Archive for September 2013

The 5 Biggest Lies Told to Car Insurance Companies   Leave a comment

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Fudging on your car insurance application to save on the premium may seem like a harmless white lie, but it can spell trouble for you down the road.

A new report by Quality Planning Corp. in San Francisco says car insurance companies lost $15.9 billion in 2008 from what it calls “premium leakage” — meaning loss of revenue due to the inability of insurers to keep track of changes in customers’ situations that affect prices. The number represents almost 10 percent of the total $167 billion in personal auto premium written.

“It’s a major problem, and some companies are taking it very seriously,” says Quality Planning senior vice president Bob U’Ren. His company designs solutions for insurers to validate policyholder information and cut premium losses. In other words, they’re in the business of making sure you’re telling the truth.

Here are the most common misrepresentations customers make to their car insurance companies.

1. Under-estimating the number of miles driven

Whether out of ignorance or as a strategy to cut their premiums, many people lowball the number of miles they drive. Some simply forget to call their car insurance agents when they get new jobs that lengthen their commutes. This lie was the most misrepresented rating factor in 2008 and accounted for an industry loss of more than $3 billion

2. “Forgetting” to report all the drivers in the household

Up to 2 percent of policies written are for households with a driver who’s not listed on the policy — and that “missing” driver is usually a high-premium teenage driver or an adult driver with a lot of premium-boosting baggage. In conducting premium audits, Quality Planning asked one mom why her 17-year-old daughter, a licensed driver, wasn’t listed on the policy. Her reply: “I totally forgot she was in the household.” Unrated drivers accounted for $2.6 billion in lost premium in 2008.

3. Fudging the garage location

Quality Planning noted a slight upward trend in the number of people misreporting where they park their cars, particularly in big cities, where garage locations can affect premiums dramatically. Location discrepancies led to $1.3 billion in lost premium in 2008.

4. Claiming discounts that no longer apply

In some cases, drivers conveniently forget to tell their car insurance agents that the conditions that gave them a discount have changed. For example, perhaps they ended membership in an organization that made them eligible for a special premium rate. These wrongly applied discounts, based on misinformation about the driver or the car, added up to $2.9 billion in 2008.

5. Misstating how the car is used

Some customers fail to tell their car insurance companies that they’re using the car for business. An at-home daycare provider, for instance, may neglect to mention that the household van is used to transport the kids to the park every day. Insurers lost $1.5 billion in premium as a result of this type of misrepresentation.

How car insurance companies find out

There are a variety of ways car insurance companies can find out that you lied. If the teenage son you fail to list on your policy gets in a car accident, it’ll be pretty obvious.

Insurance companies also turn to outfits like Quality Planning, which use sophisticated analytical testing to uncover rating errors. The company puts an insurer’s policies through a battery of more than 150 tests, cross-referencing data and employing pattern-matching algorithms to identify errors and discrepancies that suggest fraud or misrepresentation.

If you think the insurance company can’t find out how far you drive every year, think again. Odometer readings taken at smog testing stations, for instance, can be compared to what you report to your insurance agent, U’Ren says. It’s just one example of how your information can be checked.

Given the turbulent economy, insurers have good reason to pay attention. According to Quality Planning, every 1 percent reduction in rating error can result in a 20 percent profit gain. So don’t be surprised if the information you report to your car insurance company comes under increasing scrutiny.

Why should you care about lies?

For one thing, truthful customers end up paying higher premiums to make up for those who lie.

In addition, if a car insurance company catches you in a lie, it can cancel your policy and refuse to pay your claim — assuming you provided inaccurate information intentionally.

Some of the misinformation reported to insurers stems from outright consumer fraud — people deliberately lying to their car insurance companies in order to score lower premiums.

“People know how insurance works and how the game is played,” U’Ren says.

But most misinformation is the result of unreported lifestyle changes. For example, in 52 percent of household auto insurance policies, there’s a change in the vehicle or drivers each year. And more than 25 percent of workers change jobs every year, which affects the number of miles driven, according to Quality Planning.

“Oftentimes, the insurance agent is the last person you think to contact,” U’Ren says.

“Our blogs are for general education and information only and may not represent your unique needs. Coverages will vary. Please contact your insurance agent to verify your specific policy terms and conditions.”

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Posted September 6, 2013 by leecountyinsurance in Uncategorized

Students   Leave a comment

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When a teenager gets a license, it’s probably the first time he or she focuses on insurance. And as young people graduate from high school and head off to college or enter the working world, there are lots of insurance matters for young people out on their own for the first time to think about.

AUTO

Teenage drivers represent the highest risk segment of the population and are involved in more serious and fatal accidents than anyone else. From the insurance company’s standpoint, high risk requires a higher insurance premium. Teenage drivers can add anywhere from 50 and 100 percent to the cost of a family’s auto coverage. Generally, it is cheaper to put a teenage driver on the family policy. Driver education and good student discounts can take the sting out of that to some extent. Many states have graduated driver licensing programs which phase in driving privileges and give teens driving experience under controlled conditions allowing young drivers to demonstrate good driving habits and gain experience. Pick a safe car to drive – the model chosen greatly affects the cost of insurance. If a college student does not have a car during the school year (many schools restrict cars on campus for the first couple of years) and attends a school at least 100 miles from home, tell the insurance company. Rates may be lowered significantly for the period the student is not at home.

HOME

There aren’t many “student homeowners.” But they have “stuff” that needs protection, which usually comes through homeowner or renter insurance. If a student lives at home, or in a college dorm, their personal possessions, including a computer, stereo, television, clothing and such items are covered by the family’s policy. If they have any items of exceptional value, it’s a good idea to have a separate endorsement on the policy. If a college student lives off campus, the family policy will probably not cover them. They should consider purchasing separate renter insurance.

LIFE

Life insurance protects a family’s way of life. As students approach college, not only are families focused on how to pay for it, they should also be thinking of how to keep things on track if tragedy strikes. Life insurance, whether whole life or term, is one way to ensure that resources will be there for your student to finish college if something happens to one of the family breadwinners. At a minimum, families should think about a limited policy that would cover burial expenses if a child is killed in an accident.

HEALTH

In most cases, a full-time student will be covered in the family’s health plan until he or she graduates from college, or remains a full-time student up to 23 years of age. However, if the parents belong to a closed-network HMO that doesn’t provide non-emergency coverage in the school’s area, a separate policy for the student should be considered. Most colleges have a clinic on campus and may offer supplemental insurance as well. If a child gets sick and has to temporarily drop out, parents might want to consider having tuition insurance. Otherwise, even though the child has left school, the family may be on the hook for the tuition.

DISABILITY

Disability coverage provides for lost wages in the event you are injured and unable to work. Most part-time jobs do not include such benefits, so disability insurance is unlikely to be provided by employers to students who work while going to school. For parents who are paying for their children’s college education, disability insurance would ensure that resources are there should the primary wage earner become disabled and be unable to work.

LONG-TERM CARE

The younger and healthier one is, the less paid for insurance. But long-term care insurance is generally not an insurance priority for a young student unless there are extenuating circumstances.

FINANCIAL PLANNING

Helping your student establish a solid financial foundation — managing student loans, credit cards and day-to-day finances — will help them in many ways, including getting insurance at the best possible rate. In many states, insurers use information from credit reports, along with other underwriting factors, to help determine who qualifies for insurance and what they pay. As a result, it’s important to avoid graduating from college and burdened by consumer debt in addition to student loans. Establishing a budget is a good first step. Parents may want to set up a debit card account for their student. Cash can be added conveniently to the account when needed, and expenses can be reasonably monitored.

“Our blogs are for general education and information only and may not represent your unique needs. Coverages will vary. Please contact your insurance agent to verify your specific policy terms and conditions.”

Posted September 3, 2013 by leecountyinsurance in Uncategorized