Smart Auto Insurance Blog

Last month, we talked about California’s Proposition 33, which went to vote along with the Presidential election on Tuesday.  Prop. 33 would have let auto insurance companies offer discounted rates to drivers who have maintained a long history of coverage, regardless of which company was covering their vehicle.  The San Francisco Chronicle’s Drew Joseph gives us the results of California’s vote in “Prop. 33: Car insurance changes defeated.”

Insurance companies are able to offer lower car insurance quotes to drivers who have maintained insurance coverage with their company, but continuous coverage discounts were not allowed to be transferred to another insurer.  Voters have rejected Prop. 33, so nothing will change in that respect, much to the dismay of Mercury Insurance’s George Joseph.  He offered $16.9 million, or 99% of the funds used to campaign for Prop. 33.  Opponents of the Proposition raised less than $300,000.

Two years ago, Prop. 17 asked Californians to pass a similar law regarding the transfer of car insurance coverage discounts.  That failed as well, although it was close to passing.  George Joseph of Mercury and other supporters said that even more residents would get insurance discounts with Prop. 33 than would have with Prop. 17.  But opponents of both issues said that too many people would be punished with higher auto insurance premiums to make up for the discounts offered to others.  They pointed specifically to the large amount of unemployed Californians that may be without auto insurance for a significant period of time.  The discounts offered to some drivers would have to be financed by others getting punished.  It remains to be seen whether Prop. 33 will be put on the ballot again under a different number, but George Joseph seems to have a lot of funds to put towards his cause.

Hurricane Sandy, aka “Frankenstorm”, is approaching the east coast of the United States and is expected to hit in the next few days.  As Americans make preparations for the storm by stocking up on food and water or even evacuating their homes, auto insurance companies are making preparations for Hurricane Sandy as well.  Reuters’ Ben Berkowitz talks about what they are doing in “Insurers prepare for impact of Hurricane Sandy.”  Insurers are ready for a storm of their own once the claims start filing in.  They prepare for big storms like this by prepping claims teams and sending adjusters to the locations they believe will be hit the hardest.

A spokesman for Travelers Insurance said that they have employees and other resources positioned so that their clients will get help as soon as possible after the storm hits.  They are the second largest personal home, auto, and commercial insurer in Connecticut and the third largest in New York.  Customers in both of those states are expected to be hit hard by Hurricane Sandy.  Travelers has also had to put plans in place to keep their business running smoothly across the country since a large number of employees will be working in those two states.

Lucky for insurance companies, 2012 hasn’t been too bad of a year for financial losses.  With billions of dollars of losses forecasted for Hurricane Sandy, the industry is braced to handle the claims and doesn’t expect any delay in processing because of the storm.  State Farm is the leading insurer in New York and New Jersey.  They said that they have catastrophe teams waiting to respond when the storm hits.  Allstate has teams waiting in North Carolina, Virginia, and Pennsylvania.  Private insurance companies think that the majority of their claims will be from wind damage to autos and roofs.  They also worry about business losses if businesses are out of power for a prolonged time.  Insurers are pleading with Americans to heed evacuation orders before it is too late to reduce some claims.

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.

Many of the reasons for auto insurance rate increases over the past decade are beyond our control.  According to Moneywise’s “Why are your car insurance premiums rising?,” auto insurance rates have doubled in past decade.  There is a lot of talk about the rising gas prices eating into household incomes.  Not as much talk is made about rising auto insurance prices, but that may be because a lot of people just continue to pay their bill monthly without even keeping close track of price increases.

The cost of auto insurance went up 15% last year in the UK, and increased 110% over the past ten years.  This article states that the top reason for auto insurance rate increases is a dramatic increase in personal injury claims.  In the past, the majority of car insurance claims were paid out for repairs.  But half of claims are now paid out for injuries and medical issues related to car accidents.  Between 2010 and 2011, there was an 18% increase in medical claims like whiplash.  That is the largest increase they have ever seen in the UK.  Research has shown a link between the number of no win, no fee lawyers specializing in car accident claims and the amount of claims filed in a certain location.  There could be new legislation soon regarding the way that some claims lawyers do business.

Another reason for increasing auto insurance rates is an increasing cost to repair vehicles.  New technology is great for car owners, but it really increases the cost to fix the vehicles when there is damage.  One example is that of a broken headlight that used to need a new light bulb and maybe some glass if that cover were broken as well.  Now an entire sealed panel may have to be replaced just because of a broken headlight cover.

Some organizations believe that auto insurance companies are to blame for rising premiums because competition with other insurers is causing them to get more expensive repairs and rental cars when their insured was not at fault in an accident.  Rates have been going down this year slightly because of heavy competition in the auto insurance market.  It’s difficult when things beyond your control are setting your auto insurance rates, but the best you can do is keep the factors that are under your control in your favor to get lower auto insurance rates.

Progressive Auto Insurance has been in a bit of a firestorm lately after a battle with the family of an individual who previously held their auto insurance.  Matt Fisher’s sister died in a 2010 car accident.  She held a policy for $100,000 in case she were injured or killed in a car accident and the other driver did not have adequate auto accident insurance.  In the case of her death, the other driver had a $25,000 policy, significantly less than the $100,000 held by Fisher’s sister.  Last week, Matt Fisher was on CBS This Morning talking about the battle that his family has had with Progressive since the 2010 car crash that took his sister’s life.

Since eyewitness accounts did not make it 100% clear who was at fault in the accident, the claim had to go to trial.  Fisher’s family sued the other driver so that they could establish fault in the accident.  The Fisher family believes that Progressive defended the other driver in court so that they could avoid paying out his sister’s policy. But Progressive says that their defense in court was for their own company and that the other car’s driver was defended by Nationwide, that driver’s insurance company.  Matt Fisher’s Tumblr blog, “My Sister Paid Progressive Insurance to Defend Her Killer In Court,” has garnered a huge amount of attention recently.  He has been discussed on nearly all of the major news programs and Progressive has been inundated with criticism from those who’ve taken to defending Fisher’s story.

According to Alex Alvarez of MediaITE in the article, “Matt Fisher describes how Progressive Insurance defended his sister’s killer,” the Fisher family won their lawsuit showing that the other driver was at fault.  The courts awarded the Fisher’s with $760,000 in damages.  Progressive Insurance has expressed their sympathies to the Fisher family and plans to settle this matter with them as soon as legally possible.  Matt Fisher’s blog and Twitter presence certainly made this story well know across the United States.  This has been quite a negative story for Progressive Insurance and may have hurt their reputation.  Social media has a strong power over opinions, whether related to auto insurance companies or politics.

Based on five factors used by J.D. Power & Associates, they determined that customer satisfaction is at an all-time high with auto insurance companies.  Suzanne Kane of The Car Connection talks about some of the study’s findings in “Customer satisfaction with auto insurance at all-time high: J.D Power.”  The five things researched in the 2012 U.S. Auto Insurance Study were price, billing, claims process, policy choices, and interaction with the auto insurer.  The first of this study was administered in 2000, and this year showed the highest customer satisfaction since then.

The satisfaction with price was pretty steady until you added in a significant price increase in auto insurance premiums.  Of those surveyed, 1/5 of them had received a price increase in the past year.  Customer satisfaction was 8% lower when price increases were above $50 than when they were below $50.  J.D. Power found that if insurance companies were up front with customers before a price increase and gave them alternatives to help change their pricing, satisfaction would not decrease as much.

Seven different regions were researched and ranked in the J.D. Power study.  The California Region’s highest ranking auto insurance company is Wawanesa.  State Farm ranked highest in the West Region.  The Texas Farm Bureau is the highest rated insurer in the Central Region and in the Southeast Region, it is the Farm Bureau Insurance Tennessee.  There is a tie in the North Central Region between State Farm and Auto-Owners Insurance.  Amica Mutual is the highest rated insurance company in the Northeast Region.  Finally, Erie Insurance took the top spot in the Mid-Atlantic Region.

Many people are worried that Michigan’s No-Fault auto insurance system is headed for very hard times.  According to Pete Daly’s Insurance News Net article “Crisis Predicted In No-Fault’s Unlimited Coverage,” the amount of these Michigan auto insurance claims went up by 13% in less than a decade.  This unlimited lifetime medical coverage is only required through your auto insurance in Michigan, where every auto insurance company in the state has to pay into the coverage pool.

The Michigan Catastrophic Claims Association, MCCA, reimburses auto insurance companies for any medical bills they have to pay over $500,000.  After the MCCA started accruing too much debt, they had to double the amount they would cover after from $250,000 to the current $500,000.  The unlimited medical benefits in Michigan are interesting because the state requiring the next highest medical coverage only mandates $50,000 worth of medical benefits.  Auto insurance companies will have to pay yearly premiums of $175 for each car they insure, an increase starting July 1 from the current $145.  $141.93 of that is for paying claims, $32.72 goes towards the MCCA’s debt, and $0.35 is for administration.

Unfortunately, the $32.72 doesn’t go far in covering the $2 billion in debt that the MCCA has already incurred.  Last year, $927 million was paid out in catastrophic claims.  Due to Michigan’s generous lifetime medical coverage mandate, insurance companies are worried that they will have serious financial troubles if the MCCA becomes insolvent and they have to cover this lifetime medical care.  A House Bill introduced last year would eliminate required lifetime coverage and give options of $500,000, $1 million or more chosen by individuals.  The default maximum would be $500,000.  So far, the bill hasn’t gone anywhere.

The Michigan Association of Insurance Agents has some ideas that they believe would help ease some of the costs.  They think that a medical fee schedule for PIP insurance, similar to that used for Worker’s Comp insurance, would really help lower costs related to PIP insurance.  They think that there should be clarification in the reimbursement for medical care performed by family members, because some are getting paid for every hour of every day.  MAIA also believes there should be more clarity in what is considered “serious impairment” and “pain and suffering” because there may be some questionable claims.

Right now there is some work that needs to be done to help sustain Michigan’s auto insurance PIP coverage.  Whether the unlimited lifetime coverage needs to be changed or some of the other items associated with the coverage altered, we’ll continue to follow this story.

Without even realizing it, many people face an unexpected one-day lapse in their auto insurance coverage when changing insurance companies.  The way that most companies work, their insurance policies end at 12:01AM and begin at the same time.  If you canceled your auto insurance with one company on the 1st of a month and had your new company begin insurance on the 2nd of a month, you probably didn’t even realize that you went 24 hours uncovered.  An easy way to correct this is to overlap coverage by a day or two just to remain safe, but consequences could follow if you don’t.

According to KOLO TV’s Terri Russell in Reno, the “DMV Overlooks One-Day Insurance Lapse” now.  This happened after a man in Reno was bombarded with notices telling him that there was a problem with his Nevada auto insurance policy.  He owns six different vehicles and had a one-day lapse in coverage after switching auto insurance companies.  For quite awhile, he was receiving certified mail almost daily from Nevada’s DMV.  The letters said that he would have to pay a $250 fee per vehicle to have his registrations reinstated because of his one-day lapse.

The news station contacted the DMV since the man nor his insurance company were able to get anywhere with the government agency.  They said that this does happen frequently because of the way that auto insurance companies write their policies.  Nevada’s DMV has made a big change because of this and other cases of the one-day lapse.  They are now overlooking any 24-hour gaps in auto insurance, but only those of 24-hours.  It almost always means that two insurance companies canceled and began a driver’s auto insurance policy at 12:01AM on different days.  It’s nice to see an agency using some common sense!

A system is in place for Michigan’s auto insurance that is different from any other state in the United States.  Their drivers get unlimited lifetime medical benefits for any injuries related to a crash.  According to a PR Web press release, the price that auto insurance companies pay to maintain that coverage will be going up.  In order to lessen the burden caused by this mandatory unlimited lifetime medical coverage, the state of Michigan introduced the Michigan Catastrophic Claims Association 33 years ago.  This group refunds auto insurance companies any amount they have paid in medical claims over $500,000.

Companies currently pay $145 per year for every automobile they insure to the MCCA.  This premium is going to increase 21% to $175 this July.  The MCCA currently operates with a large deficit and an increase in claims they will have to pay out is expected.  They have paid out on 28,000 claims worth close to $85 billion since the MCCA was founded.

In states other than Michigan, each policyholder chooses the amount of medical coverage they will carry and only pays their insurer for that coverage limit.  The lifetime medical benefits provided in Michigan put a big strain on auto insurance companies and the MCCA, but the yearly cost they pay the MCCA is passed right down to Michigan drivers.  Many lawmakers are trying to get a limit placed on the amount of compensation that can be received from one claim, but that has yet to happen.  Michigan’s unique auto insurance system definitely costs a lot of money, but can benefit many claimants.

After getting a lot good and bad press over the last year or so, the Chevrolet Volt is out of production right now.  According to CNN Money’s “GM stops Volt production for 5 weeks,” Peter Valdes-Dapena says that the Detroit automaker had to stop their production line.  GM’s supply of the electric car is too high, and they are temporarily laying off 1,300 workers in order to sell down some of their inventory.

Last year, GM wanted to sell 10,000 Chevy Volts but only sold a total of 7,600.  In January of this year, 600 Volts were sold, but there a was a steep increase in February to 1,023.  President Obama said recently that he would buy a Volt approximately 5 years after leaving office, but Chevy could use that sale right about now with the inventory sitting in their dealers’ lots.  The car company had said that their sales were down because supply wasn’t keeping up with demand, but has now admitted that their supply is fine and sales are just lagging.

Auto insurance companies and consumers have been closely watching the National Highway Traffic Safety Administration’s investigation into battery fires in the Volt.  After all the fuss, it was determined that Volt’s don’t have any more risk than gasoline-powered cars.  GM still made some changes to make the Volt even safer though and offered customers cars to use in the meantime or even refunds of their purchase.  Consumer Reports and many other organizations have given high marks to the Volt, so GM is hopeful its sales will increase and they’ll be back to producing Volts in Detroit in no time.