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.

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.

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.