California Auto Insurance Blog

Today there is literally nothing you can’t do from your smart phone that you could do on the web. With major auto insurers offering customer interfaces, a policyholder can get quotes, make changes, eliminate coverage, bill pay, ask questions, make claims, IM their agent, really the uses are endless.

The most active Auto Insurance companies using apps today for their customers are State Farm, Allstate, GEICO, and Progressive. These carriers offer multiple platforms for their apps, so almost any kind of smart phone can use their software (i.e. mobile site, iPhone, Android, etc.).

Allstate has their Mobileapp, GEICO markets their GloveBox app, Progressive, and State Farm their Pocket Agent.™ Within a year about 50% of phones will be smart phones. So we are getting into a new and exciting territory for handheld computers / smart phones.

Many people relocate from the city to more peaceful outlying areas. You actually have time to talk the local gossip with your neighbors. But unless you work at home, drive times will usually increase substantially. At renewal, you’ll see an increase in insurance premiums, especially company verifies mileage. typically companies will want to know your odometer or at least your one-way commute to work or annual mileage.

You would think the price would drop since claims are lower out of the high crime areas. But you are also driving longer distances. Thusly you are more likely to be party to an accident. Regardless of your driving record, another motorist (possibly an uninsured one), may run into you, costing the insurance carrier.

Car insurers will raise rates to match or exceed the risk they take on you. Their risk increases the longer the distance you drive. Car insurance companies will increase your premiums at certain annual mileage breaks, usually 5000, 7500 10,000 or 12,000 miles. Each company is different. Stay at home pleasure drivers pay the least in regards to mileage. You can lower your premiums by carpooling to work, combining trips or telecommuting more often. You’ll also save on gas and help the environment. BTW, hitchhiking is not recommended! Unless you are into strange, creepy types.

If you must drive high miles, don’t increase your deductibles, or reduce your comp and collision coverage. Check that, you can reduce your comprehensive if the annual premium goes over 10% of the cars value. But if you have a newer or financed vehicle, keep your comprehensive. Remember the likelihood of an accident is higher, so don’t change your limits. When you drive with 2,000 cars o your way to work vs. 50 cars, your chance of an accident is greater. If you move further from your work, your insurance will go up (Unless your car insurer does not verify mileage). Consider becoming self employed or switching to a closer employer. You can always comparison shop and make sure your rates are the lowest. You should be doing that annually anyway.

Auto insurance provider Mercury General Corp. said Monday that its first-quarter net income slipped 5% as it booked higher costs and investment income declined.

The company reported net income of $58.2 million, or $1.06 per share, compared with $61.2 million, or $1.12 per share, a year ago. Operating income, which excludes investment gains and losses, fell to .72 a share from .85, but still easily topped the .53 expected by analysts surveyed by FactSet.

Net investment income slipped 2% to $35.1 million from $35.9 million a year ago. The company also paid out more in accident claims during the quarter, compared with a year-ago period that had benefited from accounting adjustments.

Revenue rose nearly 1% to $705.5 million from $699.8 million, as written premiums edged higher. But higher expenses offset those gains, with costs up to $628.6 million from $618.5 million.

Mercury General reported a combined ratio of 98.2%, up from 96.3% a year ago. An insurer’s combined ratio reflects the company’s losses and expenses, so the increase means the company spent more of each premium dollar it received to pay out claims.

The company’s board declared a quarterly dividend of .60 per share, the same amount paid in the previous quarter. The dividend is to be paid on June 30 to shareholders of record on June 16.

Shares of Mercury General rose .89, or 2.2%, to $40.63 in afternoon trading.

If you live together, you could get a nice surprise if you add your girlfriend or boyfriend to your auto insurance policy. As long as your both have a good driving records (and live together), you could see lower rates.

Female drivers will benefit less by getting auto insurance together because they have less accidents than males. Insurance companies see women as safer drivers, and couples are better risks than single insureds.

Singles males would pay the most, then single females, followed by domestic partners, then finally married partners. Getting married could lower your car insurance price even more than having a domestic partner, depending on if the carrier differentiates the risks between domestic partners and married couples.

You must live together to get a reduced car insurance rate based on a shared policy. One caveat is if your significant other has a bad driving record: DUIs within the last 10 years, tickets or at fault accidents within the last 3 years could actually increase your rates. Before adding the other driver to your policy, find out about their driving history.

Bad credit can also make a shared policy more expensive, depending on if your state allows credit scoring. In states that allow credit scoring, Insurers have found that if you are responsible with your bills, you drive more responsibly.

Each insurance company uses it’s own software and underwriting to calculate premiums and rejections. Calculating rates for adding a driver is a combination of many things the company many like, like the age range or occupation of the other driver.

If your partner is much younger, has a occupation like “stunt man,” or uses their car for work, your rates could also increase.

When your domestic status changes, contact the car insurance company to see how either getting married or dropping them wold effect your car insurance rates.

New Jersey Manufacturers Group was the largest insurer in the state to receive zero valid complaints, according to a report by the state’s insurance department.

NJM is the third largest insurer in the state with 13 percent of the market. GEICO has close to 15 percent of the market, while Allstate comes in with slightly more than 14 percent.

The 2010 Auto Insurance Consumer Information Report ranks companies from worst to best in terms of valid complaint ratio. That ratio is the number of valid complaints to 1,000 insured autos. A valid complaint is defined as when “[t]he insurer’s action violated state insurance rules or laws or the issue in controversy should have been resolved by the insurer without department intervention.”

NJM had zero valid complaints and was joined by eight other companies on the list. The company was the largest insurer in the group to meet such a distinction. Palisades Group was the second largest insurer in this group.

In terms of direct written premium, Palisades Group is ranked fourth behind NJM with 10.5 percent of the market.

Allstate was ranked sixth on the complaint list with 44 valid complaints. In 2009, the company was ranked 14 and in 2008 it was ranked 13.

GEICO was ranked 15 with 19 valid complaints. In 2009 it achieved the same ranking of 15, and in 2008 it was 20.

However, the ranking in one sense can be deceptive. The worst-ranked insurer on the list was Personal Service Insurance Co. However, the company had only three valid complaints out of 13,627 vehicles it insured, but its valid complaint ratio was highest at 0.2202. It is ranked 24 in terms of direct premium written with less than 1 percent of the market.

NJM, in comparison, has 804,801 vehicles insured.

“In a competitive market, shoppers should use consumer studies like this to help evaluate an insurance company,” says NJM President and CEO Bernard Flynn in a statement. “The department’s findings show that NJM has excelled in fulfilling our obligations to policyholders, and we’re very pleased by the results.”

Sequoia Insurance Company of Monterey has been approved by the California Department of Insurance to sell so-called “pay-as-you-drive” auto insurance.

Sequoia Insurance is now approved to sell pay as you drive in California along with AAA of Southern California and State Farm Mutual Automobile Insurance.

“The voluntary initiative is an innovative program that allows insurers to offer plans based on more accurate mileage,” says Insurance Commissioner Dave Jones.

Typically, rates are based on mileage estimates. This program allows motorists who drive fewer miles to save money by only being charged for the insurance they need and use. It’s a voluntary option for California drivers.

North Carolina’s auto insurance system penalizes the state’s best drivers and guarantees profits for private insurance companies. It hurts women and older drivers, and hampers innovation. Those are key findings in a new John Locke Foundation Policy Report.

“North Carolina’s messy, complex system for providing automobile insurance places many of the state’s best and safest drivers at a disadvantage in the insurance market,” said report author Eli Lehrer, vice president of Washington, D.C., operations for the Heartland Institute. “The system is fundamentally unfair and needs to change quickly.”

Lehrer recommends five changes that would lead to better outcomes for most Tar Heel drivers. He’s releasing his recommendations as the state Senate Insurance Committee prepares to consider bills targeting auto insurance reform.

Proposed changes in Lehrer’s report involve fundamental restructuring of a complicated system that’s unique among the 50 states, he said.

“Five parties play a major role in North Carolina’s cumbersome, labyrinthine auto insurance rate-making process,” Lehrer explained. “As a Rate Bureau, elected insurance commissioner, Reinsurance Facility, court system, and private insurers all influence rates, the final product seems to produce a better deal for insurance companies than for drivers.”

The Reinsurance Facility is a government-mandated, tax-subsidized pool, Lehrer explained. Private insurers can dump any risky driver into the pool at any time.

“In fact, almost a quarter of N.C. policyholders are in the pool, compared to less than 1 percent nationally,” Lehrer said. “Some private insurers like the system because it guarantees them a profit.”

A tax dubbed the “clean risk surcharge” allows this system to continue, Lehrer said. “That surcharge averages about 6 percent a year on every auto insurance policy in the state,” he said. “In other words, the safest drivers are paying more so that private insurers can shed policies that might carry higher risks.”

By Cornelius Frolik

A popular program that offers premium discounts to motorists who agree to have their driving patterns digitally recorded worries some privacy advocates who say it is needlessly intrusive and could pave the way for future infringements.

About 250,000 Progressive customers have participated in the company’s Snapshot program in the hopes their driving behavior will earn them savings.

To partake, motorists attach a device to their vehicles’ onboard diagnostic computer that then records and transmits data to the company for six months. It measures miles driven, driving times, braking patterns and speed.

“Snapshot is a voluntary, discount-only program,” said Brittany Senary, a spokeswoman for Progressive, Ohio’s second largest auto insurer.

But Paul Stephens, director of policy and advocacy with the California-based Privacy Rights Clearinghouse, said the device also measures the time of day the vehicle is in use, which is unfair to people who work odd hours. The next step could lead insurance companies to monitor other elements of their customers’ driving behaviors, he said.

“We are on a slippery slope,” Stephens said. “They start out by collecting a little bit more information than they need … then where does it stop?”

He added the information could hypothetically be subpoenaed by law enforcement agencies in police investigations.

The device Tina Brandon attached to the steering column of her car and van looks like a futuristic garage-door opener, but instead of operating doors, it records data and saves her money.

The device, called a Snapshot, records and transmits the number of miles she drives, her speed, the time of her trips and her braking behavior. The data then goes to her insurance company, Progressive.

Brandon, 40, of Huber Heights, said her safe driving behaviors have already cut the cost of insuring her van by about $100 annually. She hopes the Snapshot program will slash the cost of insuring her car.

“Every little bit counts in today’s society,” she said.

Brandon is one of about 250,000 Progressive customers who have signed up for the company’s Snapshot program in the hopes that digital documentation of their driving habits will result in a savings of up to 30 percent off their insurance bills.

Insurance companies typically set rates based on a customer’s age, gender, place of residence, traffic record, accident history and credit score. But as technology improves and becomes less expensive, some insurance companies are using high-tech methods to set and lower their customers’ insurance rates.

Privacy advocates, however, warn that improved technology can reduce customers’ expectation of privacy.

Progressive, which is the second largest insurer in Ohio, began offering the voluntary, usage-based insurance program in the state in June 2010, and rolled out an associated advertising campaign this year. Flo, the perky character in the Progressive commercials, discussed the Snapshot in a recent ad.

Customers who have vehicles made in 1996 or newer are eligible to participate in the program, because those cars and trucks have diagnostic ports that connect to their on-board computers that track relevant information, said Richard Hutchinson, usage-based insurance general manager with Progressive.

After signing up, customers receive a Snapshot device in the mail that they plug into the computer port. Using the cellphone network, the Snapshot transmits data about the vehicle’s movements and the motorist’s driving habits.

After 30 days, Progressive reviews the data to determine if the customer is a eligible for a discount, which is applied immediately. At the end of six months, the customer returns the Snapshot and the company then determines if their driving patterns earn them a discount that will remain on their policy.

“On average, Snapshot drivers save an average of 10 (percent) to 15 percent,” said Brittany Senary, spokeswoman with the company. The average annual savings is $150.

Although the device records the vehicle’s speed, Hutchinson said speed is not a variable when calculating the potential discount. He said also Snapshots do not have GPS, and the data transmitted will not be used to increase a customer’s rate.

“It is a discount-only program,” he said. “Best case, you get up to 30 percent off your insurance rate. Worst case is 0 percent.”

From a business standpoint, the Snapshot program makes financial sense because it will attract customers who want more power over their insurance rates, Hutchinson said.

It certainly appealed to Brandon, who said she signed up for because she obeys the rules of the road and drives cautiously and defensively.

The Snapshot program is not the only discount program of its kind.

Allstate offers Drive Wise, which also rewards safe and low-mileage drivers who agree to attaching wireless telematics devices to their vehicle’s computers for measurement purposes.

A company spokesman said the program is currently only available in Illinois, but the plan is to expand into other states later this year. State Farm, the state’s largest auto insurer, has the Drive Safe and Save program, which tracks driving habits using customers’ OnStar, a subscription-based safety and communication system.

Jeff Rieder, president of the Ward Group, which is a management, consulting and research firm located in Cincinnati, said the usage-based insurance model appeals to insurance companies because although it reduces their revenue, they believe it will attract safer drivers, which will save them money in fewer claims.

“For an average insurance company, they will have about 24 (percent) to 25 percent of their policies make a claim in a given year,” he said.

“If they get customers as a whole who are a better risk, and they can reduce that 25 percent down to 22 or 21 percent, that ends up being a huge savings for them.”

Rieder, however, predicts that if discount programs grow in popularity, some insurance companies could end up charging people who do not participate in the discount programs higher rates on the assumption they are worse drivers.

“For some companies, if they don’t make the correlating adjustments for bad drivers to charge them the appropriate rates, it could disproportionately lower the revenue for the insurance company,” he said. “There has to be correlation for insurance companies to charge the worst drivers more.”

By Jeff Jeffrey

Metropolitan Direct Property and Casualty Insurance Co. has withdrawn its request for a 5.8% increase to its automobile insurance rates in California after a consumer advocacy organization challenged the filing. Consumer Watchdog, the California-based organization that challenged the rate request, estimated the rate increase would have generated $6 million for Metropolitan Direct.

If the rate request had been approved, it would have affected roughly 78,000 California drivers. Metropolitan Direct is a subsidiary of MetLife Auto & Home Group.

Todd Foreman, a staff attorney at Consumer Watchdog, who led the organization’s challenge, said his organization had concerns with how some of the data Metropolitan Direct included in its filing were presented. He said the company did not properly include data on loss trends and the data that were included had “considerable inconsistencies.”

“The Department of Insurance granted our request to intervene, and two days later the company withdrew its application for a rate increase,” Foreman said. “It was definitely a victory for Consumer Watchdog and for consumers in California.”

A company spokesman said in an email Metropolitan Property and Casualty “has observed some changes to its loss experience, and is going to make a new filing with data as of the end of the first quarter of 2011.” The filing will be made by June 1.

Consumer Watchdog’s challenge to the proposed rate increase was made under California’s insurance reform law, which allows any individual or organization to challenge proposed rate requests. That law, known as Proposition 103, does not cover health insurance requests.

Consumer Watchdog is working in support of a newly introduced bill that would create a similar rate regulatory scheme for health insurance rate requests, Foreman said. A.B. 52 is scheduled to be considered by the California Assembly’sHealth Committee on April 26.

Insurance Commissioner Dave Jones, who has been a leading voice in support of A.B. 52, has been stepping up the pressure on insurers making rate requests in recent months, particularly on the health insurance side of the market. Earlier this year, Jones asked four health insurance carriers to delay any rate increases for two months while the Department of Insurance reviewed their requests.

In March, Anthem Blue Cross Life and Health Insurance Co. slashed its rate increase from 16.4% to 9.1% and delayed implementing increases to co-payments and deductibles by 10 months from the effective date the company had originally requested. That cut was expected to save Anthem Blue Cross individual and family plan health insurance policyholders at least $40 million (BestWire, March 22, 2011).

Also in March, Blue Shield of California Life & Health Insurance, another of those companies, withdrew its request to raise premiums on any members in its individual or family health insurance plans for the rest of this year after Jones called its request excessive (BestWire, March 17, 2011). Another company that Jones asked to hold off on rate increases, PacifiCare of California, agreed to defer its premium increases by 60 days beyond their anticipated effective dates (BestWire, Jan. 31, 2011).

Metropolitan Direct Property and Casualty Insurance Co. currently has a Best’s Financial Strength Rating of A (Excellent).

By KATE FORGACH

There ought to be required reading in school to prepare us for buying auto insurance. We need training for reading insanely confusing policy details, imagining worst-case scenarios for ourselves and our loved ones, and weighing the cost of this future doom against a monthly premium payment.

Instead, we find ourselves shopping for insurance with no idea of what we’re about to do. No wonder people hate it. No wonder people throw up their hands in frustration and just shell out as much as cash they can afford, and never review the policy again. In what other arena do we seriously consider our own destruction and possible death?

So here’s help for you to decide if you still need full-coverage auto insurance, along with a tips on reviewing your current policy. Insurance is a product. You can save money on it just like anything else.

1. Do you drive a car?

You must have minimum insurance coverage as required by your state. Full coverage auto insurance generally refers to a policy that includes comprehensive and collision insurance, in addition to the state minimum.

2. Have you paid off your car loan?

You should know up front that, unless you have paid off your car loan, you won’t be able to drop full coverage. You may play with the deductible to make this more affordable, but you do need full coverage until you’ve paid off your car loan

3. Do you already have auto insurance?

After the purchase price, auto insurance can be the most expensive aspect of owning your car.. Adjusting your policy can lead to substantial savings and more affordable auto insurance. It’s absolutely worth reviewing your policy and comparison shopping every year.

4. What is your car worth to you?

Comprehensive insurance covers you if your car is stolen and not recovered, or damaged by anything other than a car accident (e.g. fire, flood or act of God). This will pay for your car to be fixed or replaced for the amount your insurance determines to be the car’s actual cash value, minus your deductible. For a general estimate of your car’s worth, consult the Kelley Blue Book.

5. What is your car worth to the insurance company?

Get out your calculator and do the math on the last question. Look up your car’s value in the Kelley Blue Book. Subtract your deductible. Don’t forget to also subtract the amount of your car loan. This is what you will receive if your car is totaled.

6. What is your car worth to someone else?

Before you decide to write off comprehensive coverage based on the results of your math, consider the 10 most commonly stolen cars in the United States are more than a decade old. So even if you drive an older car and can’t replace the car yourself, you might want to keep your comprehensive insurance.

7. Are you a careful driver?

Collision coverage pays for repair or replacement (minus your deductible) in the case of a crash. Some people think, “I drive like granny and will never crash, so why bother?” The idea is to pocket the money you’d otherwise send to insurance. However, when you are hit by the teenager who mistakes the gas for the break, you may reconsider the wisdom of this. Are you really driving a junker?

8. Is your car European, or an “old reliable” Honda or Toyota?

In this case, it may not make fiscal sense to keep collision coverage because the price of parts could be through the roof. Damage to a single part can “total” a low- or mid-value car, even if it’s otherwise drivable. A fender-bender could result in a total loss. Look at your math from question five. Would it be difficult to buy a replacement with the Blue Book value, minus your deductible (and car loan if you have one)? Your money is better spent in saving for a new car.

9. Where does your car live?

Urban drivers face many more automobile hazards than suburban or rural drivers. If you’re carrying full coverage and do little to no city driving, consider changing your auto insurance policy.

10. Is your car new?

A newer, more expensive car ought to carry full coverage. Just review your policy as the car ages. You may even have a point in mind to begin switching over from insurance to saving for a new car. Overall, the one that is best for you is the plan that will give you enough money to put you back on the road after a loss.