California Auto Insurance Blog

By Ken McCall, Staff Writer

Officials fear more increased cost would prompt drivers to go without coverage.

One of the first causes Jon Husted took up when he joined the Ohio General Assembly in 2001 was a bill to raise the state’s minimum requirements for auto liability insurance.

“I think one of the lines in my speech was, ‘The last time these were updated was around the time I was born,’ ” said the now-state senator and Republican candidate for Ohio secretary of state.

Husted’s bill, like many since, never made it out of the legislature.

The latest attempt, House Bill 23, was introduced in February 2009 by state Rep. Gerald Stebelton, R-Lancaster, but it’s yet to get a hearing in the House Insurance Committee. The bill would double all the minimums.

“My understanding is the chairman of this committee doesn’t want this bill to come out,” Stebelton said. “I think if this ever got to the floor of the House for a vote, it would pass.”

Calls and e-mails to House Insurance Committee Chairman Rep. Dan Dodd, D-Hebron, were not returned last week.

Stebelton, a trial lawyer, said it’s past time to raise the mandatory minimums.

“As you think about it, the minimum (bodily injury) limits of $12,500 per injury and $25,000 per accident are pretty minimal,” he said. “In an accident today, you can spend $12,500 just in one visit to the emergency room.”

What often happens in an accident with a minimum-insured driver, Stebelton said, is a victim ends up making a claim against his or her own policy for under-insured drivers.

“So basically, those of us who have higher limits on our policy are actually paying for this,” he said, “because that translates into higher premiums on the under-insured policy.”

State Rep. Terry Blair, R-Washington Twp., said he signed on as a co-sponsor of the bill because it would “protect people on the road.”

“It does two things,” Blair said. “If I’m the driver and I’m carrying the insurance, then it protects my assets, because it doesn’t take much to go through $12,500 on bodily injury or $7,500 on property damage. That’s almost nothing.

“But it also protects the other people involved through no fault of their own.”

Of all the bills proposed in the legislature, he said, this one shouldn’t be controversial.

“We require financial responsibility for the privilege of driving a car,” Blair said, “so we ought to make it a reasonable amount of money.”

But the auto insurance industry doesn’t agree.

Mary Bonelli, spokeswoman for the Ohio Insurance Institute, a trade group for insurance companies, said raising state minimums would just drive up the number of uninsured drivers on the road.

“This is something we’re working very hard to curtail,” Bonelli said. “And having the limits raised at this point would likely effect our numbers in a negative way.”

Dean Fadel, chief lobbyist for the trade group, argued there is no need to raise the limits because the “overwhelming majority” of Ohio drivers buy insurance with coverage above the minimums.

The people most affected, he said, would be young people. Drivers between 16 and 25, he said, account for a third of all uninsured drivers involved in accidents, and more than a quarter of all accidents on the roads.

“It’s the simple rule of the haves vs. the have-nots,” Fadel said. “We’ve all been there when we could fit everything we owned in our car. These folks are living paycheck to paycheck. That’s the population you are going to be impacting the most.”

Ohio, he pointed out, also continues to have some of the lowest average car insurance premiums in the nation.

The average auto insurance spending was $628 in 2007, 11th-lowest in the nation, according to a National Association of Insurance Commissioners study released last year. The national average was $795, the study found.

Requiring higher minimums, Fadel said, could drive those premiums up.

But the head of the trade group for Ohio independent insurance agents said the cost of doubling the minimums would amount to a very small premium increase.

Scott Nein, CEO of the Independent Insurance Agents of Ohio, said research his organization did last year found that increases would amount to a few dollars a month even for young drivers who have the highest premiums.

A single male driver in his early 20s with one speeding ticket, for example, would see an annual increase of $68 a year for the increased minimum coverage called for in HB 23. The annual cost for such a driver would increase by 17 percent, from $458 to $536 annually, or less than $6 a month.

Nein of Middletown, a former state senator for Butler and Preble counties, described himself as a “true conservative” who was against the state’s mandatory seat belt laws because he sees them as a government intrusion. But he said the state’s minimums are “just so woefully low” that they need to be changed.

“If you’re involved in an accident, you’ve got to take care of another person’s damages,” Nein said. “And if you can’t do that, they can take you on personally in a legal action, and your insurance company isn’t going to protect you.

“Normally, insurance is a lot cheaper to buy than having to go through that whole process.”

All these years later, Husted said he still supports raising the minimums.

“I think the time has come for us to update this,” Husted said. “However, we might want to wait until we’re in a little bit more of an economic recovery.”

Stebelton acknowledges that the outlook for this year isn’t good.

But, he vowed, that won’t be the end of it.

“If we don’t move it this year, it’ll be back next year,” he said. “As long as I’m a member of the General Assembly, I will be introducing this bill, because I think it’s important.”

People whose odometer doesn’t tick up much may be eligible for reduced rates on their auto insurance.

Progressive Insurance offers up to a 30 percent discount on premiums to drivers who don’t slam on their brakes, drive late at night, or accumulate a lot of miles.

This is a different method of determining auto insurance rates, which are usually determined by traffic violations and other factors.

Consumers interested in the the “Snapshot Discount” must place a small electronic device in their car. The device is designed to monitor vehicle speed and usage. After a month, Progressive reviews the results to determine a policy rate. Six months later, the plan is reviewed again and the electronic device can be returned to the company.

Obtaining a car insurance quote based on driving habits stands to help many people lower their rates. This may be especially true for those who have poor credit scores. Some states, such as Michigan, have determined that it’s completely fair for insurance companies to use such information when determining prices, the Detroit Free Press reported earlier this month

By Bob Graham

A direct-to-consumer auto insurance company says it has lowered its overall rate for coverage for drivers in New Jersey by 20%.

Wilmington, Del.-based 21st Century Centennial Insurance Co. said the lower overall rate level is for new customers, effective May 10.

The company said it is one of only a handful of auto insurers to announce a rate reduction in the past year while many of New Jersey’s largest auto insurers raised rates. New 21st Century customers will save an average of $568 annually.

Insuring over 2 million vehicles across 49 states and Washington, D.C., 21st Century companies are part of the Farmers Insurance Group of Companies.

By Jeff Gelles

If you’ve ever seen “Flo,” the cheerfully offbeat cashier in Progressive Insurance’s ad campaign, you probably know her shtick: that when it comes to auto insurance, Progressive strives to be a little bit different, too.

But Progressive’s latest attempt to distinguish itself in Pennsylvania - a plan to offer rates based on drivers’ habits, determined by connecting wireless monitors to their cars’ computers - has run into a roadblock.

The Ohio company says its usage-based “MyRate” plan offers drivers in other states, including New Jersey, discounts of up to 30 percent if they drive fewer miles, stay off the roads during the accident-prone hours after midnight, and avoid hard braking.

But Pennsylvania officials and Philadelphia’s consumer advocate raised questions about the plan, which Progressive says it has temporarily withdrawn.

Lance Haver, Philadelphia’s director of consumer affairs, said Progressive provided too little information about what data it would collect and how it could be used or shared. He said he was concerned about consumers’ privacy and also about their right not to be penalized for, say, working a second-shift job or having to navigate the city’s congested and often-antiquated roads.

Pennsylvania Insurance Department officials said that using habit-based factors in setting premiums was not necessarily objectionable. Some practices, such as asking drivers how many miles they drive each day to work, have long been common. But they said Progressive’s MyRate filing left many questions unanswered - including how few miles a policyholder would have to drive to qualify for the full discount.

“The filing was completely ambiguous. It didn’t have any details whatsoever,” said Chuck Romberger, director of the department’s Property and Casualty Bureau.

Progressive spokeswoman Susan Rouser said the company was working with the state to determine how it could meet regulators’ requirements without disclosing information that “would be of value to other insurers.”

Rouser defended the MyRate program, which is offered in various forms in 20 states - including New Jersey since August 2008.

“It gives customers control over their car-insurance rates so that people who drive fewer miles at safer times of the day, and who don’t slam on the brakes so much, can benefit,” she said in an interview.

Progressive is slowly shifting MyRate’s brand name to “Snapshot Discount” and promotes it online with a picture of Flo holding a really big camera, alongside her really big smile, big eyes, and big hair.

But the device at its heart is not a camera. It is a wireless data recorder mailed to a policyholder, who then plugs it into his or her car’s onboard diagnostic port - standard equipment in all U.S. vehicles since 1996, the company says.

In its withdrawn filing, Progressive offered only a broad-brush picture of which data the device captured and how it might be used.

The 17-page filing said, “The device records vehicle information including, but not limited to, the date and time of installation and disconnection, and the time of day and speed at which the vehicle is operated.”

Nor did it specify how habits would be evaluated, except to say that the program “rewards customers for responsible driving and reduced fossil-fuel utilization.”

The company’s filing did promise not to surcharge Pennsylvania customers for habits it considers bad, statistically speaking. In New Jersey and some other states, MyRate data can raise rates as much as 9 percent over a customer’s base premium, though the company says such surcharges are being phased out.

Even with the surcharge, the New Jersey program has drawn no complaints, said Marshall McKnight, of the state Department of Banking and Insurance. “We think the primary reason for that is that it’s voluntary, and the consumer can opt out at anytime,” he said. “From our perspective, it appears consumers are happy with the program.”

Progressive says that, across the country, more than 100,000 customers, or about 25 percent of those eligible, have signed up for the plan.

Haver’s questions elicited a few more details from Progressive’s Pennsylvania product manager, Tim Wiebe, who said in a letter that the MyRate device proposed for Pennsylvania “does not include GPS capability,” but can measure acceleration forces, and can use speed and time data to derive “rates of acceleration and braking.”

However, Rouser said Progressive planned to focus only on the distance and time of day a car is driven, as well as evidence of repeated hard braking, because each has been shown to correlate with loss claims. She said the company considered using acceleration data, but rejected it.

“We’ve just found, according to our data, that it’s not as predictive as hard braking,” Rouser said.

Haver said he remained concerned that city residents could suffer from the plan. Some have no choice but to drive during rush hours, which Progressive considers a medium risk, or between midnight and 4 a.m., which it pegs as high risk. And he said swift acceleration and hard braking were sometimes a necessity on the region’s congested and antiquated roads.

Haver said his biggest concern was Progressive’s lack of transparency about what data would be collected and how it might be used, immediately or later.

“My primary goal is to protect all the information that consumers provide voluntarily - that it remain the property of the consumer and not be sold by the insurer or used against the consumer,” he said.

Still, Haver said he was not necessarily advocating that Progressive abandon usage-based discounts.

“If the company would guarantee privacy, let consumers know what information will be collected, how it will be evaluated and used, then this type of insurance holds promise,” he said. “Until then, the risk of abuse outweighs any benefits.”

By Ryan C. Fuhrmann

Personal and commercial auto insurer Progressive Corp. (NYSE:PGR) reported second-quarter results on Tuesday that showed the company continues to grow in the segment that sells auto policies directly to consumers. Strong historical growth and high underwriting standards are other reasons to look closely at the stock, even though it is more pricey than the firm’s archrivals.

Second-Quarter Overview
Net premiums written grew 5% to $3.7 billion while net premiums earned increased 4% to $3.6 billion. Investment losses, the second primary revenue item for insurance companies that comes in the form of net investment income, sent net income down 15% to $211.9 million, or 32 cents per share. The combined ratio improved ever slightly to 92.7.

A Direct focus
Progressive continues to steal a page from Berkshire Hathaway’s (NYSE:BRK.A) (NYSE:BRK.B) GEICO insurance unit by focusing on selling automobile insurance directly to consumers. Direct auto saw a 15% jump in policies in June while policies sold through insurance agents only grew 3%. Direct policies now represent 44% of total personal auto policies in force. The company also offers insurance on “special line” products such as mobile homes, recreational vehicles, and even snowmobiles. It also operates a small commercial auto segment. (Learn more about auto insurance, see Beginner’s Guide To Auto Insurance.)

Year-to-Date Results and Outlook
For the first two quarters of its fiscal year, Progressive reported low single-digit growth in net premiums earned and investment income. Total revenues reached $7.4 billion while net income increased 5% to $507.5 million, or 76 cents per diluted share.

For the full year, analysts expect a modest increase in revenue to $14.7 billion and earnings of $1.48 per share, which would represent a year-over-year decline of approximately 7%.

Bottom Line
At a recent share price of about $20, Progressive continues to trade at a hefty premium to reported quarter-end book value of $9.44 per share. A forward P/E multiple of 13.5 is more reasonable, but it’s still ahead of peers that include Travelers (NYSE:TRV) and Allstate (NYSE:ALL) that trade at single-digit forward multiples.

However, Progressive stands out as it has managed to grow premium and investment income in the double digits over the past five- and 10-year periods. Continued growth will rely on selling direct to consumers. Progressive also has a reputation for conservative underwriting standards, which should help minimize downside risk.

Loyalty is a prized characteristic, but is there a good time to be disloyal? The answer is definitely . . . when it can save you money on insurance.

Shopping around for the best car insurance rates and home insurance prices seems like a no-brainer, but a recent study reveals that most people aren’t taking advantage of possible savings.

Only one in four auto insurance policyholders shopped around for better car insurance rates in the last year, according to the Auto Insurance Consumer Dynamics Survey released by Acxiom, a provider of marketing services with clients in the insurance industry. Of those who did “shop around,” 36.2 percent got a car insurance quote from just one company, 24.6 percent got quotes from only two companies and 22.7 percent got quotes from three insurers.

Not surprisingly, young people facing financial challenges are the most likely to comparison shop, notes Tim Prunk, managing director of Acxiom.

“There were surprises, however,” Prunk says, adding that consumers perceive very little difference between the value provided by local agents from State Farm or Allstate versus online quoters such as Geico or Progressive. While the days of loyalty to a “trusted local agent” might be waning, the real motive comes down to price: The “low cost insurance” messages of the online insurance quoters have gotten through to consumers.

“When it comes to switching carriers, it’s all about the cost,” Prunk says.

Leaving free money on the table

While Acxiom’s survey shows that many people are willing to change insurance companies for annual savings of less than $300, the question remains: Why do so few people actually search for better home insurance or car insurance rates? Alex Hageli, director of personal lines for Property Casualty Insurers Association of America, has an idea, and it’s not a very flattering one.

“People are lazy. It’s ridiculous. I don’t know why [insurance] should be treated differently — it’s comparable to a bank or credit card,” Hageli says. “I have no problem shopping around for a better rate.”

His observation about insurance buyers is echoed by Linda Sherry, a spokesperson for Consumer Action, a national nonprofit education and advocacy organization for financial literacy: “They can be remarkably apathetic.”

Saving money: Can’t be bothered?

With the current economic realities, most of us jump at the chance to keep a little more money in our wallets. But Hageli believes insurance is a different animal, and most people just don’t want to bother.

“It’s inertia,” says Hageli. He says that policyholders assume “‘I’ve been here five, six, seven years; I must be getting some kind of discount,’ but it doesn’t work that way. I think people view the length of an insurance contract more positively than the company does. Length of time doesn’t necessary work in your favor.”

“You should cheat on your insurance agent,” advises Hageli.

The Acxiom survey confirms that people who have been with the same insurance company for five years or more are less likely to switch insurance companies, but Hageli believes that’s even more reason to shop around. Many people, he believes, don’t realize that your insurance rates are based in part on your credit history, and that your insurance risk score has likely changed in the last five years.

“If you don’t shop around after five years, that initial underwriting could still be impacting you,” Hageli says.

Even if you don’t want to switch carriers, Hageli says many states have a law that requires insurance companies to re-score you if you ask for it. If your state doesn’t require that, he advises that you make it known to your agent that you might start shopping for a better price, and chances are they’ll reevaluate your rate.

“A lot of consumers are not particularly educated about insurance,” Sherry adds. “Plus there are a number of things you need to get a quote, and who understands what ‘comprehensive’ and ‘collision’ are? It’s really hard to remember what all that terminology is,” so consumers are rarely inspired to check up on homeowners and car insurance rates every six months.

Make home and car insurance part of an annual financial tune-up

Consumer Action advises that once year you revisit all your financial relationships: your bank, credit cards, insurance and investments.

Hageli believes it’s critical that people get copies of their credit reports each year, which are available for free under federal law through annualcreditreport.com. He also suggests that you get a copy of your CLUE report, which insurance companies use to assess your loss history and set your rates. It should be monitored for accuracy, just like your credit reports.

The word risky has a negative denotation. It denotes possible loss, injury, hazard, jeopardy and/or danger. For auto insurance companies, “risky” is a very familiar term in that it is one category in classifying drivers. They use the category high risk and low risk drivers. Between the two, the first has to pay higher premium.

Why the difference? Car insurance companies rationalized that high risk drivers are charged higher premiums. It can be more than 25-100% higher than the normal liability insurance because of the risk they impose to car insurance companies. Basically, one gets insurance so that he will not pay for all the expenses such as car damage due to accident.

In this premise, high risk drivers are charged higher because according to research they are more likely to be involved in road accidents. This is the reason why they have to pay higher insurance rates than the others. Insurance companies have to shell out more money for them.

What are the criteria of classifying high risk drivers? Someone belongs to the high risk category if he has multiple traffic violations in his driving record, involved in major accidents, driving with inadequate coverage, number of endorsements in his license, etc. Moreover, they are assessed whether they can pay regularly or not for their auto insurance.

Young and elderly drivers are also included in the high risk category. Teenagers are considered high risk especially young males because they are more likely to be involved in accidents because they are not yet that skilled compared to adults. They are also immature in dealing with situations that need good judgment while on the road.

As for the elderly, they are considered high risk because of the health problems that comes with age. However, they may still be eligible for car insurance as long as they provide medical proof that they are still capable to drive safely.

There is one criticism in classifying people in categories because if a particular group is classified as high risk, people who belong in it will have to pay high premium even though they are safe drivers such as the young males or teenagers.

High risk drivers are the most disadvantaged when it comes to applying for insurance because auto insurance companies may deny them or as expected have to pay higher premiums that is why they are advised to take measures that are geared towards becoming a low risk driver.

Want to check if you are a high risk driver? Check out your driving record from the Department of Motor Vehicles (DMV) and pay fines for any pending violation. Ask them how to get out of the high risk category.

Look for car insurance tips. These are readily available in the internet. If you want to look for lower rates, look for online auto quotes. These quotes are free so you should not worry of extra charges. Shop around but do not fall for unbelievable offers because they can be scams.

Lastly, talk to a car insurance agent of the company of your choice and tell honestly what coverage you need. Don’t ever tell lies just to get low cost auto insurance because they counter check their costumers’ profile like driving record, credit report and insurance claims.

Car insurance companies like Safe Auto Insurance are not immune to participating in the commonly accepted practices that a majority of insurance organizations generally adhere to. One of these practices has been challenged in a Detroit, Michigan courtroom recently.

Michigan’s Insurance Commissioner banned the practice of insurance companies basing the rates their customers paid for auto insurance on their respective credit scores. On Thursday, the Michigan Supreme Court in Detroit effectively vetoed the Commissioner’s ban, and legitimized the practice once again.

New reports are showing that an alarming number of drivers are not aware that their car insurance payments are based on their credit scores, and that number appears to be climbing every month.

No matter where a customer may turn for their car insurance, whether it is a local firm, or a nationally recognized firm like Safe Auto Insurance, Geico, or State Farm, their payments are in fact largely affected by their current credit score.

This may come as bad news to many Americans as the country continues to work its way out of a long recessionary period, and credit scores are still trying to find a way to recover. However, drivers looking to get a better feel for the approximate rates they should be paying now are encouraged to seek out free auto insurance quotes from insurance companies like Safe Auto Insurance, Progressive, and Geico.

By Matthew Sturdevant

Texas insurance regulators ordered The Travelers Cos. to immediately halt broadcast of a television commercial that says drivers could lose their homes if they don’t have sufficient auto liability insurance to cover a crash.

The advertisement is misleading and it conflicts with Texas laws protecting a person’s home, according to both the Texas Attorney General’s office and the Texas Department of Insurance which sent cease-and-desist letters Wednesday and Thursday to Travelers offices in St. Paul, Minn. If the property-casualty insurer doesn’t comply by withdrawing the ad, it could be fined up to $20,000 each time the commercial airs.

“Texans are protected by robust homestead laws that insulate homeowners from the losses depicted in Travelers’ advertisements,” Texas Attorney General Greg Abbott said. “Because the state already protects homeowners, it is improper for Travelers to scare Texans into buying insurance they may not need. The letter we sent today instructs Travelers to pull down this misleading advertisement immediately or face legal action by the state.”

An attorney for the Texas Department of Insurance also sent a letter to Travelers referencing a phone conversation with company officials in which they agreed to stop broadcasting the commercial by Saturday.

The commercial features a man driving a living room on wheels down a two-lane highway, getting distracted by his phone, swerving into the oncoming lane, then crashing. The voiceover says, “Without the right auto insurance, a crash might impact more than your car. Make sure you’re properly covered, so when you’re driving your car, you’re not risking your house.”

Travelers has declined to comment.

Denver, CO (PRWEB) July 8, 2010 — NetQuote, the leading online insurance shopping service for consumers and small businesses, today announced that Paul Ford, CEO, received the Ernst & Young Entrepreneur Of The Year® 2010 Award in the Technology category in the Rocky Mountain region. According to Ernst & Young LLP, the award recognizes outstanding entrepreneurs who are building and leading dynamic, growing businesses. Paul was selected by an independent panel of judges, and the award was presented at a gala event at the Grand Hyatt in downtown Denver on June 24, 2010.

“NetQuote.com helps consumers secure the right insurance at the best rates,” Ford said. “Our website technology connects over 700,000 people every month with best insurance providers for their needs, and I’m honored that our positive impact is being recognized with this award.” NetQuote.com offers consumers a free, simple and effective way to obtain competitive quotes on Home, Renters, Health, Life, Small Business and Auto insurance. Visitors complete an easy quote request form and are instantly matched to quotes from the best insurance carriers for their situation.

“NetQuote.com helps consumers secure the right insurance at the best rates,” Ford said. “Our website technology connects over 700,000 people every month with best insurance providers for their needs.”
The Ernst & Young Entrepreneur Of The Year program celebrates its 24th anniversary this year. The program honors entrepreneurs who have demonstrated exceptionality in such areas as innovation, financial performance and personal commitment to their businesses and communities.

As a Rocky Mountain region award winner, Paul will now be considered for the Ernst & Young LLP Entrepreneur Of The Year 2010 national program. Award winners in several national categories, as well as the overall national Ernst & Young Entrepreneur Of The Year award winner, will be announced at the annual awards gala in Palm Springs, California on November 13, 2010. The awards are the culminating event of the Ernst & Young Strategic Growth Forum, the nation’s most prestigious gathering of high-growth, market-leading companies.

Sponsors
Founded and produced by Ernst & Young LLP, the Entrepreneur Of The Year awards are pleased to have the Ewing Marion Kauffman Foundation and SAP America as national sponsors. In the Rocky Mountain, local sponsors include Denver Business Journal, Faegre & Benson, Clifton Gunderson, and JohnstonWells Public Relations.

About NetQuote
NetQuote® is the Internet’s most popular comparison insurance website, connecting consumers with multiple insurance agents who compete for their business. Since 1989, NetQuote has connected more than 25 million people to the largest network of local insurance agents and national insurance carriers. NetQuote saves consumers time and money with objective insurance information and comparison shopping services for Auto, Home, Renters, Health, Life and Small Business insurance via NetQuote.com. NetQuote partners with the nation’s top insurance carriers including Allstate®, Nationwide®, and Progressive® to make sure consumers get the right policy at the best price.

About Ernst & Young’s Entrepreneur Of The Year® Awards Program
Ernst & Young’s Entrepreneur Of The Year® is the world’s most prestigious business award for entrepreneurs. The award makes a difference through the unique way it encourages entrepreneurial activity among those with potential and recognizes the contribution of people who inspire others with their vision, leadership and achievement. As the first and only truly global award of its kind, Ernst & Young Entrepreneur Of The Year® celebrates those who are building and leading successful, growing and dynamic businesses, recognizing them through regional, national and global awards programs in more than 135 cities in 50 countries.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited located in the U.S.