On Insurance Rates

what now

After seeing an insured go to the national carrier they are with and lower themselves from our minimum to the state minimum. 

Completely understand this younger person who needs to drive to work, pay other bills, etc.  On the other hand, 8 of our 10 options would not offer a rate so he is left with 2 of our choices and maybe 2-5 others elsewhere.  Now, we have a woefully underinsured driver on the road because this is what he can afford. So, his carrier is doing what they can to take on some of the riskier populations.  But riskier is relative to the criteria they are basing rates on.  Charging for driving infractions versus for paid claims.  But, those other 8 companies of ours, not to mention a few dozen more will then shoulder the cost of the property damage from any claims he is involved in, not to mention the potential for large medical bills.  As I learned this fall, it is very likely, in the event of a claim that exceeds the property damage, the carrier that pays it can then sue, garnish wages, etc.  None of these are positive.  None of these are healthy for the finances of the overall population.  None of these are good activities for expense ratios. But, if a contract is not enforced, if consequences for bad choices are ignored, where are we left?
We’re left where we are now.  With companies who may or may not know who they want to insure.  Then, they apply data to that uncertainty and it seems to be when in doubt, apply a higher rate.  But it gets better, see when they cannot afford that higher rate and then cancel that policy, the new company can choose to negatively impact the rate for this person. This now locks them into a typically higher rate for another six or so months, maybe longer.  Not good for anyone.
Now, in theory, they could have provided him with coverage and collected premium, maybe secured with a telematics device?  What if we took a longer play and said, you know, this person fits all our criteria and seems to have had a rough stretch 2 years ago.  But, no claims were paid out and there were no accidents reported.  Looks like he/she is in college and engaged now(we know because we are using data confidently and to the benefit of the customer, not the carrier) maybe this is a person we should work with?  

No solutions, just concepts that can be used better.

Dear Insurance agent losing business to me;

I hope this finds you doing well.  It’s been a bit and I know things can be tough for some of us.  Safe to say it could be more challenging now than when you started in the business.   Honestly, if there was an insurance police this would be something they would want to know about, but since there is not I’ll just write this note to you.

For a while, I honestly thought it was mostly the on-line quoting machines that were making such a simple mistake.  Than I started to see more and more captives acting this way.  Yes, indpendents are not completely innocent but  I don’t take as much business from independents.  I’ve always wondered if it was 1) a mistake 2) a lack of knowledge or worse 3) a mandate from the company they work for.  In the case of the local captive agent, I am guessing it is more of a product of desperation. Really needing every phone call to result in business so you cut corners.  You cut corners you wouldn’t cut for your family but would do it in the name of  “low rates” or worse binding a policy today for a commission or some sort of contest.

Here’s the thing, by short changing your customer, you are actually short changing yourself.  In the short term you are costing yourself commission and potentially your customer some much needed coverage.


Honestly, I have no idea.

Now take this from the sales side.  If your fellow agents are doing things one way, why would you want to go down to their level?  You wouldn’t!!!!  So please stop doing it.

How do you fix this?  Simple.  When you are quoting auto insurance, whenever possible you provide the same amount of supplemental un and underinsured motorist coverage as the liability coverage you are providing.  Really not hard.  If you are quoting $500,000 in liability, you quote $500,000 in un/underinsured motorist.  SIMPLE, now just do it.  EVERY TIME.

  • it’s the right thing to do for your customer
  • it’s the right thing to do for your family
  • it’s the right thing to do for your top line
  • it’s the right thing to do for your bottom line
  • it’s the right thing to do for society
  • you’ll close more deals because you’ll stand out
  • you’ll make the industry better

Seriously, if you need more reasons it might be time for another business.  Anyhow, happy selling.




The agent taking your business

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.


But does the band aid fit?

So the other morning I was shaving and cut my chin a bit.  Somehow these tiny cuts bleed profusely and with about an hour before I had to leave I had to do something.  So I apply some cream so it will clot a bit and then apply the first band aid I could find.  It was clear and way bigger than what I needed but it worked.  It had the little bit of gauze that all band aids have and after a short time the bleeding stopped.  Now our upstairs cabinet was not quite like this;

But we did have five different kinds available.

Now as I was leaving I removed the band aid and confirmed this bleeding was done but what if it started again?  So now I went into our kitchen cabinet and grabbed a band aid.  So the downstairs cabinet is more for those times when the kids get cuts outside so it looked a bit more like this;

I went with the penguins from Madagascar.  Not because of the penguins but because it was a much smaller band aid.  Still had the same interior gauze but smaller.  It would work and fit my chin better but it did have a penguin on it and I was going to present at a meeting.  Not exactly ideal.

The point is this, there are several hundred companies that offer insurance.  Reality is the most important coverages (the gauze) that are offered are the same.  Now is your company the right size for you or the right color or have the right other features that is the true question.  And don’t worry, although changing companies takes a little longer than removing a band aid it is less painful.

Just some thoughts.

Rate increases are bad for everyone

Unfortunately people have come to accept rate increases with their auto and home insurance policies.  Kind of sad.  They have heard all sorts of silly excuses;

” Rates are going up across the state…”

“It’s inflation…”

” The big storms across the country are the cause..”


Rates go up because companies can raise rates PERIOD.  That is all, for the most part they do just go up.  Now this kind of rate increase is the main culprit.  FACT is if your driving record has changed since when you took out the policy your rate should go up.  But now it also goes up if you have a home insurance claim as well.  Thing is most home insurance claims are avoidable and most times you see an increase.  Sort of like with auto insurance, like it or not ANY accident that shows up on your record will likely have an impact.

But what is the next level?  Well now that we see what happens to the consumer lets watch it get worse.  So Company A increases rates so someone they insured calls their agent.  Now is this company is the only option the agent has to work with both Company A and the agent will now likely lose this customer.  Congrats, you tried to get more money now both the company and the agent lose money.

Now lets say the person is with an independent broker.  Well now Company A, who is in a bit of a partnership with the agent/agency, may not have the best available rate.  But since it costs more to get a new client than keep an old one the agency “shops” for a better rate and finds one.  Even if the commission rates(insurance is not a not-for-profit) are the same from the old company to the new one the agent still loses.  See the time you have to invest is what is at issue.  Without the rate increase you have a seemingly happy customer and a briefer annual review.  With the rate increase we have a disappointed customer and more time spent making things better.

When the things we do for profitability are not gaining profits it might be time to change things.

Markets change, I get it.  Times and people change, I get it.  Arbitrarily raising rates “just because we can” is hindering the long term results and profitability of an entire industry.

Just some thoughts.  Could go longer.

Buy an insurance policy with time not money

Sort of.  Let’s talk about life insurance for a minute.  Definitely needs to be at or near the top of the list for everybody.  Key here is getting something because reality is that something is better than nothing.  The majority of the population can use some financial help when a loved one dies.

This help can be to cover a funeral or other last wishes.  It is also important to take some time to grieve.  Then of course there are all those household expenses that might be your responsibility.   Maybe you have just taken out this policy just so you can leave money to family members because there is no one depending on your income.  These are all great reasons to have it in place.

What about the emotional part.  What if your actions on this planet were actually being invested for you?  The return would then be an almost immeasurable amount of love and support when it is needed most.  Now those do not amount to  dollars and likely cannot be used to pay bills but there is something to be said for good feelings and support.  Is that “policy” as important as the one that gives actual dollars?  Depends on who you ask.

Can you have one without the other?  Sure, it is easy to simply buy a life insurance policy.  The other one actually requires effort and time.  See you cannot buy genuine support and feelings.  You cannot buy genuine, unsolicited emotions and support…but you can earn it.  Since you cannot buy this kind of policy and can only earn it doesn’t that immediately make it more valuable.  Money cannot purchase unsolicited, genuine feelings.  It cannot make people choose to share and be there for your family when they do not need to be there.  You can spend(see donate) a lot of money and probably get a church full of people there.  Can probably even get some nice post death awards.  But what are those worth?

Key here, I guess, is you can have one without the other but why would you want just the one.  I think your family would want both.

Just some ideas.

Math and value and flood insurance

Woke up early and was immediately thinking about one of my last conversations yesterday.  Let’s start with some math;

If you spend $1000 and in return I lower the cost of something by about $3000 what could you consider your return on investment(roi)?  $2000 not bad.  Not bad at all.

So in the first year of this new product you saved $2000 by spending $1000.  Now in the second year(assuming current numbers stay the same) you actually save $3000 since you do not spend the $1000 again.  So you have now made $5000 by investing $1000.  500% return.

Now let’s say you need to keep that product for 10 years so $2000 the first year plus $3000 *12 = $36,000 for a total of $38,000 . **Average time in a home is 13 years** All because you invested $1000.

DISCLAIMER; This is math based on the current situation in flood insurance.  Where a provisional rate is approximately $6000 but if  you invest $1000 there is a very good chance you will see that reduced by about $3000.  With this being a brand new situation(roughly 4 months old) it is to early to make these figures more accurate.

**Real Estate version;

Is not spending $1000 worth losing a buyer?

Is not spending $1000 worth delaying a sale…and possibly losing the buyer?

Is not spending $1000 today worth saving maybe $38,000?

This is no different than upgrading your bathroom, lighting, landscape, paint, etc.

So at the present time here is my explanation as to why I will not guarantee the above; http://www.youtube.com/watch?v=9MGTq0QHWCQ

Let’s look at it another way; DEDUCTIBLE math

So you are getting $250,000 in coverage and want the same $1000 deductible as your home.  Your rate is $6370 BUT factor in you think FEMA is nuts (they are) and you firmly believe there will be NO FLOOD at your home.  So you take a $5000 deductible.  New rate of  $4988 savings of $1382.  The math looks weird, you take on $4000 more in risk but this year you save $1382 plus year two $1382 plus year three and what do you know you are now in the clear (assuming you saved this savings)  risk averted.

Remember insurance is an exchange of risk.  Flood rates are nuts because people were not paying enough into the big pool of insurance.  The only act of government that I believe will fix this is when the government GETS OUT OF THE FLOOD INSURANCE BUSINESS.

When deciding on how to spend your insurance budget don’t just settle for what the crowd says is right.  Your willingness to take on more risk is rewarded with a savings which you should value.  Especially if you place no value on the flood insurance you have to buy.

Just some thoughts.  Please open your mind to some new ideas.


Thank you State Farm

Thank you for being so large and mostly doing things so good that you force the entire industry of personal insurance to raise their collective “game.” Of course the larger you are the more chance you have to make mistakes so I do not give a whole lot of thought to the usual complaints.

Now I have spoken previously about your awful use of marketing so will not be walking that road today.  I did want to imagine something though.  What if you spent a small portion of your money actually helping create better customers?  Well you have the most customers, by some estimates 1 of every 5 cars, so in theory you can have the biggest impact.

How about instead of letting 5 agents in Poughkeepsie send out the same stupid letter about multi-policy discounts and “saving” $825 you include some education.  Here are some thoughts;

  • You use credit as a part of your rate.  How about some basic tips on improving your credit
  • How about telling people taking a defensive driving course will help?  You can probably drive down the price of the course and maybe make it better?
  • How about pushing the annual review?  You know you have plenty of claims where a home was not properly insured.  Maybe you can get Accucoverage to release a wide scale version of their site.  Heck maybe you can make your own?
  • How about coordinating your marketing?  Maybe then you can print on 100% recycled paper or even use postcards.  Lot of waste here
  • How about you be the first company to institute rate reductions instead of rate increases?  My goodness this would be fascinating to see.  Don’t be like Allstate and charge people for the “privilege” of being rewarded for good behavior

Just some thoughts.  Your HUGE use your size to the advantage of an entire industry.


But what will it cost to rebuild your home?

This might be the toughest question I have to answer when it comes to insuring a home.  Why?  Because the reality is that at the time you start a policy, unless you just built the home, you really have no definite way of knowing this number.  So here is my take; When in doubt always make sure you feel comfortable.  Here are some things to do;

1. As an agent I use any public data I can get my hands on.  This is combined with what you tell me then I input it into the company provided home replacement cost estimator.  Out comes your homes replacement cost and per company policy you have to have this as your minimum level of coverage.

2. Some people do a quick calculation, this guy included, so you take $150 and multiply it by the home’s square footage and you have a value.  Some people use $200, me as well, depending on the type of home and where it is.

3. Here is a resource I played around with while thinking about this topic; www.accucoverage.com .  Easy to use but like all estimators it is limited.

4. Here is a free one; www.building-cost.net

5. And another paid one; http://www.hmfacts.com/homeowners/

6. You could find a home builder and get them to give an estimate

7. You can research Modular Construction homes that look like yours

8. You can find a newly constructed home near yours and see what it is selling for.  Keep in mind that if it is brand new somebody is trying to profit on it so the sales price could be a solid number to compare with yours.

Now I have done options 1-5 as well as 7 and 8 and can say, at least for my home, all seven figures were different.  BUT they were all pretty close, so now what?  My home is covered to the standards of the company I insure it with.  It is also at a figure that I feel more than comfortable with.  Could I get less coverage?  Yes, but then you need to do the math.  I can probably lower my coverage from $300,000 to $250,000 and might technically still have plenty of money to build my home.  But I am not comfortable there and I think it is silly to save maybe $50 and lose $50,000 in coverage.

Should you do this every year?  Well yes, to some extent you need to check in on your coverage every year.  As bad as it would be to be under-insured it is still pretty bad to be paying for more insurance than you need.

Now what, well I could use some help.  See I did all of these steps but would love for you to do them and let me know what you find.  E-mail me here [email protected] so we can discuss.  Also, as long as you would share the final reports I would be happy to pay for the estimators in steps 3 and 5.

As always, just some suggestions you may want to try.

How many insurance policies do you have?

Let’ start with the typical two person household; You own vehicles so you have (1) auto insurance , whether you have a mortgage or not you are smart enough to own insurance for your residence (2)renters/home/condo/mobile home ,  you have also decided to by some extra liability insurance so you have an (3) umbrella policy.  Now you also have other interests so you have insurance plans for your (4)boat, (5) atv (6) motorcycle (7) motorhome and (8) classic car .

So physical things are covered what about you? Well of course you purchase (9)health insurance and  you each own (10), (11) life insurance as well as (12) (13) disability insurance .  You even took advantage of the AFLAC (14) accident and (15) cancer plans offered at work to supplement the (16) catastrophic illness plan you bought separately .  Don’t forget about your teeth (17) dental insurance and your eyes (18) vision.

18 yes 18 different policies.  In case you were wondering insurance plays a HUGE role in the bottom line of your household.  But wait what if….

You own an investment property (19) landlords insurance and that little vacation place at the lake (20) second home insurance, I was wondering where you kept those toys.  Well certainly we must be done.  Well what if you own a business…

So you need some basic (21) general liability coverage then depending on the business you will need (22) workers comp and (23) disability and quite possibly(24) commercial auto not to mention the (25) professional liability coverage you may have as well as the (26) directors and officers for the board you serve on. Whew, 26 potential policies for you to keep an eye on and there are even more than this this is actually pretty basic.

Insurance is a big puzzle and the scary part is there are still people out there who will “predict” you are over insured before they complete the puzzle.