Smart Auto Insurance Blog

I just read an article insinuating that car rental companies might actually be forging your signature to add car insurance to your rental that you didn’t even want.  Most car insurance companies cover a rental car if you need one while yours is getting fixed.  But car rental companies make money off of the additional things they charge you for, so there have been recent allegations that some rental companies are charging you for car insurance you don’t need or want.  Recently, Dollar Rent A Car at the Denver airport was accused of charging a Florida man for car rental insurance without his permission.  This information comes from The Seattle Times article “Is rental-car insurance a scam?,” by Christopher Elliott.

Dollar insisted that the Florida driver had signed his consent for $215 in car rental insurance and $53 in roadside assistance for the rental car he drove for a few days.  When the charges were disputed, Dollar sent a form letter to the driver.  But he also disputed the charges with his credit card company and they believed him and refunded his credit card.  Dollar sent a copy of the supposed signature adding the extra coverage and this particular driver says that it was forged.  Not only did he not sign opting for the extra charges, he didn’t even need that coverage because he had personal auto insurance to cover rental cars as well.

A lawyer and consumer advocate told The Seattle Times that there have been hundreds of other consumers saying that this same thing has happened to them.  Unfortunately many consumers give up after their initial dispute and pay the bill because they don’t think they have a chance to fight any further or don’t want to spend the time fighting in court.  Since there is no type of legislation or regulation on this matter by the federal government, car rental companies don’t have much concern over lawsuits here and there.  Employees working for minimum wage are often pressured to up-sell extra coverage and receive large commissions.  With e-signatures becoming the norm, car rental insurance fraud and other car rental extras might be easier for these employees to pull off.  Read everything you sign and keep copies, especially when it comes to dealing with companies that have a history of fraudulent complaints.

Business Insider published an article by Emmet Pierce to let consumers know “The Seven Most Terrifying Car Insurance Words.”  These typically come up after some type of accident or driving violation, but in some cases it’s just because of your age.  If you cause a car accident, a surcharge will be added to your auto insurance policy for a pre-determined period of time.  The only ways to possibly get out of this added surcharge are appealing a traffic ticket and begging your auto insurer.  But there is a good chance that you’ll just have to wait it out until your surcharge goes away.

Once your state mandates that you carry SR-22 insurance, the only way you will be able to get cheaper car insurance is by having a good driving record going forward and waiting out the time period of three to five years.  An SR-22 form is a certificate of financial responsibility that high-risk drivers have to show the state government after an infraction such as a DUI.  Auto insurance rates will increase because your insurer has to file these forms and because you are considered a risky driver.

If your auto insurance policy is canceled, you can be in a world of trouble.  Not only are you no longer insured by the company with which you have a history, other insurers will be much less likely to offer you coverage because of the previous cancellation.  Nonstandard insurance is reserved for drivers with a bad driving past and is not available from all auto insurance companies.  This comes with a hefty price tag, but carrying nonstandard insurance, waiting out the average time period of three years, and driving safely are the only ways to get off the nonstandard insurance list.

Once a parent has to add a teen driver onto their insurance policy, rates can increase by 50 to 100%.  This is because teens have a history of driving fast, using poor judgement, and lack experience.  Teen drivers are three times as likely to get into a fatal car accident as drivers twenty and older.  There are discounts for good students available and it makes a difference if your teen keeps a clean driving record starting at 16, but rates won’t go down significantly until the age of 25.

Many fees are being tacked on now for things like emergency response at an accident scene, even if you weren’t at fault in the accident.  Look out for added fees on your policy.  Finally, step-downs are used by some auto insurance companies.  If someone is driving your car that isn’t listed on your policy, your insurer might have a provision to lower your coverage to state-minimum levels if they get into an accident.  Most drivers are unaware they have this step-down provision, but it could cost you a lot of money.  Check with your auto insurance company regularly to make sure you know the ins and outs of your policy and to see what discounts you may qualify for.

If you are driving one of the top ten bad luck cars, you probably wish you would have seen this list before purchasing your vehicle.  Just because your car may be on the Insurance Institute for Highway Safety’s bad luck car list, you don’t have to run out and buy a new car.  But it’s good information to know, especially if your auto insurance company raised your rates after you bought one of these cars.  CNBC’s Daniel Bukszpan gives us the full list in “10 bad luck cars.”  The IIHS determined this list based on personal injury protection (PIP) claims for cars made between 2009-2011.  All of the cars have at least one thing in common; they are small.  Small cars are more likely to sustain claim-worthy damage in an accident, but they also are typically driven in urban areas and by single people who drive them daily because there isn’t another car in the household.

The Chevrolet Aveo wagon has a claims frequency of 22.3 out of 1,000 insured vehicles.  It’s inexpensive and has great fuel economy, but in the case of an accident drivers will not fare as well as those with bigger cars.  Nissan’s Sentra has a claims rating of 23.  Interestingly, when crash test results are given, they are typically taken against other small cars and aren’t quite accurate when compared to what could happen with other vehicles on the road.  The Dodge Avenger is a midsize vehicle, but its 23.7 rating is likely based on its powerful engine.  The way people tend to drive cars with powerful engines leads to higher losses in collisions and a higher frequency of injuries.  The Hyundai Accent and Nissan Versa tied with a claims frequency of 24.6.  They are both very small and the Accent actually has a “poor” rating in side-impact crashes.

Kia’s Rio is now one of the cheapest cars to insure, but the trade-off is a 24.9 claims frequency rating.  The Mitsubishi Galant has a rating of 25.4.  Although it is a midsize sedan, it is close to being a small sedan because it’s at the low end of the midsize size range.  The Chevrolet Aveo has a claims rating of 26, so it is involved in quite a few more accidents than its wagon counterpart in position 10.  The second highest rating goes to the Suzuki SX4.  It’s overall “marginal” ratings from the IIHS are just above the rating of “poor.”  Toyota’s Yaris has the highest claims frequency rating at 28.5 out of 1,000 insured vehicles on the road.  This auto has around twice the average claims for vehicles on the road, mostly based on the fact that it is very small.  Some of these cars do have the cheapest auto insurance rates out there, but after auto insurance companies see these study results that just may change.

Around 1% of those with auto insurance are using usage-based programs to try for discounts on their auto insurance premiums.  But according to NASDAQ’s “The rise of usage-based auto insurance,” that number is rising.  In the next five years, some estimate that as many as 20% of drivers could be using usage-based programs.  They even predict that 30% of drivers will be using them by 2020.  Usage-based insurance, or UBI, allows your auto insurance company to place a device in your car to monitor your driving habits.  They can determine when you drive, how often, how far, how fast you are accelerating, as well as your braking habits.  Companies advertise discounts of up to 30% when you use their UBI, if you are found to have safe driving habits.

When asked, drivers said that they are happy to give up some privacy in exchange for a discount on auto insurance rates.  Between smart phones and Facebook, people are used to giving up some of their privacy, so they willingly participate in UBI services.  In fact, companies who are not currently using this technology, or at least in the development process, are pretty far behind and risk losing some customers.  At some point in the future, drivers may end up paying higher premiums if they don’t allow their insurer to track their driving habits.  It’s unlikely that insurers will force drivers to share UBI information, but collecting this data will likely become the norm in the future.

Here is a summary of some of the companies offering usage-based insurance.  First of all, you do have to have a car that is newer than a 1996 model.  Drive Wise is offered in three states by Allstate, but they plan to expand the program later this year.  American Family Insurance has tested their product and is currently developing a plan to implement it.  Esurance has teamed up with Sprint to collect UBI data, but it is only available now in Texas.  GMAC collects data through OnStar.  The Hartford insurance works with Octo USA to collect data for their TrueLane program, currently available in five states.  Progressive’s Snapshot is available in most states and even non-customers can try it out.  Travelers has started using IntelliDrive in four states.  Safeco offers the Rewind program to some customers who are trying to avoid rising premiums after violations.  State Farm’s Drive Safe & Save program also works with OnStar and is available in 14 states.  Have you taken advantage of UBI yet?

Did you know that your auto insurance company can charge you higher rates if you are close to the limits on your credit cards or have filed bankruptcy in the past?  In most states, they can.  In 47 states and the nation’s capital, credit-based car insurance pricing is allowed and is commonly used.  This so-called insurance scoring has been used for more than a decade, but will be outlawed soon if some opponents have their way.  According to Insurance News Net’s “OAI: Auto Insurance Scoring Bill Highlights Controversial Practice,” three Democratic House members have a bill they hope will end the process of insurance scoring.

Currently, when you are looking to get a quote on auto insurance, in most states insurers will look into your financial history before making your quote.  They can increase your premium based on your applications for new credit, how close you are to your debt limits, and other financial factors.  Many different states have already tried this type of bill on the state level to no avail.  If state auto insurance legislation is any indicator of how this bill will fare federally, it has quite a difficult path to follow.  Massachusetts is the only state that has passed a recent ban, but it was just an update of an existing ban on this insurance practice.

There are two hotly debated sides to this issue and both have their points to be made.  Supporters of insurance scoring say that studies show that people with bad finances tend to file more auto insurance claims and bigger claims than those with a sound financial history.  Based on this they say that pricing is more fair and accurate when insurance scoring is used.  Without it, those with strong financial backgrounds would be paying more than they should to compensate for those with poor financial histories.  Opponents of the program say that lower income drivers are already struggling and this will catastrophically hurt those who are trying to do the right thing by carrying auto insurance.  We’ll keep you updated with where this bill goes.

In Louisiana, auto insurance checkpoints will probably have to be announced ahead of time by police departments.  According to “La. wants public advance notice for insurance checkpoints,” Charles Nguyen of Online Auto Insurance says that HB 713 is moving onto the state House after passing through the Committee on Transportation, Highways, and Public Works.  This proposal would make police announce any checkpoints on a local news or radio broadcast, as well as transferring all of the same guidelines for current checkpoints to Louisiana auto insurance checkpoints.

Current checkpoints are used to look for those driving under the influence, make sure drivers are wearing seatbelts and have registered, insured vehicles.  Police need to use signs and flares as well as public notifications of their checkpoints.  They also have to have a non-field officer submit paperwork for the times, location, and duration of any checkpoints.  Police are required to perform all checkpoints in a timely manner so that no one has their time wasted.  They also have to use some type of system for stopping motorists, rather than stopping them at random.

As Louisiana police check more for auto insurance policies for drivers, lawmakers and insurance companies hope that the state will have fewer uninsured motorists.  They already have a policy called “no pay, no play.”  Motorists who don’t carry their own auto insurance policies cannot get payment for the first $15,000 of bodily injury or $25,000 of property damages, even if they were not at fault.  It really does pay to have auto insurance coverage, whether you are worried about getting in trouble at a checkpoint or losing payment in an accident.

Delaware auto insurance rates are going up for State Farm customers in that state.  According to Online Auto Insurance News’ John Pirro, “State Farm car insurance rates to rise for Delaware policyholders.”  Starting today, rates will be increasing around 1.9% in Delaware.  State Farm is the second biggest auto insurance company in Delaware behind Nationwide.  Their market share is 22 percent and they say that they’re raising rates so they can keep the financial promises they have made to those customers.

Many factors will determine the amount of individual policyholder increases, including their particular coverage and any discounts they maintain.  All liability and personal injury protection coverage will be increasing.  Collision and comprehensive costs, however, will be increasing for some but decreasing for others.  From 2006 to 2008, PIP claims increased 10% and property liability claims increased 4.5%.  State Farm is also raising Michigan and Wisconsin auto insurance rates, while they are decreasing Illinois, Alabama, and Georgia auto insurance rates.

Some basic tips for understanding auto insurance and choosing auto insurance companies are available on CNN’s website through a collaboration with Fortune and Money.  They first want you to know that you are often a statistic, rather than a person.  Auto insurance companies tend to see you as a risk based on certain risk factors like your job and where you live.

Even if the coverage appears the same, prices are always different through different auto insurance companies.  Shopping around is one of the best tips related to finding the best auto insurance premiums.  Don’t shop only on price though.  Just because a company has the cheapest price, it doesn’t mean that they have quick and reliable customer service.  Those are very important as well.

It’s smart to get more than the minimum coverage required in your state because most state requirements are really just the bare minimum.  Always ask your insurer for discounts.  They are available and most companies will lower your auto insurance rates if you have a good driving record and you simply ask.

Some auto insurance companies force you to use replacement parts that are not made by the original equipment manufacturers.  This can cause problems in your vehicle, so make sure that your insurer will cover original parts.  The article reminds the reader that while the insurance company does want you to recoup your financial losses, you may not have the same ideas of what is fair compensation.  Make sure that your plan is updated and that you know all of the details before filing a claim.

Just like the cell phone industry fought for you to be able to take your phone number from one company to another, the auto insurance industry in California wants you to be able to take your discounts with you.  According to “Car insurance discount act could give break in prices,” Nannette Miranda of California’s ABC News10 says that your continuous coverage car insurance discount could become portable.

If the 2012 Automobile Insurance Discount Act passes, any driver who receives a discount for retaining continuous auto insurance coverage from one company would be able to take their discount to another company.  If this does not pass, companies will still be prohibited from giving discounts based on past coverage with another auto insurance company.  This initiative does not take into account any type of discounts for being a good driver.

A campaign consultant argues that this will allow for greater competition in the marketplace as companies can charge better rates.  The Consumer Federation of California disagrees.  They say that people who have been uninsured for any period of time will be hurt by 40-50% surcharges on their insurance coverage, even if they were uninsured because they didn’t have a vehicle.  Mercury Insurance tried to pass a similar initiative two years ago to no avail.  There are some people who believe Mercury is behind this initiative as well.

Allstate Insurance continued its crackdown of insurance fraud in New York state to close out 2011.  Many insurance companies have a big problem with insurance fraud because of the no-fault coverage issued in the state of New York, according to Insurance News Net’s “Allstate Files $1.1M Insurance Fraud Case in NY.”  This most recent lawsuit for $1.1 million is against sixteen people accused of falsely running companies they said were owned by a medical doctor in order to submit false claims to Allstate.  This is Allstate’s ninth insurance fraud lawsuit in New York this year and their thirty-sixth since 2007.

Unfortunately, no-fault auto insurance has been causing a fraud nightmare in the state of New York for years.  Consumers in New York pay more for their auto insurance because there is so much fraud, dubbed a ‘fraud tax’ by some.  An Allstate spokesperson urges New York lawmakers to enact and enforce regulation that will eliminate no-fault insurance or find a way to eliminate the fraud it is causing.

This most recent scheme involved multiple small companies and individuals sending medical claims and referrals in violation of the no-fault law.  Everything was under the guise of a named medical doctor who does not really exist.  Allstate’s Special Investigative Unit filed this lawsuit to recoup the more than $1 million it feels it lost.  Allstate Insurance is joined by many other insurers, like Donegal Insurance, and state leaders in New York in their battle to reform the no-fault auto insurance system.

Written by Sara Smart

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