Your Artificially Inflated Auto Rates

[abcrystcats]

I must be the LAST person on earth to notice this quirky little fact about auto rates, but here it is:

Did you ever notice how changes to your auto rates take place ONLY on your "renewal" (whatever THAT is) date, every six months? If a ticket falls off, your rates get lower at the renewal. If you get charged for an accident or a new ticket, it goes on then, too. Seems like an odd time delay, doesn't it?

Let me give you a scenario: Let's say you wrote your auto policy with someone January 1st, 2006. That makes your renewal dates January 1st and July 1st of each year. Now let's suppose you had an accident February 1st. Five months go by and your rates stay the same. Sounds GOOD, so far, doesn't it? You only get hit with the increase on July 1st, when your "renewal" hits.

OK, now speed forward to three years from now. Three years is the typical time period most auto insurance companies look back to determine auto rates.

It's March 1st, 2009. You're getting awfully sick of the surcharge for the terrible accident you caused way back in February, 2006. Enough is enough, already, you're thinking, as you pay your hiked- up bill for the umpteenth time.

Then, the phone rings. It's ME on the phone and I'm here to tell you that although my company COULDN'T beat your auto insurance price two months ago, we CAN now! I tell you the price and you get all excited and come right down to my office the next day to SWITCH companies and get out from under that nasty old BAD company that was charging you 25% more.

I've got a SALE and I am pocketing the commission.

YOU are a happy camper because you got cheaper auto rates.

But consider a second scenario. This is a make-believe one, because it doesn't happen like this, now.

Let's say you still get in that accident on February 1st. Let's say that instead of having the surcharge for the accident hit you on your next six-month "renewal" date, it hits you the first of the following month. Does that make more sense to you? It makes a LOT more sense to me. It is more FAIR, because it's more immediate.

Same sales call from me on March 1st, but it ENDS differently. "NO thank you." you say. "I've already gotten a letter from XX Insurance Company saying that my rates are going down on the first of this month.

Now, think about this: that is ONE less sale that I will make that month. That is ONE less commission that I will collect, and that commission, directly or indirectly, comes OUT of the pocket of some insurance company.

Do you think that commissions for sales artificially inflate the rates you pay for your auto insurance? YOU BET THEY DO. And what if there were FIVE TIMES AS MANY SALES as there ought to be in a normally competitive market, because of a stupid thing called an automobile insurance "renewal" date ??? Would you think that your price would be blown totally out of proportion by all the VULTURES ('scuse me, but I gotta call it by its name) snatching their opportunities in the huge window of MONTHS after your ticket rolls off?

It's human nature to want a cheaper rate and to want it NOW. I can't blame the consumer for falling for it. I blame this stupid "renewal" date baloney.

If tickets and accidents were added to your policy premium within 30 days after the occurrence, and removed within 30 days after the three year window, I surmise that there would be about FIVE TIMES less switching of auto insurance carriers for the average consumer, and FIVE TIMES less commission would be paid out to yutzes like me, who THINK they're selling something, when in reality, they're just taking advantage of an absurdly long time delay to collect commission money that doesn't belong to them.

There's no no TRUE competition in the automobile insurance market right now, and the prices you're seeing are artificially high because of this stupid rule.

When I pointed this out to my boss, she said, "And thank God."

I'm not thanking God.

I'm rather disgusted.

I'd rather pat myself on the back for a health insurance sale. Auto seems like more of a cheat than a challenge to me right now.

[Marksman45]

The worst part is that I'm *legally* required to have auto insurance to drive.

In Oklahoma, things are so spread out that it's hard to get from place to place if you ain't driving. And forget about public transport. Aside from the larger cities, it's non-existant.

Although a car isn't as necessary as food, shelter, or clothing, my ability to get around directly affects my ability to obtain those three things. I need a car if I want to live anything other than the life of squalor to which so many people around here have resigned themselves. I need a car, and for a car I need insurance.

As you said, the insurance companies aren't really competing.
Insurance is the only game in town, and it's crooked.
Which would be okay if the game wasn't mandatory.

[abcrystcats]

Marksman, I don't agree.

You're LEGALLY required to have it to PROTECT THE OTHER DRIVER.

I used to think like you, but it's LIABILITY protection that you are legally required to carry, and that is at the minimum limits.

Here's how it works:

If you hit someone and it is your fault, then someone has to pay for their injuries and the damage to their property (THEIR car).

Your liability coverage is called "Bodily Injury, Property Damage" and it's usually set up like this: 50/100/50. That means your insurance company will pay up to $50,000 in bodily injury, per person, in the car you hit, and $100,000 overall if there is more than one person in the car. It will also pay up to $50,000 in ANY kind of property damage your at-fault accident creates. In Colorado the legally required State Minimums are 25/50/15. I don't know what they are in Oklahoma. Maybe you can tell me.

25/50/15 on a used car is dirt-cheap. I've seen it as low at $25.00 a month on a quote and that is at my current company, which, I'll tell you is NOT Geico or Progressive.

Besides, it isn't your LIABILITY protection that costs the big bucks. What costs the BIG bucks is your Comp and Collision. When you want to start protecting your OWN car from damage, they charge you. Comp especially. That is because Comp kicks in when there's damage that happens when your car DOESN'T collide with another vehicle. Like, when your windshield gets chipped up and you want it replaced, or when you leave your car parked in the open and there's a hail storm. Not your fault, but you don't like having to pay your own costs to repair the damage, so you make the insurance company do it.

Check out your rates. You'll find I am right. Comp and Collision costs you money. The state doesn't REQUIRE you to carry it. That is your decision.

If you have a LOAN on the car, then it's NOT YOUR CAR, and the lender can require you to carry it. That's not a law, that's just the conditions of the loan.

Here's another thing: you want to keep your rates down? Then don't get tickets and don't get in accidents. Period.

I think this "renewal" thingy is a big joke. It plays off human nature and hikes up rates by allowing car insurance companies to repeatedly steal business from each other. Every time you get enrolled at another company there are administrative costs for your enrollment. There's commission paid to the agent too. That's BS. If we had more up-to-the-date penalty times and drop-off times for tickets and accidents, the auto insurance companies would have WAY lower admin costs and you'd see some real pricing, all the way around.


But don't tell me you think it's messed up that you have to pay to protect the other driver if you hit them. I'm not gonna go there, sorry.

I agreed before I understood how it worked, though.

[abcrystcats]

I forgot.

This renewal bit indirectly affects your property insurance rates too.

That's because auto insurance rates are the "drivers" that influence whether or not most people switch insurance carriers.

It's a hassle having your home insured one place and your cars in another. Some people do it, but most don't.

If I call you and say I can save you 25$ a month on your auto rates, but ONLY if you bring your homeowner's insurance over too, will you do it? Yes. You'll do it if my homeowner's rates are exactly the same as what you're paying now, or evne if they are $5.00 higher.

Does that mean people switch property insurance carriers almost as frequently as they switch auto insurance carriers? Yep, nearly.

And that means extra admin costs and commissions paid for property insurance too.

Basically, MOST of the people who do the work that I do are getting supported by ONE thing: renewal dates on auto insurance. Without that, I'd be out of a job so fast it's not even funny.

All it takes is ONE reform, ONE law, and your rates can go down.

It isn't even that big a deal to make this change.

Glad I learned all about auto and property insurance, but I am sure glad I don't have to rely on it. I am no more "selling" these products than I am flying!

[abcrystcats]

More.

Check out this site:

www.insurancescored.com

for an exploration of the use of credit rating in establishing your individual auto premiums.

When I first heard of this, I was outraged. My credit score has nothing whatsoever to do with the likelihood that I will get in an accident or pick up a moving violation! In fact, I've been in darn few accidents in my life. For the sake of honesty: I've been in two. I haven't had a ticket in close to 20 years.

You can read on a portion of this site that auto insurance companies REALLY don't think your credit score has to do with your ticket and accident tendencies. They believe it predicts CLAIMS CONSCIOUSNESS -- in other words, your likelihood of FILING a claim and costing the company money is indicated by your relative financial solvency.

Bullshit again.

This is just based on anecdotal evidence and experience, but this is my take on it:

I have had poor credit most of my life. When I rearended someone in a parking lot three years ago, I did NOT report the claim. I paid the damages out of my own pocket. I could have filed a claim for the destruction of my driver's side mirror against the side of a tollbooth. I did NOT file. I paid for it myself. My logic each time was: this is MY fault, so I should pay.

On the contrary, I have noticed that some of our most well-to-do, credit-worthy clients are trigger-happy when it comes to filing claims for minor things. If their windshield is chipped, they want it replaced. Some guy came in the other day and almost joyfully reported that he'd been rearended. He complained of pain in his neck and back and so forth.He said he was working on remodeling his bathroom but he was going to lay off that day because of the pain. A few days later he called and asked if he was entitled to monetary compensation (from the other insurance, since the accident was not his fault) for his "pain and suffering." I wasn't about to answer that kind of questionfor the other company, but it shocked the hell out of me how QUICK this fairly well-off guy was to jump on his alleged "right" to monetary compensation!

On the homeowner's side, it's even worse. People want to file for every little bit of damage to their homes, yet they get mad when you tell them about the deductible and they get even madder when their rates go up as a result of their receiving monetary compensation for the damage. Again, my general experience so far has been that the more wealthy the client (up to a point) the more likely they are to file.

Of course, the really wealthy don't need to stoop to petty tricks. But the middle income people do it frequently, and those are the ones with generally good credit ratings.

IMO, using credit scores to make your rates higher is just another way of robbing the poor to pay for the rich.

32 states have banned the practice. I think this bright idea will eventually die out.

[Marksman45]

I understand about liability, protecting the other driver, etc.
And I agree that it should be legally required.

What I'm saying is that anything that is *required* should be obtainable from businesses with fair & reasonable practices that are actually competing in an actual free market.

[Lightning Rod]

this subject testifies to the power of big money in our country

sure, it's good to spread risk (the purpose of insurance)

but, it's a disgrace when one industry has the lobbying power to mandate that their product should be purchased by everyone.

Imagine if the dairy industry was strong enough to have legislation passed that would mandate that every time you went to a grocery store you had to buy a gallon of milk and a dozen eggs.

You drive at your own risk. If you don't have insurance, then you bear full liability. If you choose to purchase insurance then you spread the liability.

But it should be voluntary

[abcrystcats]

Thanks for the clarification, Marksman. We are on the same page, exactly.

OK, and Lightning Rod, I suppose it might make more sense to require every driver on the road to deposit $65,000 in a bank account, for the use of whatever other driver they happen to hit. If you're willing to do that, then we will agree. However, if you don't have $65,000 lying around then how are you going to "bear full liability?"

In the old days, people who had debts they couldn't pay were made indentured servants. Is THAT a good solution to this problem? If you hit me in your car, and you have no insurance, and no other way to pay my medical bills and losses, should your services be sold to the highest bidder? That's the only way I can imagine that society could force you to "bear full liability."

There are plenty of drivers out there on the road with no insurance. That's illegal, but somehow they get away with it. And when they hit somebody, the person they hit is usually SOL.

Oh yeah, you can purchase insurance to protect yourself against the scofflaws too. That's "uninsured motorist" protection. But that is what is REALLY unfair -- that you should be forced by someone else's lack of responsibility to insure yourself against their depradations.

I DON'T want to go back to the good old days where people were forced to pay their debts by selling their freedom. And it's totally unrealistic to expect people to set aside $65,000 just for the privilege of driving a car.

And I DON'T want to see people do damage to the lives and property of others and then just walk away, either.

Eliminating all that, mandatory liability insurance seems to me to be the most humane and sensible solution to the problem.

I mean, shoot, how bad can it be? You pay 35$ a month and then if you hit someone, the big, bad insurance company has the deep pockets to pay for the injuries you cause.

Could be worse.

[Doreen Peri]

And I DON'T want to see people do damage to the lives and property of others and then just walk away, either.

Eliminating all that, mandatory liability insurance seems to me to be the most humane and sensible solution to the problem.

I mean, shoot, how bad can it be? You pay 35$ a month and then if you hit someone, the big, bad insurance company has the deep pockets to pay for the injuries you cause.

I totally agree! I'm so glad they make people buy liability insurance in my state. In some states, they don't.