Even Good Drivers May Be Hampered by Stigma of High-Risk Insurance

Good drivers covered by high-risk automobile insurers may find it hard to overcome that stigma when seeking new coverage from a standard insurer, a new analysis suggests.

Drivers who switch from a high-risk or “nonstandard” auto insurer to a large standard insurer may be quoted higher rates, even if they have safe driving records, according to the analysis by the Consumer Federation of America.

Three major mainstream insurers often quote such drivers significantly higher premiums, compared with quotes for drivers who were previously insured by large standard insurers, the analysis found.

The practice may particularly harm drivers in low- and moderate-income communities, making it difficult for them to find affordable insurance rates, said Douglas Heller, an insurance consultant who conducted the study for the federation. Often, he said, drivers in low-income or underserved areas have few options other than nonstandard insurers, even if they themselves have clean driving records. But once they are covered by nonstandard policies, they may be penalized if they try to move to mainstream coverage, he said.

For the analysis, Mr. Heller and an associate tested whether quotes in 20 cities from seven large insurers differed depending on whether the customer seeking the quote was switching from a smaller nonstandard insurer. The researchers sought quotes for a hypothetical female driver with a perfect driving record; first, they said her prior coverage was with a major insurer (State Farm), then they said her coverage was with a nonstandard company.

In a majority of cities where quotes were available, three major companies — Allstate, Farmers and American Family — used a driver’s previous insurer as a factor in determining the new premium quoted, the study found.

In those cities, Allstate quoted a rate that was 15 percent more on average for a good driver who had previously been covered by high-risk carriers like Safe Auto Insurance and Equity Insurance, compared with State Farm.

Farmers and American Family both charged 9 percent more on average for prior coverage through nonstandard insurers, compared with State Farm.

In one example, the federation found that Allstate quoted a driver in Queens an annual premium of nearly $4,200 when the prior insurer was State Farm. But Allstate quoted the driver more than $5,000 when the prior insurer was one of two nonstandard carriers.

“If one’s driving experience shows that he or she is low-risk,” Mr. Heller said, “then it does not make sense to use the fact that she was previously insured with a nonstandard company against her.”

The federation did not have data on how often drivers switch.

The analysis also found that practices varied by insurer and by market. Allstate raised rates on some customers coming from nonstandard insurers in 12 cities, but it actually lowered rates in three cities (Pittsburgh, Seattle and Tampa, Fla.).

In some cases, the impact was highly localized; Geico quoted rates as much as 72 percent higher in Tampa for drivers who previously had coverage through a nonstandard carrier, but did not use such information to price policies in any other city tested. (Geico declined to comment.)

Three large companies — State Farm, Progressive and Liberty Mutual — did not increase rates at all in relation to drivers’ prior insurance companies, the study found.

Allstate’s pricing “has been and continues to be determined by risk and costs,” said Justin Herndon, a company spokesman, adding, “Insurance prices are risk-based so that lower-risk drivers pay less than higher-risk drivers.” Allstate does not consider factors like income or race when setting insurance rates, he said.

Linda Wagener, a spokeswoman for American Family, said in an email that a driver’s prior insurance from a nonstandard carrier was “one of many factors” used in determining auto premiums. Data show that customers moving from a nonstandard policy have a higher likelihood of future losses than those who come from a standard policy, she said. “As a result,” she said, “their rates are different, to reflect the different levels of risk.”

Farmers did not respond to a request for comment.

Nonstandard insurers sell about $7.5 billion in auto insurance in the United States, representing about 7 percent of the auto insurance market, according to the federation.

David Snyder, vice president for policy development and research with the Property Casualty Insurers Association of America, said the federation’s analysis showed that insurers use a “wide diversity” of practices when considering a driver’s prior coverage, suggesting a competitive market. “It shows the companies are not all doing it the same way,” he said.

The report is the latest in a series of analyses by the federation, highlighting ways in which lower- and moderate-income consumers may be affected by the use of various nondriving-related criteria to set auto insurance rates.

Here are some questions and answers about auto insurance:

How can I find the lowest premium when switching from a nonstandard auto insurer?

Because the use of prior-insurer coverage varies in setting rates, it makes sense to obtain quotes from several insurers, Mr. Heller said. It’s now easy to obtain quotes from companies online, but he advises calling two or three local agents as well.

Are there other costs, besides premiums, that I should consider?

Make sure to ask about fees, not just premiums, Mr. Heller said. Particularly with nonstandard insurers, there are often “policy fees” of $30 to $50 to buy coverage, and extra fees if you pay in installments or add an additional car to the policy later. After getting a quote, he said, “make sure you know all the hidden costs before you decide which company is giving you the best price.”

Do all states permit insurers to consider nondriving-related criteria to be used in setting auto rates?

Some states bar the use of credit history, or of an applicant’s occupation and educational level, in setting rates. Gov. Andrew Cuomo last month proposed banning the use of education and occupation in setting rates in New York, unless insurers can provide proof to the state’s Department of Financial Services that the criteria do not result in rates that are “unfairly discriminatory.” The proposal is subject to a 45-day comment period.

“Good drivers shouldn’t be penalized with higher premiums just because they have a lower-paying job or may not have gone to college,” said Chuck Bell, a policy analyst for Consumers Union, which supports the proposal.

The change, however, could have negative consequences for some drivers, Mr. Snyder said. For instance, it might prevent insurers from offering popular “good driver” discounts to certain people based on occupation, as they often do with teachers.

Senate Republicans Nod at Bipartisan Push for Insurer Payments

Senate Republicans are expressing a willingness to consider a bipartisan approach to strengthening the individual insurance market under Obamacare, even as President Donald Trump is deciding whether to end payments for it.

Senate Majority Leader Mitch McConnell said on Saturday he’d be open to the attempt, which follows the collapse of Republican efforts to repeal and replace the Affordable Care Act, according to the Associated Press. Republican Senator Thom Tillis said he’d be obligated to consider it.

“We have got a destabilized market where insurance rates are going to go up 20, 30, 40 percent next year,” Tillis of North Carolina said on ABC’s “This Week” on Sunday. “Anything that we can do to prevent that and the damage that that will have on people who need health care I think is something I have to look at.”

The Senate health committee will begin bipartisan hearings in early September on stabilizing and strengthening the Affordable Care Act’s individual insurance market, Republican Chairman Lamar Alexander of Tennessee and top Democrat Patty Murray of Washington said in a joint statement on Aug. 1.

While saying he was open to a bipartisan plan for subsidies, McConnell also said on Saturday there was “still a chance” to address a repeal and replacement of Obamacare — but that it was quickly becoming unlikely, according to the AP.

Obamacare First

Trump has also tweeted to his 35.2 million followers that senators, who are away from Washington for their summer recess, shouldn’t vote on anything else until they’ve completed the effort to revamp President Barack Obama’s signature health law.

Health and Human Services Secretary Tom Price said July 30 that “no decision’s been made” on whether to continue key subsidies under the law to health-insurance companies, but that the administration’s job is “to follow the law of the land.”

The payments, called cost-sharing reductions, help insurers offset health-care costs for low-income Americans. Trump has repeatedly suggested ending the payments as bargaining tactic to bring Democrats to the negotiating table.

The next payment is due on Aug. 21.

Thom Tillis

Photographer: Drew Angerer/Getty Images

“The cost-sharing reductions over time need to be eliminated,” Tillis said. “But we can’t just all of the sudden pull the rug out from underneath an industry that has had this in place for about seven years.”

Need Bipartisanship

Appearing together on CBS’s “Face the Nation” on Sunday Republican Governor John Kasich of Ohio and Democratic Governor John Hickenlooper of Colorado said both parties should work to find a solution.

“Republicans are going to have to admit that there is a group of people out there who will need help,” Kasich said.

“I think we’ll be surprised at the number of senators that are willing to kind of step back and say, ‘All right. Let’s roll up our sleeves, and work on a bipartisan basis, and see how far we can go,”’ Hickenlooper said.

Republican Senator Ron Johnson of Wisconsin said “we do need to stabilize those markets” but urged his colleagues to move on to other priorities.

“I really do think we probably ought to turn our attention to debt ceiling and funding the government and tax cuts until we can really get all the parties together,” Johnson said on CNN’s “State of the Union” on Sunday.



Make home insurance compulsory; it will help deal with natural calamities

Insurance as of today is treated as a compulsion and not as an essential component. The thought needs to be re-classified. The government can do much in changing this perception and help increase the insurance penetration in India.

With the implementation of the Goods and Service Tax (GST) Bill, the Indian economy will witness positive strides. It will help create uniformity in the tax structure pan-India by removing several taxes and seamless tax credits, though with the added cost of compliances.

For the insurance sector, we hope to be in the lower tax rate (ie., 5% or 12%) considering the low market penetration and the large middle class component of the Indian population with plenty of available potential.

Talking about health insurance, the government should be applauded for their efforts in providing health insurance coverage for below poverty line (BPL) families. However more can be done for the salaried class.

Currently if one purchases a health insurance policy for self /spouse/children, he/she can claim a tax deduction of up to Rs 25000. When one purchases a health insurance policy for parents (a senior citizen), he/ she is eligible for an additional tax deduction benefit up to Rs 30,000. Given the rising cost on medical expenditures, it would be even more beneficial if they could provide further tax benefits under 80 D.

In recent years India has witnessed an alarming trend with regard to natural calamities. The same results in mammoth loss not only to life but property. The government’s role here, should be to help increase home insurance penetration to the lengths and corners of India – given that awareness levels are still low.

The government can look to create awareness campaign on the importance of insuring home and contents and can also like in the case of Motor Insurance, can look at making Home Insurance compulsory. Another step of encouragement would be to give tax benefits in this area. Also, when one takes a home insurance policy for either their owned or rented residence, the premium for the same should be eligible for tax deduction benefit similar to the once passed.

With the recent cyber-attacks on banks, the industry has witnessed an increased trend in buying cyber insurance to safeguard them against risk arising out of cyber-attacks. There is an equal need for introducing strong preventive mechanism and deterrents cyber attackers. The government can do its bit by taking necessary steps to curb cybercrimes through amendments to respective laws and acts to introduce strong punishments for cyber-crimes. As a preventive measure, it needs It needs to speed up the process of setting up advanced cyber security and e-surveillance agencies.

IRDAI has made e-insurance mandatory and with digitalisation it becomes easier for policyholders to maintain policy documents and availing an insurance policy online. This system will work even better if the government can announce incentives to boost online transactions.



Best Credit Card Travel Insurance

The best type of insurance is the one you don’t ever use. Travel insurance is basically like any other type of insurance, something we pay for, happy to not use and a little annoyed when do. Did you know you may have travel insurance coverage already in your wallet? That’s because some credit cards come with travel insurance as a benefit. Here’s the skinny on credit card travel insurance, when you’d use it, typical coverage policies and some of the best travel credit cards that carry it.

Travel Accident Insurance

Travel Accident insurance from your credit card covers the primary cardholder and authorized users, such as a spouse or domestic partner, or even dependent children (under 24), depending on the card. This insurance pays a benefit if a covered person is killed or injured in a common carrier accident while traveling or during a vacation. An injury may include loss of a limb, sight, speech or hearing.

This is the form of travel insurance I hope no one ever has to claim, but if you used a credit card to purchase your travel, it’s likely you have some coverage. In the event of some tragedy, having this insurance will provide a benefit.

What is the typical coverage policy? $100,000 for personal credit cards (business credit card will often cover more, up to $500,000)

What are some of the best travel credit cards that offer this travel insurance coverage?

Bank Examples of Personal Credit Cards
Chase Chase Sapphire Preferred Card, Chase Freedom, United Mileage Plus Club Card, United Mileage Plus Explorer Card, Southwest Rapid Rewards Premier Credit Card, Hyatt Credit Card, Ritz Carlton Rewards Credit Card, Disney Premier Visa Credit Card.
American Express Platinum Card, Premier Rewards Gold, Gold Card, Green Card, Starwood Preferred Guest, Mercedes Benz, EveryDay, Everyday Preferred, Blue Sky, Blue Cash EveryDay, Blue, Hilton Honors Surpass, Hilton Honors, Delta Reserve, Gold Delta SkyMiles, Platinum Delta Skymiles, JetBlue Cards
Citi Citi Hilton HHonors Visa Signature Card, Citi Hilton HHonors Reserve Card, Citi AAdvantage Platinum Select World Elite Mastercard, Citi AAdvantage Executive World Elite Mastercard, Citi AAdvantage Gold World Elite Mastercard, Citi ThankYou Premier Card, Citi ThankYou Preferred Card, and Citi Prestige Card.
Capital One Capital One Platinum Credit Card, Capital One Secured Mastercard.
Barclay Barclay Arrival Plus World Elite Mastercard, Barclay AAdvantage Aviator Red World Elite Mastercard

Lost Luggage & Delayed Luggage Protection

If your checked or carry-on luggage is permanently lost, stolen or damaged by the common carrier, having this benefit may refund the purchase price of the missing items or the cost to repair the damaged items. If your checked baggage is delayed on a trip, this benefit may reimburse the cost of necessary items until your baggage arrives. Don’t forget you can get your checked bag fees waived with credit cards too.

Let’s say you’re traveling to the French Alps for a ski vacation. You decide to take your own skis and check them at the airport assuming they are arriving at your destination for your vacation.  Your luggage is sent to Tokyo, not on your flight to Geneva, and it will take another 2 days to arrive at your destination.  This is now three days of skiing you would have missed.  Having the right credit card will reimburse the cost of your ski rentals for these three days. If you packed your ski pants and ski jacket in the same bag as your skis, using the right credit card to book your travel, can cover the expense of replacing these items up to the amount designated by your policy coverage.

What is the typical coverage policy? For lost luggage, between $1,750 – $3,000. For Delayed luggage, from $0 – $500 per trip. Unfortunately, I had to use my Chase Sapphire Preferred benefits for lost luggage before.

What are some of the travel credit cards that offer this coverage?

Bank Examples of Personal Credit Cards
Chase Chase Sapphire Preferred Card, Chase Freedom, United Mileage Plus Club Card, United Mileage Plus Explorer Card, Southwest Rapid Rewards Premier Credit Card, Hyatt Credit Card, Ritz Carlton Rewards Credit Card, Disney Premier Visa Credit Card.
American Express Platinum Card, Premier Rewards Gold, Gold Card, Green Card, Everyday Preferred, Hilton Honors Surpass, Hilton Honors, Gold Delta SkyMiles, Platinum Delta Skymiles
Citi Citi Hilton HHonors Visa Signature Card, Citi Hilton HHonors Reserve Card, Citi AAdvantage Platinum Select World Elite Mastercard, Citi AAdvantage Executive World Elite Mastercard, Citi AAdvantage Gold World Elite Mastercard, Citi ThankYou Premier Card, Citi Prestige Card
Capital One None
Barclay Barclay Arrival Plus World Elite Mastercard, Barclay AAdvantage Aviator Red World Elite Mastercard

Trip Delay / Cancellation / Interruption

If your trip is canceled or interrupted because of personal matters, illness, travel related or weather, having the right credit card may provide reimbursement of the cost of your trip. It is the middle of winter and you’ve decided to skip the snow for a cruise to the Bahamas. The ship leaves in two days.  The day before you leave a winter storm rolls in and you have 36 inches of snow on your front door step.  You can’t get out. You’ve paid for your cruise and instead of enjoying that drink by the pool on your cruise, you’re shoveling out of your house with your next-door neighbors. By using the right credit card to book your cruise, you may be able to recover some or all of the cost of your trip.

Some credit cards offer no trip delay/cancellation insurance while other personal credit cards can provide up to $10,000 per trip if your vacation is canceled or has to be cut short, in addition, some will provide up to $500 if your trip is delayed by more than 12 hours.

What are some of the credit cards that offer this coverage?

Bank Examples of Personal Credit Cards
Chase Chase Sapphire Preferred Card, Chase Freedom, United Mileage Plus Club Card, United Mileage Plus Explorer Card, Hyatt Credit Card, Ritz Carlton Rewards Credit Card,
American Express None.  American Express sells a travel insurance product allowing supplemental coverage.   
Citi Citi Hilton HHonors Visa Signature Card, Citi Hilton HHonors Reserve Card, Citi AAdvantage Platinum Select World Elite Mastercard, Citi AAdvantage Executive World Elite Mastercard, Citi ThankYou Premier Card, and Citi Prestige Card.
Capital One None.
Barclay Barclay Arrival Plus World Elite Mastercard, Barclay AAdvantage Aviator Red World Elite Mastercard

Bottom Line on Credit Card Travel Insurance

It’s important to check the policy for your existing credit cards to determine your level of coverage. You can find this by calling the number on the back of your credit card or checking your credit card’s benefit guide. If you find that your credit card does not provide sufficient travel insurance coverage, consider carrying a card in your wallet that does because it’s something you want to have and hope to never use.



Life Insurance Activity Off In 2Q

Braintree, MA. (July 19, 2017) —U.S. individually underwritten life insurance activity declined
-2.6% in June year-over-year, closing out a second quarter that showed improvement over Q1 losses, according to the MIB Life Index. The composite index has lost ground in every month of 2017; softening of year-over-year application activity first surfaced in the third quarter of 2016. At the close of the second quarter, the MIB Life Index is off -3.2% YTD. 2017 YTD declines basically erased gains achieved in the first two quarters of 2016, and gave back roughly one third of the total gains recorded in the 2015-2016 expansionary period. In relative terms, the Q2 2017 YTD Life Index value (99.96) is now on par with index values seen in Q2 2015 (99.78). June’s application activity was -1.6% off the pace from May 2017 levels, but consistent with seasonal norms. 2017 year-over-year declines should be tempered against the all-time high index values posted in the comparative six months of 2016.

U.S. life insurance application activity declined across all three age groups in June with the 45-59 group showing the largest losses at -5.0%, year-over-year. In June, ages 0-44 was off the least at -0.9% and ages 60+ was off -4.1%, as compared to same month last year. For the second quarter, application activity ages 0-44 were down –0.4%, ages 45-59 were down -4.6%, and ages 60+ were down -2.1%. Year-to-date, application activity ages 0-44 are down –2.3%, ages 45-59 are down -5.5%, and ages 60+ are down -2.1%.  Application activity ages 45-59 continue to account for the lion’s share of 2017 declines.

About MIB

MIB is the life and health insurance industry’s most trusted and secure resource for data-driven risk management services that protect the financial integrity of its members and address their evolving needs. Owned by its members, MIB is uniquely positioned to securely collect and analyze confidential data. MIB services help to detect fraud, errors and omissions on insurance applications; to analyze industry data needed to manage a variety of financial risks; and to make regulatory reporting compliance less onerous and more efficient. As the life insurance industry’s first statistical agent, our MIB Solutions, Inc. subsidiary cost-effectively performs annual data calls for those insurers subject to principles-based reserving. MIB Group, Inc., a membership corporation, provides services through its wholly-owned operating subsidiaries, MIB, Inc. and MIB Solutions, Inc.  


Life Insurance Activity Off In 2Q