums had declined by 5.2 percent.
3. Consumers with clean driving records were 19 percent more likely to see savings under the new system than those who had accidents or violations during the first year of managed competition.
4. Most consumers maintained their level of coverage when renewing their insurance policies. Those who changed their level of coverage were twice as likely to increase than to decrease their coverage levels. Many insureds opted to reinvest some of their premium savings into additional insurance coverage.
5. African-American, Hispanic and Asian drivers were more likely than the overall population to increase their level of coverage.
6. Since the introduction of competition into the Commonwealth’s automobile insurance market, by April 1, 2009, nine new companies had entered the Massachusetts auto insurance market. New entry into a market is a sign that the market is becoming robust and affording consumers greater price and service options.
7. The number of drivers in the so-called residual or high-risk market is declining, meaning that more drivers are able to find acceptable insurance premium and service options among competing companies in the marketplace.
8. In the first year of managed competition, there was a 13 percent decrease in the number of uninsured vehicles on Massachusetts roads.
9. Sixty-nine percent of consumers continue to purchase coverage through agents, rather than purchase directly. This number is nearly twice the national average.
10. Forty-two percent of the consumers surveyed were more satisfied with the auto insurance market in Massachusetts than a year ago and only 3 percent were less satisfied.
11. Under the new system, 87 percent more agencies are representing four or more companies, whereas under the old system many agencies represented only one or two insurance companies – this makes it easier for consumers to shop for the best policy at the lowest price for their needs.
12. Approximately three out of four consumers indicated that they were aware of the new auto insurance system, and those who were aware were 60 percent more likely to have saved money than those who were not aware.
13. Not all consumers availed themselves of the new system in the first year. Some believed shopping around would be time-consuming; they were skeptical that they would save money; they found it difficult to compare insurance policies from different companies and they believed they could not change insurance carriers before a policy had expired.
Overall, the study showed positive results for most Massachusetts drivers but also highlighted that more outreach and education needs to be done to continue to afford all consumers the benefits of managed competition.
Under managed competition, insurance companies may propose competitive rates, offer new and different products, and provide new services to consumers. Consumers can benefit from shopping for the best price, coverage and service options for themselves. In order to review the impact of the changes on consumers over the first year, the Division of Insurance commissioned a study, measuring such variables as premium levels and consumer attitudes and experiences with the new system of purchasing automobile insurance. The study covers the time period from April 2008 to April 2009.
The changeover to managed competition began in April 2008 after many decades during which state regulators set the insurance rates that all automobile insurance companies in Massachusetts were permitted to charge. Since the early 1990s, Massachusetts witnessed a decline in the number of companies offering private passenger auto insurance here from 35 to 19 in 2008. In the first year of managed competition, nine new companies entered the Massachusetts auto insurance market. Under the new system, consumers can benefit because companies can compete against one another for market share by charging different rates, offering innovative discounts and other incentives, and increasing their efficiency.
The survey included nine focus groups with consumers held around the Commonwealth, a preliminary survey of 1,100 consumers, a comprehensive 30-minute survey of more than 4,500 drivers and one-on-one interviews with over 50 insurance agents and executives. Minorities and drivers in urban areas were over-sampled to ensure that their experiences were accurately reflected and then weighted to represent their overall incidence on the insured driving population. The results, which are statistically valid and reliable with a confidence rate of 95 percent, showed the following:
1. Massachusetts consumers saved over $270 million in insurance premiums in the first year of managed competition. This data wasdetermined from an analysis of survey responses on the premiums drivers paid for their automobile insurance.
2. Average premiums per vehicle dropped 8.2 percent during the first year under managed competition; previously in 2006-07, premiums had declined by 5.2 percent.
3. Consumers with clean driving records were 19 percent more likely to see savings under the new system than those who had accidents or violations during the first year of managed competition.
4. Most consumers maintained their level of coverage when renewing their insurance policies. Those who changed their level of coverage were twice as likely to increase than to decrease their coverage levels. Many insureds opted to reinvest some of their premium savings into additional insurance coverage.
5. African-American, Hispanic and Asian drivers were more likely than the overall population to increase their level of coverage.
6. Since the introduction of competition into the Commonwealth’s automobile insurance market, by April 1, 2009, nine new companies had entered the Massachusetts auto insurance market. New entry into a market is a sign that the market is becoming robust and affording consumers greater price and service options.
7. The number of drivers in the so-called residual or high-risk market is declining, meaning that more drivers are able to find acceptable insurance premium and service options among competing companies in the marketplace.
8. In the first year of managed competition, there was a 13 percent decrease in the number of uninsured vehicles on Massachusetts roads.
9. Sixty-nine percent of consumers continue to purchase coverage through agents, rather than purchase directly. This number is nearly twice the national average.
10. Forty-two percent of the consumers surveyed were more satisfied with the auto insurance market in Massachusetts than a year ago and only 3 percent were less satisfied.
11. Under the new system, 87 percent more agencies are representing four or more companies, whereas under the old system many agencies represented only one or two insurance companies – this makes it easier for consumers to shop for the best policy at the lowest price for their needs.
12. Approximately three out of four consumers indicated that they were aware of the new auto insurance system, and those who were aware were 60 percent more likely to have saved money than those who were not aware.
13. Not all consumers availed themselves of the new system in the first year. Some believed shopping around would be time-consuming; they were skeptical that they would save money; they found it difficult to compare insurance policies from different companies and they believed they could not change insurance carriers before a policy had expired.
Overall, the study showed positive results for most Massachusetts drivers but also highlighted that more outreach and education needs to be done to continue to afford all consumers the benefits of managed competition.
Tuesday, June 2, 2009
GEICO Enters Market
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.
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.
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."
Friday, April 3, 2009
Mass. House Approves Bill That Would Make Auto Insurance Appeals Board Permanent
By DAN RING dring@repub.com
BOSTON - The state House of Representatives on Thursday approved a bill that would make permanent a state board that rules on drivers' appeals of motor vehicle insurance surcharges.
The 155-0 vote in the House moved to enshrine the state Division of Insurance's Board of Appeal in state law and strip away the power of an insurance commissioner to unilaterally abolish the board.
The vote comes two weeks after Insurance Commissioner Nonnie S. Burnes dropped her disputed plan to scrap the board and agreed to keep it operating. Burnes had wanted to eliminate the board as part of a new system that allows auto insurers to set their own rates and allows drivers to shop around for the best rates.
Rep. Angelo J. Puppolo, D-Springfield, a cosponsor of the House bill, said it didn't make any sense to eradicate the board.
"The board allows consumers a fair appeal process," Puppolo said. "I'm glad we were able to make it permanent. It's a great win for the consumer."
The House approved the bill after a 90-minute debate.
The Senate last week voted 39-0 to approve the bill.
A spokeswoman for Gov. Deval L. Patrick said the governor supports the preservation of the appeal board, but needs to review the details of the bill before deciding whether he will sign it.
Sen. Stephen J. Buoniconti, sponsor of the bill in the Senate, said he expects lawmakers to send a final bill to the governor's desk in about a week. The West Springfield Democrat said the bill is universally supported and is a high priority.
Buoniconti said he received 50 phone calls from insurance agents and consumers when Burnes planned to abolish the board.
Supporters said the appeal board gives consumers a fair hearing if they are assessed a surcharge. A driver can receive a surcharge if the insurer rules the driver is more than 50 percent at fault in a collision.
Surcharges can costs hundreds of dollars and can remain on an insurance bill for up to six years.
People can pay $50 to lodge an appeal with the board and an appeal often pays off. Last year, the board heard 43,264 appeals around the state and approved 52 percent of the appeals, according to the state Division of Insurance.
About 10 percent of the hearings, or 4,500, were held for Western Massachusetts residents at the Registry of Motor Vehicles on Liberty Street in Springfield.
Burnes had planned to have motorists appeal surcharges directly to their insurer. But critics said insurers were unlikely to grant many appeals of their own decisions considering the money at stake.
In a statement on Thursday, Burnes said, "We heard the concerns voiced by the public and responding to those concerns, we decided to maintain the board of appeal and its accident resolution review process."
Burnes had moved to dismantle the board because she said it didn't fit with managed competition for auto insurance. Under the year-old competitive system, the state no longer fixes rates and insurers have more freedom to offer different policies and compete for customers.
Burnes also met with resistance because elimination of the board would have actually cost the state money. According to Burnes, the state receives about $2 million a year in fee revenues and it costs about $1.7 million a year to operate the board.
"These hearings not only pay for themselves but generate revenue for the commonwealth," said Rep. Walter F. Timilty, D-Milton. "That's a plus in this climate."
BOSTON - The state House of Representatives on Thursday approved a bill that would make permanent a state board that rules on drivers' appeals of motor vehicle insurance surcharges.
The 155-0 vote in the House moved to enshrine the state Division of Insurance's Board of Appeal in state law and strip away the power of an insurance commissioner to unilaterally abolish the board.
The vote comes two weeks after Insurance Commissioner Nonnie S. Burnes dropped her disputed plan to scrap the board and agreed to keep it operating. Burnes had wanted to eliminate the board as part of a new system that allows auto insurers to set their own rates and allows drivers to shop around for the best rates.
Rep. Angelo J. Puppolo, D-Springfield, a cosponsor of the House bill, said it didn't make any sense to eradicate the board.
"The board allows consumers a fair appeal process," Puppolo said. "I'm glad we were able to make it permanent. It's a great win for the consumer."
The House approved the bill after a 90-minute debate.
The Senate last week voted 39-0 to approve the bill.
A spokeswoman for Gov. Deval L. Patrick said the governor supports the preservation of the appeal board, but needs to review the details of the bill before deciding whether he will sign it.
Sen. Stephen J. Buoniconti, sponsor of the bill in the Senate, said he expects lawmakers to send a final bill to the governor's desk in about a week. The West Springfield Democrat said the bill is universally supported and is a high priority.
Buoniconti said he received 50 phone calls from insurance agents and consumers when Burnes planned to abolish the board.
Supporters said the appeal board gives consumers a fair hearing if they are assessed a surcharge. A driver can receive a surcharge if the insurer rules the driver is more than 50 percent at fault in a collision.
Surcharges can costs hundreds of dollars and can remain on an insurance bill for up to six years.
People can pay $50 to lodge an appeal with the board and an appeal often pays off. Last year, the board heard 43,264 appeals around the state and approved 52 percent of the appeals, according to the state Division of Insurance.
About 10 percent of the hearings, or 4,500, were held for Western Massachusetts residents at the Registry of Motor Vehicles on Liberty Street in Springfield.
Burnes had planned to have motorists appeal surcharges directly to their insurer. But critics said insurers were unlikely to grant many appeals of their own decisions considering the money at stake.
In a statement on Thursday, Burnes said, "We heard the concerns voiced by the public and responding to those concerns, we decided to maintain the board of appeal and its accident resolution review process."
Burnes had moved to dismantle the board because she said it didn't fit with managed competition for auto insurance. Under the year-old competitive system, the state no longer fixes rates and insurers have more freedom to offer different policies and compete for customers.
Burnes also met with resistance because elimination of the board would have actually cost the state money. According to Burnes, the state receives about $2 million a year in fee revenues and it costs about $1.7 million a year to operate the board.
"These hearings not only pay for themselves but generate revenue for the commonwealth," said Rep. Walter F. Timilty, D-Milton. "That's a plus in this climate."
Thursday, April 2, 2009
New Registry of Motor Vehicle Fees 2009
This list reflects the transactions that will change in price Friday, April 3, 2009 at 5:00 pm:
Registration Fees
*Amendment $25.00
*Duplicate $25.00
License & ID Fees (5 year)
*Class A $75.00
*Class B $75.00
*Class C $75.00
*Mass ID / Liquor ID $25.00
Out of State License Conversions (5 year)
*Class A $125.00
*Class B $125.00
*Class C $125.00
Title Fees
*Certificate of Title (Clear, Owner Retained, Reconstructed, + Recovered Theft) $75.00
*Salvage Title (Repairable + Parts Only) $50.00
Other Fees
*Instant Issue License/ID $50.00
*Driver History (Paper) $20.00
*Driving Records (Certified + Non-certified) $20.00
*Accident Report $20.00
*Reducible Load Permit Amend $20.00
*Reducible Load Permit (Overweight Permits) $50.00 Minimum
*Returned Check/CC Fees $15.00
Registration Fees
*Amendment $25.00
*Duplicate $25.00
License & ID Fees (5 year)
*Class A $75.00
*Class B $75.00
*Class C $75.00
*Mass ID / Liquor ID $25.00
Out of State License Conversions (5 year)
*Class A $125.00
*Class B $125.00
*Class C $125.00
Title Fees
*Certificate of Title (Clear, Owner Retained, Reconstructed, + Recovered Theft) $75.00
*Salvage Title (Repairable + Parts Only) $50.00
Other Fees
*Instant Issue License/ID $50.00
*Driver History (Paper) $20.00
*Driving Records (Certified + Non-certified) $20.00
*Accident Report $20.00
*Reducible Load Permit Amend $20.00
*Reducible Load Permit (Overweight Permits) $50.00 Minimum
*Returned Check/CC Fees $15.00
Thursday, March 19, 2009
A Milder Hurricane Outlook From AccuWeather
A Milder Hurricane Outlook From AccuWeather
NU Online News Service, March 18, 11:55 a.m. EDT
The 2009 hurricane season will see three hurricanes impacting the U.S. coast, compared with four that arrived last year, and a lower total number of named storms, according to an AccuWeather.com early forecast.
Joe Bastardi, AccuWeather chief long-range and hurricane forecaster, also predicted storms may be more likely to form in the Atlantic basin closer to the coast. The possibility of a major hurricane making a U.S. landfall cannot be ruled out, he warned.
“This year’s forecast shows only half as many impacts on the United States as there were last year,” Mr. Bastardi said. “But keep in mind, it only takes one major hurricane hitting a highly populated area to have devastating impact.”
“Early indications show a reduction in the overall number of named storms and of major hurricanes in the Atlantic basin compared to last year, but the number of storms should still be near or a little above normal.”
The meteorologist pointed to several factors influencing the forecast, including:
• Dissipation of the weak La Niña in the Pacific Ocean. A reverse to a weak El Niño, which is associated with decreased hurricane activity in the Atlantic, is most likely in the middle to latter part of the hurricane season.
• The expected orientation of high pressure in the eastern Atlantic will produce stronger easterly trade winds across northern Africa than last year. This will result in increased dust and dry air being pushed westward into the Atlantic where many tropical storms originate.
• Cooler water temperatures in the deep tropical Atlantic, a typical breeding ground for hurricanes, which can reduce hurricane activity and intensity. This may create a season in which storms are reaching a greater intensity further north and east than last year, leading to less impact in the Caribbean areas hit hard last year.
• A continuing multidecadal pattern of higher-than-average water temperatures in the Atlantic, raising the chance of major storms near the East Coast until about 2020.
Mr. Bastardi forecasted that while there will be 13 storms this year, compared with 16 in 2008, the number of hurricanes will remain the same at eight. He predicted two major hurricanes compared with five last year and one major hurricane hitting the coast compared with none last year.
NU Online News Service, March 18, 11:55 a.m. EDT
The 2009 hurricane season will see three hurricanes impacting the U.S. coast, compared with four that arrived last year, and a lower total number of named storms, according to an AccuWeather.com early forecast.
Joe Bastardi, AccuWeather chief long-range and hurricane forecaster, also predicted storms may be more likely to form in the Atlantic basin closer to the coast. The possibility of a major hurricane making a U.S. landfall cannot be ruled out, he warned.
“This year’s forecast shows only half as many impacts on the United States as there were last year,” Mr. Bastardi said. “But keep in mind, it only takes one major hurricane hitting a highly populated area to have devastating impact.”
“Early indications show a reduction in the overall number of named storms and of major hurricanes in the Atlantic basin compared to last year, but the number of storms should still be near or a little above normal.”
The meteorologist pointed to several factors influencing the forecast, including:
• Dissipation of the weak La Niña in the Pacific Ocean. A reverse to a weak El Niño, which is associated with decreased hurricane activity in the Atlantic, is most likely in the middle to latter part of the hurricane season.
• The expected orientation of high pressure in the eastern Atlantic will produce stronger easterly trade winds across northern Africa than last year. This will result in increased dust and dry air being pushed westward into the Atlantic where many tropical storms originate.
• Cooler water temperatures in the deep tropical Atlantic, a typical breeding ground for hurricanes, which can reduce hurricane activity and intensity. This may create a season in which storms are reaching a greater intensity further north and east than last year, leading to less impact in the Caribbean areas hit hard last year.
• A continuing multidecadal pattern of higher-than-average water temperatures in the Atlantic, raising the chance of major storms near the East Coast until about 2020.
Mr. Bastardi forecasted that while there will be 13 storms this year, compared with 16 in 2008, the number of hurricanes will remain the same at eight. He predicted two major hurricanes compared with five last year and one major hurricane hitting the coast compared with none last year.
Monday, February 23, 2009
Are You Covered?
Will your home insurance really protect you in case disaster strikes? Find out if your policy fits your needs -- plus how to reduce its cost.
By Elizabeth Gehrman February 22, 2009
Like many people, Nancy Dalrymple and Michael Flannery never thought much about their homeowner's insurance. Every so often they put a check in the mail for their agent and figured coverage would be there if, God forbid, they ever needed it.
Until their Winthrop single family went up in flames in November 2005, that is. "I thought everything was fine," Dalrymple says. "But they said we were way underinsured. We only had something like $193,000 on the structure, and we had damage of about $360,000. Then of course you have other coverage for contents, but it was a total loss. We lost far more contents than we had coverage for."
In addition, Dalrymple says she felt rushed, during a time of trauma and devastation, into getting the extensive repair work done quickly, which led to hiring a contractor who went way over budget and disappeared in the middle of the job, and a second whose shoddy work landed the couple in informal mediation talks. The couple, who had paid off their mortgage two months before the fire, had to take out a new mortgage to finish the work. They still have not moved back into the house. "Once you have a claim, it becomes an adversarial relationship between you and the insurance company," Dalrymple says, "whereas you thought they were part of your team. They're not."
Dalrymple might feel differently, insurers insist, if she had been more informed about her homeowner's policy and what it entailed. "Most people never read their policy," says Mike Barry, vice president of media relations at the Insurance Information Institute, an insurance trade organization based in New York. "I understand it's not the most scintillating reading, but it's well worth their while to do it. The greatest mistake people make is not understanding their policies."
Many in the insurance industry maintain that it is the job of agents to keep their clients informed, but there is no question that being a proactive consumer -- knowing what to ask your agent about in terms of both coverage and cost-saving measures -- will put you in a better position in the event disaster does strike. "Every year, get a checkup on your insurance," says Kathy Silvia, a licensed broker and cofounder of the Fair Insurance Agency in Centerville. "Just like you would get an annual physical exam. Schedule it for when your policy renews, which is usually the month you bought your home. The worst time to find out what you're covered for is after a loss." Getting an insurance checkup is especially important if you've done renovations that have increased the value of your home.
The state's switch to a competitive auto insurance system last year means there are now more opportunities to shop around for all your insurance needs -- and if you bundle the policy for your car with one for your home, using the same carrier, you could save up to 20 percent. Here's how to get the coverage you need and maybe save some cash, too.
Choose the Best Coverage: The first thing consumers need to understand, insurance insiders say, is the replacement cost for both the dwelling and contents. The replacement value of the dwelling will be lower than what your house would be worth on the open market and lower than the tax assessor's evaluation, because both of those values are affected by location, lot size, and other factors, whereas replacement value only takes into account how much it would cost to rebuild the house in what insurers call "like kind and quality." That is, if you had gingerbread and intricate moldings in the original structure, the new house should have those, too, at no extra cost to you.
When you apply for a policy, your agent should ask lots of questions about the construction of your home. If you feel you don't know enough to judge your home's replacement cost, it might be a good idea to hire a contractor to help you get an accurate appraisal.
Standard policies require you carry at least 80 percent of your home's replacement cost, says Silvia. So if you purchased a policy with $100,000 in replacement cost a few years ago, but building materials have gone up since then, as long as that $100,000 still represents at least 80 percent of the current cost of rebuilding your home, the insurer will pay the full amount.
You can add endorsements that modify your insurance coverage; two are particularly recommended: Guaranteed replacement cost coverage pays the full cost of replacing or repairing a home, even if it is above the policy limit. This endorsement can protect you from inflated building costs in the event of a disaster that affects a whole neighborhood, such as a hurricane, a wildfire, or something unexpected like the 2006 chemical-plant explosion in Danvers. Another is a building ordinance endorsement, which protects you if building codes change in a way that might increase your replacement cost. On the Cape, for instance, the code was recently amended so that windows are now required to withstand 110-mile-per-hour winds rather than 90-mile-per-hour winds. "Twenty miles an hour means absolutely nothing to me," Silvia says, "but in the pocketbook, it means a lot when you have to replace those windows."
Putting your personal property on a replacement-cost basis may also be worthwhile, since standard policies - which generally assume contents to be worth 50 percent of the replacement cost of the dwelling -- figure in the depreciation of electronics and other goods. "If you get 50 percent for content value and add a replacement cost endorsement onto the policy," says Silvia, "most companies will increase the content value to 70 percent of the building's value." For example, say your television is stolen. A standard policy will take into account the age of the TV; if the average life of a TV is 10 years and yours was five years old, you'll get only half of its replacement value toward buying a comparable new one -- unless you have this extra coverage.
In certain circumstances -- such as if your home has a swimming pool or trampoline or you own a breed of dog deemed dangerous -- standard insurance companies will often refuse to cover you. In that case, you'll have to go with the Fair Access to Insurance Requirements (FAIR) plan, a state-sponsored program paid for with money pooled by all the carriers that operate in the Commonwealth. The FAIR plan covers all owners as long as their houses meet certain minimal safety requirements (such as there are no live wires dangling from the ceiling), and it does not necessarily cost more for comparable coverage.
As Dalrymple and Flannery found, even a single large claim can also force you into the FAIR plan. "Sometimes it makes me embarrassed to be in insurance," says Irene Morrill, vice president of technical affairs for the Massachusetts Association of Insurance Agents. "You've been a client for multiple years, paid your bills, never had a loss, have a loss, and we nonrenew you. It makes no sense to me." On the upside, you can challenge nonrenewal, and after three years claim-free, most companies will again consider you an acceptable risk for the voluntary market.
Consider These Extras
In addition to basic replacement costs and liability, many other types of coverage can be tacked onto a standard home insurance policy. Whether you want them depends on how you live and your tolerance for risk. Among the extras you might want to consider:
Many people don't realize that if they have a home-based business, a standard homeowner's policy covers the contents of their office for only $2,500; an endorsement can raise that substantially. It's also wise to cover your business for additional liability. Morrill tells of the time a FedEx delivery person fell down and sued the homeowner. "It was a business delivery," she says, "so they didn't have coverage."
According to Silvia, fewer than 10 percent of Massachusetts residents have flood insurance, which most agents think is a big mistake. Even if you don't live in a flood-prone area, an unusually heavy rain can bring water into your basement and storm drains can back up, and these are not covered on a standard homeowner's policy. Depending on where you live, you may need to purchase this coverage through the National Flood Insurance Program, which is managed by the Federal Emergency Management Agency (fema.gov/business/nfip). You can challenge your flood zone -- say, if you live near the water but on top of a high hill -- and possibly lower your rate. To learn your flood risk, go to floodsmart.gov and type in your address.
Earthquake damage is also not covered on a standard policy and, depending on your location and the type of house you have, it can run as little as $35 per $100,000 of coverage. Julie Bisconti, marketing director at Claremont Insurance in East Boston, says her mother has affordable earthquake coverage on her frame house in Revere, but her mother's next-door neighbor can't afford it on his more crack-prone stucco house.
Whether you think it's worth the extra cash depends on your own personal comfort level. "There is a fault in Eastern Massachusetts," says Frank Mancini, president and CEO of the trade organization Massachusetts Association of Insurance Agents. "I think the last time there was a quake was probably 250 years ago. Are we due for one? I'm not a seismologist."
If you have valuable art, antiques, jewelry, or the like, you may want to add a rider for them. "You need separate appraisals for each thing," says Bisconti, "and if you start listing each of these individual things, you'll really start paying for them." Therefore, that $500 Hummel figurine your grandmother gave you probably isn't worth an amendment; your $15,000 Renoir sketch, however, is a different story. "You can't insure sentimentality," adds Morrill.
Most policies won't cover all similar valuables -- that is, all the books in your collection or all of your jewelry - but require separate appraisals for each piece; there are, however, some companies that offer blanket endorsements, so be sure to ask your agent.
A few of the more obscure but possibly worthwhile types of extra coverage include identity-fraud expenses, additional personal liability for things like slander and defamation of character, and even a refrigerated products rider -- which has a low deductible and might have come in handy during the recent ice storm in the north-central part of the state. Often, such types of coverage can be packaged together for an additional cost of as little as $50 a year.
Lower Your Costs: The cost of your insurance policy is based on many things, including the neighborhood you live in and the age, condition, and style of your house -- a flat roof, for example, is considered a greater risk than a pitched roof, since snow buildup can cause a collapse. While you can't change certain aspects of your house, there are many factors under your control:
Your credit score: Those who maintain decent credit, goes the reasoning, probably work harder to keep their houses in good shape, too. A score in the high 700s will put you in the highest-tier -- and lowest-cost -- insurance schedule.
Your C.L.U.E. score: Your Comprehensive Loss Underwriting Exchange number is similar to a credit score, but rather than tracking whether you pay your Macy's bill on time, it keeps tabs on how many insurance claims or even inquiries you make. A low C.L.U.E. score will increase your policy's cost, so it's a good idea to check yours periodically to make sure no mistakes have crept in. You are entitled to a free C.L.U.E. report annually and can order it at choicetrust.com. If there are errors in your report, learn how to appeal them at consumerdisclosure.com.
Your lifestyle: Many companies offer discounts for nonsmokers and, perhaps surprisingly, even for those who work at home. "Some companies will give a credit if nobody works outside the home for more than a certain number of hours a week," says Silvia. "Because it's more likely they'll be there if something happens." If you're the type who always has a little something in the bank, that can help, too: Insurers frequently offer "paid in full" discounts to those who save them monthly paperwork by clearing up their entire bill yearly instead.
Your home's extras: Additional security in the form of deadbolts or burglar and fire alarms can decrease your premium, as can storm shutters if you live in an area with high-wind risk.
A higher deductible" "Insurance is for 'Oh, my gosh, my house is leveled to the ground,' " says Silvia. "It's not for 'They just stole my $200 bicycle.' " She recommends increasing your deductible from a typical $500 to $1,000 or even $2,5000. "Whatever you can afford. It can save you 20 to 25 percent of your premium." You may also be able to save money by increasing only a portion of your deductible; for instance, agree that you'll pay more if hit by a wind- or hailstorm.
Shopping around: Some insurers offer a discount for longtime customers; others lower your premium when you switch carriers. Every couple of years, it's a good idea to get some competing quotes to make sure you're getting the best rate; a good place to start is at insweb.com, which allows you to include the specifics of your house and lifestyle before providing you with the name of an insurer in your area that meets your needs.
Taking a class: Some insurers offer a discount of up to 15 percent to clients who take three workshops with the Massachusetts Affordable Housing Alliance's HomeSafe program. Learn more at mahahome.org/class/hs_about.html.
File a Big Claim Wisely
If you find yourself in a situation similar to Dalrymple and Flannery's -- where you've experienced a significant loss -- often your best first step is to hire a public adjuster. Though no statistics are available, public adjusters maintain that for a 10 percent cut, they can increase the payout you will receive from your insurer. "An insurance claim is a business transaction between two parties with opposing interests," says Timothy Ball of Ball and Boyd Public Adjusters Inc. in Marstons Mills. "One side knows what they're doing, and the other side doesn't. We're helping the side that doesn't." You'll get better results, Ball says, if you call a public adjuster immediately after the problem strikes, rather than getting one involved after your insurance company has already made a decision. "It's much easier to negotiate when they haven't taken a position yet."
Even if the amount you're reimbursed doesn't end up being substantially higher, many say it's worth hiring your own adjuster simply because of the energy required to settle a claim. "A major benefit of our service," Ball says, "is that you don't have to deal with the insurance company. It saves you time, aggravation, and, ultimately, money."
Nancy Dalrymple, who hired her adjuster right away, agrees. "You have to pay," she says, "but you're so traumatized by the event that it's hard to get your foot going. Our adjuster took care of a lot for us so we didn't have to deal with it."
What Every Homeowner Must Do:
Buying a good insurance policy is just the start. The following measures will ensure that if you ever have to file a claim, you can prove what you've lost. "The more documentation you have," says John Cantalupa, supervising underwriter for the Massachusetts Fair Access to Insurance Requirements plan, "the easier the process will be."
Take photos of your house that clearly show the materials used in construction; keep a copy both on and off the premises, either in a safe-deposit box or with a friend or relative. Document any special features, such as marble tile or a custom kitchen.
Keep a list of valuable contents, with photos and any appraisals, both on and off the premises. Knowyourstuff.org, a site administered by the Insurance Information Institute, allows you to download free software to create an inventory of your home.
Elizabeth Gehrman lives in East Boston and writes the On the Block column for the Globe Magazine. Send comments to magazine@globe.com.
By Elizabeth Gehrman February 22, 2009
Like many people, Nancy Dalrymple and Michael Flannery never thought much about their homeowner's insurance. Every so often they put a check in the mail for their agent and figured coverage would be there if, God forbid, they ever needed it.
Until their Winthrop single family went up in flames in November 2005, that is. "I thought everything was fine," Dalrymple says. "But they said we were way underinsured. We only had something like $193,000 on the structure, and we had damage of about $360,000. Then of course you have other coverage for contents, but it was a total loss. We lost far more contents than we had coverage for."
In addition, Dalrymple says she felt rushed, during a time of trauma and devastation, into getting the extensive repair work done quickly, which led to hiring a contractor who went way over budget and disappeared in the middle of the job, and a second whose shoddy work landed the couple in informal mediation talks. The couple, who had paid off their mortgage two months before the fire, had to take out a new mortgage to finish the work. They still have not moved back into the house. "Once you have a claim, it becomes an adversarial relationship between you and the insurance company," Dalrymple says, "whereas you thought they were part of your team. They're not."
Dalrymple might feel differently, insurers insist, if she had been more informed about her homeowner's policy and what it entailed. "Most people never read their policy," says Mike Barry, vice president of media relations at the Insurance Information Institute, an insurance trade organization based in New York. "I understand it's not the most scintillating reading, but it's well worth their while to do it. The greatest mistake people make is not understanding their policies."
Many in the insurance industry maintain that it is the job of agents to keep their clients informed, but there is no question that being a proactive consumer -- knowing what to ask your agent about in terms of both coverage and cost-saving measures -- will put you in a better position in the event disaster does strike. "Every year, get a checkup on your insurance," says Kathy Silvia, a licensed broker and cofounder of the Fair Insurance Agency in Centerville. "Just like you would get an annual physical exam. Schedule it for when your policy renews, which is usually the month you bought your home. The worst time to find out what you're covered for is after a loss." Getting an insurance checkup is especially important if you've done renovations that have increased the value of your home.
The state's switch to a competitive auto insurance system last year means there are now more opportunities to shop around for all your insurance needs -- and if you bundle the policy for your car with one for your home, using the same carrier, you could save up to 20 percent. Here's how to get the coverage you need and maybe save some cash, too.
Choose the Best Coverage: The first thing consumers need to understand, insurance insiders say, is the replacement cost for both the dwelling and contents. The replacement value of the dwelling will be lower than what your house would be worth on the open market and lower than the tax assessor's evaluation, because both of those values are affected by location, lot size, and other factors, whereas replacement value only takes into account how much it would cost to rebuild the house in what insurers call "like kind and quality." That is, if you had gingerbread and intricate moldings in the original structure, the new house should have those, too, at no extra cost to you.
When you apply for a policy, your agent should ask lots of questions about the construction of your home. If you feel you don't know enough to judge your home's replacement cost, it might be a good idea to hire a contractor to help you get an accurate appraisal.
Standard policies require you carry at least 80 percent of your home's replacement cost, says Silvia. So if you purchased a policy with $100,000 in replacement cost a few years ago, but building materials have gone up since then, as long as that $100,000 still represents at least 80 percent of the current cost of rebuilding your home, the insurer will pay the full amount.
You can add endorsements that modify your insurance coverage; two are particularly recommended: Guaranteed replacement cost coverage pays the full cost of replacing or repairing a home, even if it is above the policy limit. This endorsement can protect you from inflated building costs in the event of a disaster that affects a whole neighborhood, such as a hurricane, a wildfire, or something unexpected like the 2006 chemical-plant explosion in Danvers. Another is a building ordinance endorsement, which protects you if building codes change in a way that might increase your replacement cost. On the Cape, for instance, the code was recently amended so that windows are now required to withstand 110-mile-per-hour winds rather than 90-mile-per-hour winds. "Twenty miles an hour means absolutely nothing to me," Silvia says, "but in the pocketbook, it means a lot when you have to replace those windows."
Putting your personal property on a replacement-cost basis may also be worthwhile, since standard policies - which generally assume contents to be worth 50 percent of the replacement cost of the dwelling -- figure in the depreciation of electronics and other goods. "If you get 50 percent for content value and add a replacement cost endorsement onto the policy," says Silvia, "most companies will increase the content value to 70 percent of the building's value." For example, say your television is stolen. A standard policy will take into account the age of the TV; if the average life of a TV is 10 years and yours was five years old, you'll get only half of its replacement value toward buying a comparable new one -- unless you have this extra coverage.
In certain circumstances -- such as if your home has a swimming pool or trampoline or you own a breed of dog deemed dangerous -- standard insurance companies will often refuse to cover you. In that case, you'll have to go with the Fair Access to Insurance Requirements (FAIR) plan, a state-sponsored program paid for with money pooled by all the carriers that operate in the Commonwealth. The FAIR plan covers all owners as long as their houses meet certain minimal safety requirements (such as there are no live wires dangling from the ceiling), and it does not necessarily cost more for comparable coverage.
As Dalrymple and Flannery found, even a single large claim can also force you into the FAIR plan. "Sometimes it makes me embarrassed to be in insurance," says Irene Morrill, vice president of technical affairs for the Massachusetts Association of Insurance Agents. "You've been a client for multiple years, paid your bills, never had a loss, have a loss, and we nonrenew you. It makes no sense to me." On the upside, you can challenge nonrenewal, and after three years claim-free, most companies will again consider you an acceptable risk for the voluntary market.
Consider These Extras
In addition to basic replacement costs and liability, many other types of coverage can be tacked onto a standard home insurance policy. Whether you want them depends on how you live and your tolerance for risk. Among the extras you might want to consider:
Many people don't realize that if they have a home-based business, a standard homeowner's policy covers the contents of their office for only $2,500; an endorsement can raise that substantially. It's also wise to cover your business for additional liability. Morrill tells of the time a FedEx delivery person fell down and sued the homeowner. "It was a business delivery," she says, "so they didn't have coverage."
According to Silvia, fewer than 10 percent of Massachusetts residents have flood insurance, which most agents think is a big mistake. Even if you don't live in a flood-prone area, an unusually heavy rain can bring water into your basement and storm drains can back up, and these are not covered on a standard homeowner's policy. Depending on where you live, you may need to purchase this coverage through the National Flood Insurance Program, which is managed by the Federal Emergency Management Agency (fema.gov/business/nfip). You can challenge your flood zone -- say, if you live near the water but on top of a high hill -- and possibly lower your rate. To learn your flood risk, go to floodsmart.gov and type in your address.
Earthquake damage is also not covered on a standard policy and, depending on your location and the type of house you have, it can run as little as $35 per $100,000 of coverage. Julie Bisconti, marketing director at Claremont Insurance in East Boston, says her mother has affordable earthquake coverage on her frame house in Revere, but her mother's next-door neighbor can't afford it on his more crack-prone stucco house.
Whether you think it's worth the extra cash depends on your own personal comfort level. "There is a fault in Eastern Massachusetts," says Frank Mancini, president and CEO of the trade organization Massachusetts Association of Insurance Agents. "I think the last time there was a quake was probably 250 years ago. Are we due for one? I'm not a seismologist."
If you have valuable art, antiques, jewelry, or the like, you may want to add a rider for them. "You need separate appraisals for each thing," says Bisconti, "and if you start listing each of these individual things, you'll really start paying for them." Therefore, that $500 Hummel figurine your grandmother gave you probably isn't worth an amendment; your $15,000 Renoir sketch, however, is a different story. "You can't insure sentimentality," adds Morrill.
Most policies won't cover all similar valuables -- that is, all the books in your collection or all of your jewelry - but require separate appraisals for each piece; there are, however, some companies that offer blanket endorsements, so be sure to ask your agent.
A few of the more obscure but possibly worthwhile types of extra coverage include identity-fraud expenses, additional personal liability for things like slander and defamation of character, and even a refrigerated products rider -- which has a low deductible and might have come in handy during the recent ice storm in the north-central part of the state. Often, such types of coverage can be packaged together for an additional cost of as little as $50 a year.
Lower Your Costs: The cost of your insurance policy is based on many things, including the neighborhood you live in and the age, condition, and style of your house -- a flat roof, for example, is considered a greater risk than a pitched roof, since snow buildup can cause a collapse. While you can't change certain aspects of your house, there are many factors under your control:
Your credit score: Those who maintain decent credit, goes the reasoning, probably work harder to keep their houses in good shape, too. A score in the high 700s will put you in the highest-tier -- and lowest-cost -- insurance schedule.
Your C.L.U.E. score: Your Comprehensive Loss Underwriting Exchange number is similar to a credit score, but rather than tracking whether you pay your Macy's bill on time, it keeps tabs on how many insurance claims or even inquiries you make. A low C.L.U.E. score will increase your policy's cost, so it's a good idea to check yours periodically to make sure no mistakes have crept in. You are entitled to a free C.L.U.E. report annually and can order it at choicetrust.com. If there are errors in your report, learn how to appeal them at consumerdisclosure.com.
Your lifestyle: Many companies offer discounts for nonsmokers and, perhaps surprisingly, even for those who work at home. "Some companies will give a credit if nobody works outside the home for more than a certain number of hours a week," says Silvia. "Because it's more likely they'll be there if something happens." If you're the type who always has a little something in the bank, that can help, too: Insurers frequently offer "paid in full" discounts to those who save them monthly paperwork by clearing up their entire bill yearly instead.
Your home's extras: Additional security in the form of deadbolts or burglar and fire alarms can decrease your premium, as can storm shutters if you live in an area with high-wind risk.
A higher deductible" "Insurance is for 'Oh, my gosh, my house is leveled to the ground,' " says Silvia. "It's not for 'They just stole my $200 bicycle.' " She recommends increasing your deductible from a typical $500 to $1,000 or even $2,5000. "Whatever you can afford. It can save you 20 to 25 percent of your premium." You may also be able to save money by increasing only a portion of your deductible; for instance, agree that you'll pay more if hit by a wind- or hailstorm.
Shopping around: Some insurers offer a discount for longtime customers; others lower your premium when you switch carriers. Every couple of years, it's a good idea to get some competing quotes to make sure you're getting the best rate; a good place to start is at insweb.com, which allows you to include the specifics of your house and lifestyle before providing you with the name of an insurer in your area that meets your needs.
Taking a class: Some insurers offer a discount of up to 15 percent to clients who take three workshops with the Massachusetts Affordable Housing Alliance's HomeSafe program. Learn more at mahahome.org/class/hs_about.html.
File a Big Claim Wisely
If you find yourself in a situation similar to Dalrymple and Flannery's -- where you've experienced a significant loss -- often your best first step is to hire a public adjuster. Though no statistics are available, public adjusters maintain that for a 10 percent cut, they can increase the payout you will receive from your insurer. "An insurance claim is a business transaction between two parties with opposing interests," says Timothy Ball of Ball and Boyd Public Adjusters Inc. in Marstons Mills. "One side knows what they're doing, and the other side doesn't. We're helping the side that doesn't." You'll get better results, Ball says, if you call a public adjuster immediately after the problem strikes, rather than getting one involved after your insurance company has already made a decision. "It's much easier to negotiate when they haven't taken a position yet."
Even if the amount you're reimbursed doesn't end up being substantially higher, many say it's worth hiring your own adjuster simply because of the energy required to settle a claim. "A major benefit of our service," Ball says, "is that you don't have to deal with the insurance company. It saves you time, aggravation, and, ultimately, money."
Nancy Dalrymple, who hired her adjuster right away, agrees. "You have to pay," she says, "but you're so traumatized by the event that it's hard to get your foot going. Our adjuster took care of a lot for us so we didn't have to deal with it."
What Every Homeowner Must Do:
Buying a good insurance policy is just the start. The following measures will ensure that if you ever have to file a claim, you can prove what you've lost. "The more documentation you have," says John Cantalupa, supervising underwriter for the Massachusetts Fair Access to Insurance Requirements plan, "the easier the process will be."
Take photos of your house that clearly show the materials used in construction; keep a copy both on and off the premises, either in a safe-deposit box or with a friend or relative. Document any special features, such as marble tile or a custom kitchen.
Keep a list of valuable contents, with photos and any appraisals, both on and off the premises. Knowyourstuff.org, a site administered by the Insurance Information Institute, allows you to download free software to create an inventory of your home.
Elizabeth Gehrman lives in East Boston and writes the On the Block column for the Globe Magazine. Send comments to magazine@globe.com.
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