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.

Fulfilling a contract, earning votes, re-election

My thoughts are a bit, but not much, different as it pertains to our crazy system of elections 

Most of my commute is littered with silly yard signs promoting various candidates as is my mailbox.  Although I watch shows, I do not watch cable T.V. or listen to the radio so I avoid that noise.

Metaphor and simile’s; I suppose the deeper one gets into a subject(insurance), and wants to help people understand it, the more similes and metaphors you can use.  Although insurance is a bit dirty, it is unfair to compare it to politics since that is much dirtier…sort of.  But where does it make sense?

Claims.  Claims are supposedly why you have insurance, just in case.  The truth is, likely 90%+ has it because the law or a mortgage requires it.  But, when a claim doesn’t go well, what happens?  Well, the claimant first feels the brunt of it.  Then, if there is an agent/broker they feel some of it.  Depending on when during the policy period, at some point the agent/broker now finds out the customer wants to leave.  BUT, here comes the catch.  If you were regularly reviewing your rates, there is not an artificial buffer keeping your rate high.  So, you go to switch and it becomes HIGHLY unlikely that you can since you now have a claim on your record.

Behind the scenes; nice enough couple starts with a $2400 rate and is thrilled.  You run the CLUE report and find 5 occurrences over a 5 year period.  2 of these are using towing, total payout $124.  1 is a relative’s so we exclude it.  That leaves you with a comprehensive claim since his vehicle was vandalized while parked and she hit a deer.  New rate?  $3800  WTF?  Nope, just insurance.  **Yes, there are dozens of things behind this but scenarios like this are not unusual.

Sort of like; taxes are up, standard of living is down, your town/city/state’s reputation is not good, you might even be involved in some “shady” stuff but you are getting re-elected because you or your party has the money to do it.

ADVERTISING But when your signs go out are you advertising to new votes or old votes?  In theory, we are in a connected world.  If you received 1000 votes last election, how many of those can you depend on to vote for you again?  BUT, bigger than that, how many of those can you depend on to encourage another person to vote for you?

It is very rare that we receive a phone call specifically requesting a company be used. Like Sasquatch rare, * Saw SmallFoot, usual story but still fun.  Nice Soundtrack**  BUT, most of our calls come based on the name of one of our divisions, our parent company name or one of our team.  Wondering why voting is that much different?  Kind of like a new candidate having an office two doors from office and to my knowledge, no hellos have been exchanged.  Then again, ignoring small business is just what New York does.

It goes back to some basic stuff; be worth sharing.  Give people reasons to share you. Don’t advertise to advertise.  Focus on being worth voting for(buying) and the rest seems to take care of itself

Adding value to car claims

Well, I have some relevant experience lately and this post from 2010, updated in 2015, is the same advice I followed and still give out.  But, along the way there where several missed opportunities to add value to an insurance brand.

  • So your car is on its way to the shop or in the shop and you need a rental. Now, my experience with Hertz and Enterprise was as expected; average.  Nothing bad nothing worth noting.  What would I like to see different?
    • There are ALOT of people who cannot or it would hinder them to have to give the $50-$100  hold on their credit card for the rental.  This can be an easy fix
    • I suppose a reasonable amount of empathy from both places.  But, I wonder if they actually understand the insurance claims process enough to empathize?
  • Lots of talk about BMW, Tesla, Volvo, etc. making programs where the car comes with insurance.  There are several affinity programs that exist as well.  But, when I stepped into, as the kids and I called it, The Clown Car.  Really was a Nissan Versa, not a bad ride just “what was available” I was underwhelmed.  Then, accident two happened and I was in a Subaru Impreza sedan.  Ironic but very nice.  That is when it hit if you have a car brand, why are you not working closely with insurance companies as well as rental car companies.  You have a captive audience that can be narrowed down to people who MUST BUY A NEW CAR.  What a missed opportunity.  Sure, there are some people loyal to brands but I bet there are thousands, if not hundreds of thousands who would “try” something either intentionally or because it was an equal option. This could also end up being a place for companies to save money on claims?
    • Look at all the car advertising you see on the internet, in your mail, etc.  Wondering; what is the cost to get someone to buy a car?  What is the average cost of rental cars during a claim?  Well, the coverage typically available is between $900-$1500.  How does that fit with customer acquisition cost?
  • Although I like telematics, adoption will be a challenge in the largest part of the market, the middle.  Why?  Retrofitting older cars?  Well, there is an app for that.  It is more trust that does it.  So I had a new fancy Subaru with all sorts of features my old Scion didn’t have.  This was interesting.  Is this another way to get people used to having things in the car that bring value?
  • I’m not a fan of more advertising, but I am still left wondering why Hertz/Enterprise, again they have a captive audience, didn’t attempt to make me like them?  Both had a nice experience at the counter and I did need to call both and both were ok.  But, again, here is a chance to differentiate.  We travel a few times a year and may need to rent a car.  Who should we choose?  My wife has a corporate program she is a part of, maybe now is the time to really “wow” a family?
    • ” Oh, you are part of the Gold Program, we won’t be putting a hold on your card….”
    • “Oh, I see you have $30 a day, but wait you are part of our Gold program so here is an upgrade……”
  • Maybe you can even go a step further and tell your car renter that, if they need gas during the rental and go to Sunoco(just an example) please scan the card on the keychain for $.10 off a gallon….

Here is to hoping I avoid any more field research with rental cars and claims 🙂

Paying for loyal rates?

Yup. A couple of times a month we run into something similar.  Long time, likely profitable, customer not exactly being appreciated https://theinsurancebill.com/?p=199

Truth is, I’ll likely be in a similar spot about 10 months from now.  But how can that happen?  You had two NOT AT FAULT accidents.  Exactly  But, because of a lot of things, including a call center order taker and some weak regulations, one driver did not have enough coverage.  That means I need to use my coverage *sigh*.

Lots of bigger questions, but the one that pops into my mind is the “accident forgiveness” conflict.  My children, and maybe yours, have accidents all the time.  Forgiving accidents is just part of what you do for children. Our employees make mistakes all the time.  We fix them and move on, we don’t change their salary because of them.  But yet, in insurance, it seems to be acceptable to pay a company to forgive an accident.  Huh?

Don’t most consumers forgive actuaries, executives and underwriters on a daily basis for abusing price optimization, miscalculation and poor performance?  They even willingly but maybe unwittingly continue to pay premiums.

Times are a changing, time for a change.

 

When the system breaks

I lose some sleep and wake up thinking about yesterday’s “loss.”  Not really a loss more like a time where everything seems to match up but it just doesn’t.  Everything is there;

  • was referred by a trusted person(is there any better way)
  • has been with me a few years(yup, 98+% stay)
  • had actually met in person(shocking but happens)
  • helped with a non-insurance thing(helped get one a job)

So you go into the renewal time ready to follow the plan and this time it doesn’t work.  Factually the overall plan always works.  But, within that plan, sometimes the sub-plan doesn’t get the expected result.  Take the other set of circumstances;

  • two people in a relationship(fortunately insurance is ahead of the rest of the country)
  • above average credit(yup, like it or not insurance scores work)
  • home owner(they better rethink this one soon)
  • college degree(not as valuable as you think)

Feeling good at this point but then the bad side of the Insurance industry steps in.  One driver gets a ticket for using his cellphone.  No big deal right?  WRONG  Fortunately the current rate is still competitive in the market.

Quick aside; the sooner we stop punishing people for things that are more driven by profit the  better.  Some companies have wised up and in many cases look at DWI/DUI differently.  Cell phone use is in a similar category.  Good people make mistakes.  We have an imperfect “justice” system. Act accordingly.

 So you look at putting the home and auto with the same company, this has not been possible yet,  and you think;

Life might be slightly easier if you couldn’t give a multi-policy discount

But that is not the case so we trudge forward and the news gets worse.  You are in a pretty good spot but then you remember the small claim last year.  By small I mean a payout of $429.  And in steps the flawed, old, non customer-centric philosophy of throwing away every other rating variable because somebody used their insurance.  Flag on the play, I am calling a foul or honestly just saying BullS*&$ .   You wonder why so many new “tech” companies are coming into “your” space.  You wonder why you have to(really choose to) spend so much money on advertising to get new customers.

It is because you are not treating your current ones very good!!!!

Enough already.  I am moving forward, my model works and soon enough this model will solve this nonsense as well.  Honestly, waiting for Insurance companies to do it is a colossal waste of time.

Moving forward.

Claim Economics

Had a call about a claim this weekend.  No big deal, part of the business.  An awful, annoying and very, very broken piece of the business but part of it.  So the usual;
Is everybody ok?  Yes
What happen?  other person hit me, admitted fault and police were called **REAL good news but must be handled properly**
Then what?  Call the other company, not yours….
Etc. etc. More posts here and here and here

Here is what I thought about though.  Both companies have the money ” in the bank” to pay this claim.  So what do they lose?  Well they plan on this anyhow and the reality is, if done correctly, it is really just a marketing activity.  This is your chance to jump over price and cement a relationship but instead both the paying and the non-paying company will likely negatively impact both the person who is at fault and who isn’t.

WHY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Baffled by the economics of this since we have already committed a lot of money to an underwriting philosophy that made this customer one that we want.
Baffled at why an industry would allow the occurrence of one claim where a person was deemed completely not at fault to override several dozen other factors.
But, then again, this is likely just another example of how having clear goals, appreciating humans and allowing morals, ethics and philosophy to blend with technology is really just the next frontier.

Rethinking claims and the causes

***Working thought, from an idea via a longtime friend***

So the scenario is quite common, friend calls and says they want to have some tree work done on their property.  Pretty common.  You can also insert, new roof, new furnace, upgrade to electric panel, drainage dug, fire alarm installed, etc.  Think of it as any proactive, likely preventive measure that can reduce the likelihood and at worse the severity of a claim.

“Bill, is there an extra discount for cutting down the trees?  Will they(the insurance company) pay for it?  ”    No and No.

Why not?  Well, in theory, this is your responsibility.  Maintain your home.  Home insurance is not a maintenance policy.  Nor should it become one.  On the other hand, if we are engaged in this great mutual enterprise of protection, of a partnership with a set of people, why aren’t we working together.

What to we do first?  I think we come up with a pretty comprehensive list of items that can be done that can reduce or sometimes eliminate the likelihood of common claims;

  • Annual home inspection by a certified home inspector
  • Gutter maintenance
  • Improving or adding better drainage
  • Keeping trees/tree limbs off a certain perimeter of the home
  • Insect/animal inspections and preventive measures
  • Alarm systems; fire, smoke, co2, central alarms, mobile monitoring
  • Nest type thermostat with temperature sensors
  • Documented annual cleaning/inspection of wood stoves and fire places
  • etc.

Then set up a pretty basic incentive structure.  Say a $20 annual credit to be applied to your premium for completing 1-3 of these.  $30 for 4-6, etc.  Or maybe a deductible credit.  Right now it is popular to diminish/waive a deductible after a period of years.  This is nice but does it really make sense?  Is it something the customer can see/feel/touch/SHARE right now?  NO it is not.   Maybe doing something big like tree removal/pruning or a new furnace or a new roof gets you a $20 a year credit for say 5 years?  *Yes, some are already doing a roof discount**   Lets expand this.

Let’s get better relationships in place with say Angie’s List, Home Advisor or other similar site.  In theory, they are already filtering the good contractors from the bad, why replicate their effort?  No need.

If used properly this can be a massive retention tool as well as loss ratio reducer at the broker/agent level.   This will also help the carrier.  Not to mention, this is something actually worth talking about.  It is a positive incentive that can put more money back into the local economy while creating a marketing activity worth talking about.  Seriously, enough of this overplayed and diluted discount non-sense.

Thanks for considering.  Open to your thoughts.

The real cost of a claim is

much more than the money you are given.

10:00 Thursday, August 22nd my car was hit.  I was deemed 100%, not at fault and only suffered a small cut and a few hours of soreness.  This is being written 23 days later and my car is still in the shop.

Yes, I have a rental and have had it available since the day of the accident.

Yes, I have no out of pocket expense for this accident since I am not at fault.

No, I am not terribly pleased with this whole claims process.

See I have consulted with a few hundred claims and know how to handle them but I missed the worst part when there are no physical injuries of course.  Cars can be fixed or replaced.  In most cases, people will heal.  But I did overlook the immeasurable and uncompensated annoying part that goes along with claims.

It sucks to not have your car.

Yes, that is a bit petty since I do have a nice enough car to drive around but it is not my car.  My driving habits have not changed, I have not changed my usage, I’ve just enjoyed it much less.  See there is something to be said for this situation.  See your home/rental/condo policy has loss of use coverage which basically provides living expenses if you are displaced from your home.  Now within that coverage, I am aware of claims adjusters having a little leeway when it comes to what they pay out.  This coverage pays for a hotel or even a place to rent but it also compensates for meals if you need to eat out and the cost exceeds what is normally spent.  I’ve personally had a claims adjuster work with me to pay for a hotel in a different city since we were to be out of the house anyhow.

What is the comparable thing for auto insurance?  I’m not looking for much, just a little something to acknowledge the inconvenience.  Maybe Geico sends me a $20 Starbucks card with a little note;

” We know this is annoying, hang in there your car will be ready soon…”  Of course, it would be funny if they wrote  “Sorry the dopey kid we insure chose to test his 0-60 time while coming out of a Dunkin Donuts.  Have a coffee on us”

Just a little something to be a bit more human.  After all, this is not a transaction, you actually have had an impact on my household.  Either way, I think I’ll start doing this for my friends.

Just some thoughts, do with them what you like.

Dear Enterprise Rental Car,

8/29/13

I had an unfortunate moment last Thursday when my car was struck by another one.  Now that I have had some time to relax and think I thought I would right you a letter.  I believe that if you are going to hand out feedback you need to be willing to share good and bad.  DISCLAIMER, I have been haphazardly recommending you for about ten years since a previous employer had arrangements with you.  Shame on me.

The good news is my first two conversations with Geico representatives were wonderful.  Great job empathizing with me, made me feel like they really cared.  Not once was I put on hold in about 20 minutes on the phone.  The bad news, in my first conversation with your rep I was put on hold twice and could tell he had a lot more he was working on than just my car.  I also let him know that I would need a larger car.  Since I have two children that would not fit in the Fiat he offered maybe something else would be available,  he really was unconcerned.  I asked him if he really wanted to send me out in a car that was not safe and he did not answer.

More good news, Geico stepped up and made sure I had a comparable car available.  More bad news, when I arrived there were two options but neither was washed and ready.  When I did get the new car it was then washed while I waited.  FAIL.  Then when I started the car I realized the car needs an oil change.  This has been great, every time I start the car I am reminded of how little your employees care about it.  Should be real fun for the next two weeks while my car is fixed.

Good news, Geico checked in to make sure things went smooth.  I informed them of how great their service was but how your bad service actually reflects negatively on them as well.  Of course they were not pleased.  More bad news, you have young impressionable adults who could and should become wonderful pieces of society.  Instead the person that handled the paperwork followed his script and made sure I was just another transaction.  Thought it was particularly wonderful when I told him about a stain in the back seat and he told me “don’t worry about it we are only concerned with the outside..”  So we don’t care about interior or the engine, nice.

Now these may be small things but the reality is small things add up to big things.  Like the 1000+ people I do business with each year and the couple of dozen claims my customers have each year, they all add up.  One person at a time I try to provide a good experience, I own all my actions, good and bad.  I am by no means perfect but I always try.

Thanks for reading.   Best of luck on improving your experience.

Dissatisfied in Poughkeepsie,

 

Billy Van Jura

 

P.S.  Also, shouldn’t all your cars have satellite radio?  Why make someone have to look for stations in an unfamiliar location?  I am sure XM can give you a volume discount like you give Geico and other insurance companies.

It’s renewal time, what do you do first?

So the paperwork for my renewal came in the mail this past week.   Just like millions of other people I went and looked at the rate.    So now what?  Well here are some things I look for in my own renewal, as well as yours when I have the chance to renew it;

  • Is it correct?  Yes, is it correct.  Is my name spelled right, are the right vehicles there are all my discounts correct.  Before you think about the rate lets make sure the basics are correct.
  • Now that we know it is correct, how is your rate?  Did it go up much from last year?  Like it or not rates go up.  What increase can you deal with?
  • So now you want to improve your rate, first lets start with discounts.  Do you have all you can have?
  • Next place to look is at your comprehensive and collision coverage.  If you have it, do you need it?  If you have it, what is your deductible?  $1000 is not a lot of damage on a vehicle.  Ask yourself “If my car is safe to drive and looks presentable would I be ok with a little dent?”
  • Now shop, that’s right shop.  For whatever reason getting 3 estimates works for most things in life.  This does not mean you are going to leave it just means you are being diligent.  LOYALTY IS OVERRATED

Some things to keep in mind.  Your driving record may preclude any change being a possibility.  There may be a good chance for savings by changing how you pay your bills.  You might have as good a rate as you can get.

So what do I do?  Well my wife and I have a ticket or two and a small accident so we fall into the category of not being able to shop.  BUT when reviewing the policy I realized we both can take a defensive driving course.  This will save close to $200 per year for the next three years.  We will spend $49.90 to take it so this is a heck of an investment.  In my case, it is finally time to drop the collision on my 2003 Jetta.  I hung on as long as I could but the Kelly Blue Book value now longer justifies keeping collision coverage.  Dropping this saves a couple hundred more.  Now things are definitely better.  Factor in the nice discount for paying in two payments and I am spending less this year that I did three years ago.  Not bad.

Just some thoughts, would be happy to help customize these suggestions for you.