Dynamic underwriting exists…and somehow it is bad for customers

I’ve had my own run of claims as well as some others going on lately.  Fortunately, an occurrence that could have been claimed, sort of,  and a basic “How to handle a claim post”

Both are still accurate and both are somewhere between far from the truth and not enough.  I’ve long thought insurance functions as much like a credit card or bank loan than what people expect from insurance.  But, maybe I’m also abusing or misusing the word dynamic a bit.

Is your insurance re-underwritten year to year?  Sort of but in my experience, not completely.  See it is quickly reviewed and assessed for negative things like claims.  Sure, you may not see a surcharge for that accident but look closer.  See, you have a tier assigned to you and if that changes you’ll also likely see your rate go up.  Hence, dynamic underwriting….but not really.

But I was married this year or completed college this year or bought a house this year.  Don’t those things help?  Sure, sort of.  But, not completely in the live environment.  See, adding a second car and a spouse will find you multi-car savings but doesn’t typically adjust for your spouse or partners credit score or college degree that you don’t have.

An agent needs to know this and also needs to know the how and when to adjust.  But, as with all things, there is a cost associated with this.  The company does not bear the burden of keeping a customer.  In fact, many of their actions make you wonder if they actually want to keep the customer.

So, is it dynamic underwriting or situational dynamic or something else?  So it is much more situational dynamic.  In other words, we’ll be dynamic when it is convenient for us.  Yup.  That is why when David asks about filing a claim I have to have a drawn-out explanation that ends with, I really have no idea if it is a good idea or not. You really just have some sort of “loan” that sometimes functions like insurance, other times functions as a credit card with 6 months interest-free and no payments that you better read the fine print on.

Until an insurance company wants customers from top to bottom in the organization, this is unlikely to change.

When your “competition” helps you

So I was playing around with on-line quoting and of course had to use Geico.  Recently, now about 3 months late I received a well done email.  Obviously now part of a drip campaign.  This is not remarkable but what was there certainly is.

Coverage Coach

FANTASTIC.  First of all it is a very cool tool.  Clean screens, easy to use, etc.  But why is this important?


That’s right.  I went through it ten times with a variety of combinations and every time I came up with less coverage than what I would offer a similar person.  Baffled by this but not surprised.  I’ve been replacing Geico policies for years.  When not replacing them I am encouraging(sometimes begging) people to please take higher coverage.  Most of the time it works.  Let me speculate on why;

  • They think they are saving you money?  In theory they might be.  In reality, 9 out of 10 times they aren’t.  Really.  If you could save $50 a year or have $400,000 which would you choose?
  • “But you don’t need that much coverage…”  Prove it.  While you are at it go to the store and by me a lotto ticket.  Same scenario.  Also, if you have not noticed, companies partially base your rates on previous liability limits.  Lower limits typically leads to higher rates.  Your call.
  • $250 deductible?  $500 deductible?  No coverage on a $5000 vehicle?  Baffled.  When it comes to your comprehensive and collision coverage(also known as physical damage) consider a few things.

1. If your car is safe to drive and presentable would you get that small dent fixed?

2. Ask a body shop how much work $500 actually is?  Also ask about $1000.  Oh, by the way, the odds of your rate going up for a claim less than a $1000 are as good as over $1000.  Basically whatever you collect for the claim you’ll likely pay back over the next 3-5 years.

3. What your car is worth and what it is worth to you may be two different things?  Math doesn’t lie.

Just some quick thoughts.  Unfortunately the philosophy behind Gecio may be getting more of a life with some of the new “quoting” companies.

Just some thoughts.  Use if you want.


I really need to lower my rate…

This is something I hear on a very regular basis.  Yes, I try to lower said rate whenever I am introduced and asked to help this situation.  But what can I do?  I can;

  • Get proposals from 12 different companies
  • review the coverage and make some suggestions
  • advise you to take a defensive driving coverage
  • give some ideas about how/when to pay to save money
  • review your discounts
  • help you make a plan

So that is five things I can do.  Now what can you do;

  • get proposals from the other twenty or so companies you can
  • Actually make some changes on your coverage
  • TAKE the defensive driving course http://www.newyorksafetycouncil.com/default.aspx?
  • Consider not getting a monthly bill, pay in full to save more
  • Actually go through everything
  • Be patient, your ticket or accident is with you for three years
  • Consider an older vehicle not a brand new one
  • Ask yourself if you are ok with a small dent in a safe car
  • Ask yourself how much work you can do around your home
  • start looking at this as a vital piece of your financial plan
  • review annually
  • Forget your loyalty to a company, loyalty needs to go both ways

Way more you can do than I can do.

Just some suggestions, thanks for reading

Is this a claim?

So about an hour ago this tree came down and I am sure many more have come down and will come down up and down the east coast.  So now what?

  1. Make sure everyone is ok.  In this case no people were near by
  2. Take a photo ALWAYS document damage BEFORE you clean up **It is ok to wait till the storm is over but do your best to limit damage***
  3. Get an estimate or do the work yourself    ***BE CAREFUL*** When storms occur unscrupulous gougers and amateurs come with them.
  4. Talk to your neighbor, always better to play nice.

Is it a claim?  Well a tree from your property fell through your neighbors fence during a storm.

Did you do anything negligent? NO, so that just means there should be no lawsuit.

So this is my tree, will I get paid for the clean up?  In all likelihood it is a double no.  This tree should cost well less of my $1000 deductible to clean up and it also did not hit a covered structure of MINE.

Will my neighbor have coverage?  Well a tree hit his covered structure(assuming he has home insurance and other structures) BUT this might be a $200 length of fence and I am guessing $200-$400 to cut up.  I am hopeful even if he has a $500 deductible his agent is smart enough to tell him not to put this silly claim on his record and if he has $1000 it is likely less than his deductible.

But hey it missed his deck and somebody will get some great firewood so it is not all bad right?

Just some ideas, use at your discretion.  Sometimes it is better to open a claim and go unpaid than to find out later.  Either way, your decision.

How to take control of your claim

Step 1.Remember why you have insurance, it is not for the little annoying thing that you can comfortably afford to fix.  It is for the event that you need help paying to fix.  Filing a claim because  “I pay for insurance why shouldn’t I use it…” can get you in to trouble. **What is trouble?  Trouble is having rates on the higher side of the market for at least three years**

Step 2. Do your homework.  So you just filed an auto claim and you think it is pretty bad.  Well how about you get an estimate from your local body shop?  Then you can spend some time on-line figuring out what your car is worth.  Try Kelley Blue Book and Edmunds and then try and shop for your car on AutoTrader.

Step 3. Part of your contract whether it be for auto or home insurance it is your responsibility to limit the loss.  Have I ever seen a problem with this clause?  No.  Reality is most people apply some effort to limiting the damage.  Some things to considerSo you have some damage at your home, how much of the work can you do yourself?  Have you called someone that you would have repair the work for an estimate? **Odd as it may be, the rule of getting three estimates seems to always work.**

Remember your deductible is your choice, calling in a claim is your choice and taking control of your claim is your choice.

**UPDATE 5/19/2015**

All of these and the updates are as true as ever.  We have  even begun to be more proactive.  How?  By taking higher deductibles.  Reality is $1000 is not a lot of damage.  Also, when it comes to homes, you do not actually pay the deductible out.  Many vendors/contractors/tree people and others will work with you and you can even do some of the work yourself.  Also, keep an eye on State Farm.  I like that they have gone to a percentage deductible.  Interesting.  I do not have enough data on it but it is interesting.

Are you overinsured?

I am aware of no way to ever say someone has too much insurance, the fact is you just never know.  There is just one circumstance you can say you may be overinsured when it comes to a home.  An insurance company is insuring the cost to rebuild your home.  They are not covering your tax assessment nor are they covering the market value of the home or even what you think your home is worth.

So how do you become overinsured?  Generally, I see this when a policy has not been thoroughly reviewed in a 2-3 year period and the coverage has been allowed to automatically inflate.  The other is when agents simply insure a home based on the previous carrier information and do not actually review the replacement cost of a home.


  1. Figure out the square footage of your home and multiply it by $130  $150(updated 5/12/15) per sqft this will give you a rough idea.
  2. Call your agent and ask for a full review of the dwelling coverage on your home insurance.  Before you do this assemble a pretty thorough description of the details of your home including square footage, types of floors, bedrooms, bathrooms, etc.  They can then input this into whatever evaluation software they are using.
  3. The other thought is if you happen to know a builder, not a handyman, plumber, roofer or another specialist an actual person who has built a home.  Check with them as well.

FURTHER, update 5/12/15

The more things change the more they stay the same.  The challenge may be slightly greater now that the overall “market” for home purchases has leveled a bit.  Think of it this way;

  • You can buy homes all over the U.S. that would cost more to build than buy used
  • Based on insurance company math people are building brand new homes at 50-100% more of what they are worth on the open market
  • With a choice of at least three if not seven different replacement cost calculators, who is right?  I have no idea

Bottom line, a little homework goes a long way.  Do your best.  Don’t settle for less but know that settling on a comfortable figure is the likely outcome.  As always, hope it never matters.


Just some thoughts.

The Anatomy of a Car’s Value

2003 Volkswagen Jetta GL:  So according to KBB.com  the Good Trade-in Value is $1700 and Fair is $1125 so maybe I am around $1500.  Now private party says $3225 and Fair is $2525, let’s keep being reasonable and say $2875 as the private party we won’t use retail because this car is not in excellent condition.

How about Edmunds?  A little different process here comes up with $2734 as a trade in $3752 as a private party, same thing here retail seems a bit high.

So KBB average with my adjustments is $2187.50 and Edmunds is $3243  that is about a $1000 difference.

I was hoping to find some for sale, however, was unsuccessful so where does that leave me?  With a $1000 collision deductible I may see somewhere between $1100 and $2200 dollars in the event of a total loss and the coverage costs about $100 for the year.  It still looks like I am ahead and I would not mind having that money to buy another car.  That being said, IN MY OPINION, it is almost time to drop the coverage.

Why should you do this, so in the event of a claim you are not surprised at the first offer that an insurance company makes.

5/12/2015 UPDATE

This car was sold in July off 2013 for $550.  There was a very large market, larger than I thought there would be.  Definitely could have received more for it.  But at that point, my conscience and moral compass stepped in and we all felt very satisfied at this price.  It does go to show, as in this post that there is absolutely a market for cars that you cannot find on the internet.



What’s my car worth?

It is your means to get around town, to work, to play to kids activities.  it is worth a lot to you but what is it worth to an insurance company?  The cost to repair a car is going up so if your car is older you need to keep in mind that if the cost to repair your car is more than the value of the car it may not get fixed.  Now what is the car actually worth in dollars?  It may not be as much as you want.

Try and find a consensus.  Visit Kelly Blue Book (www.kbb.com) and/or Edmunds (www.edmunds.com) to help determine the value of your car.  Be reasonable with the condition and figure the middle number is about where you are.  How do you double check this try a car buying site like www.autotrader.com .  Give yourself a reasonable driving radius and try and find your car.

When should you do this?  NOW and/or right after an accident

Maybe it is not worth keeping collision coverage on your car?  It is also a great idea to know what your car is worth when the car is being assessed for damage.


5/11/2015 UPDATE

I’e been paying closer attention to this for 4+ years.  Despite the tools suggested above there are a few other things to consider.

  • There seems to always be a market for pick up trucks.  The color does not seem to matter, dents don’t seem to manner either.  Somebody is always looking for one
  • Older Hondas.  They are just popular across a variety of segments of people.
  • Subarus. Especially the all wheel drive ones.

Im sure there are lots of others you can enlighten me on, these are just a few that seem to stand out.  Why does it matter?  Because the market for your car or a car that you may buy can vary for a bunch of reasons.  The computer models mentioned above are solid but don’t overlook “market” factors.