jeanie

Do you mind sharing what state you live in? Thanks.

Jesperss

Absolutely. Have a quote with Geico at $602

Jesperss

Washington

emptiness

ofcourse i have liability coverage too, how can i have full insurance without having the basic, state required minimum liability coverage?

soitgoes

You have very low liability coverage. It would be EASY to exceed your limits quickly.

beachfan

Absolutely not true regarding the voiding of coverage. The only way they can void the coverage is by showing that they would have not written you had they known the truth. They can go back and charge you the difference between the correct and incorrect premium.

What happens is that the rating factor that is being lied about starts becoming less and less of an indicated reduction (vs. baseline) and everyone pays more.

beachfan

It is not legal to unfairly discriminate, which means that you cannot use race as a rating variable. By law. That doesn't mean you can't discriminate, you just can't unfairly discriminate (which means race, religion, etc.).

However, to extend that to any subgroup means that everyone would be paying the same. When that happens you get picked off by the competition - how do you think State Farm got to be so big. Everyone was charging the same rate statewide for auto, then State Farm decided rural drivers were less risky and targeted them with lower rates. Easy pickings for them. The rest of the companies were saddled with urban drivers at inadequate rates.

xxpert

Your missing the point, as someone else already posted you can easily exceed your state minimum coverage and when that happens say goodbye to your savings, credit, home equity etc. My state requires 25k/50k but I hold 300k/300k and also have a million dollar umbrella policy in addition. I think I pay about $100 bucks a year more for the higher coverage and $180 a year for the umbrella policy but that's a very small price to pay to insure I dont lose everything just because of an accident... As my insurance agent tells me " buy the insurance or own the loss"

mia

Discussion of the relationship between credit card churning and insurance premiums is relevant, but discussing insurance applications, coverage or rates is off-topic. In particular, please do not advise others on the amount of insurance they need nor on ways to reduce premiums.

redtop43

I hope this post will be considered on-topic in light of Mia's admonition.

I am a credentialed property-casualty actuary with 35 years of experience, including 10 years in personal auto. Let me offer some information.

I will use the term "credit scoring" even though it is technically inaccurate, the proper term should be "insurance scoring." Companies use their own scoring models, some use proprietary models, some purchase models from companies such as Fair-Isaac.

Progressive was one of the first companies to use credit scoring. I was able to get a copy of their credit model in the late 1990's. It was about 700 pages long, and it was printed on white paper in pale blue ink. This led me to believe that it had been filed with a state insurance department under their rating laws, and under those rating laws anyone can come and inspect and copy rate filings. However, documents printed in this way won't copy. They had other documents submitted that were in dark red ink on a black background, which likewise wouldn't copy.

If you go back 30 years, you would find that if you called an insurance agent or company out of the blue for a quote, you would invariably get their worst rate. Companies would have 2, 3, 5, or more rate plans filed, ranging from "Super-Preferred" to "Substandard." In order to get a better rate, they basically wanted to meet you and size you up. Although the rate was fixed based on variables such as age, sex, marital status, geographic location, type of vehichle, and driving record, assignment to a rate tier was discretionary. Basically it was the right of State Farm Mutual to say "We choose not to sell you a policy" while State Farm Fire & Casualty, a separate company, to say "We will sell you a policy."

Credit scoring is what allows companies to quote you on the internet. This is their way of "knowing you." It has led to a quantum increase in the aggressiveness of companies writing personal lines. Among the top-tier companies, there is fiece competition for who can build the best scoring model.

One thing I found weird (I have not been heavily involved in this line since the late 1980's) was how every company could advertise "Drivers who switched saved $x." Obviously, not every company could have lower rates than every other company, and the qualifcation "Drivers who switched" is a key one. I pinged an old friend who does this stuff a lot, and he said yes, there is enough variation in the models used by different companies so that there can be a pocket of people who are paying GEICO $1000 who State Farm will insure for $600, and vice versa.

No one knows exactly why credit scoring works, but we know that it does. As actuaries, we are agnostic to the reasons. We don't really care, frankly, if we knew that blue-eyed people have lower claims that green-eyed people, we'd be find on a blue eyes discount. We don't press for rating based on race or religion, but if it were legal, we'd be fine with it.

The Federal Trade Commission did a major study, which is considered as the more or less defniitive answer in this area, it is at http://www.ftc.gov/os/2007/07/P04480...nce_Scores.pdf. Roughly speaking the conclusion is that credit scoring works, but no one knows why.

In general, the credit models are trade secrets. Even if you try to look online and you know what to look for and how to read it, you usually can't find it. For example, in Florida, all rate filings are posted on the internet, and if you look at the GEICO filing you will find something like 25 rate bands, but now policies are assigned to rate bands is protected as a trade secret.

If you really care enough to know what the actuarial profession thinks about risk classification, you can see the Statement of Risk Classification Principles at http://actuarialstandardsboard.org/p...dices/risk.pdf. However, that represents the profession's view and not necessarily those of insurance regulators, "consumer advocates," or insurance companies.

I can share that 30 years ago we had profound frustration about the primitive state of auto insurance rating. For example, at the time, a Chevy Malibu and Chevy Camaro were rated the same, because they cost the same. We did a study at the company I worked for at the time, finding that one of the biggest predictors of claims was axle ratio. I don't even know what axle ratio is, but I think the lower the axle ratio, the higher the accelration. We also found some counter-intuitive results, like that policies with one driver and two cars had higher losses tha those with two drivers and two cars. Why? One-driver policies were unmarried people and two-driver policies were married people, and the effect of marital status was greater than had been recognized. However, we often mused about finding better ways. Annual mileage was a seemingly useful variable, but surprisingly hard to collect accurately. What if we could measure acceleration? Left turns? Hard braking? Usage at really late hours, or at rush hour? Dreamers, weren't we? Those of my generation look wistfully at Progressive's "snapshot." To us, what is most appealing about that is that it has the potential to actually CHANGE driver behavior. Not just to move the costs around from driver to driver, but to make everyone a less accident-prone driver.

China Clipper

This is a logic fail and fact fail. The logic fail is easy: if the only penalty attached to lying on apps were an adjustment in the premium, nearly everyone would magically qualify for the lowest rates and adjust their premium only after they made a claim. Moreover, the substantial costs of insurance companies' attorneys and investigators would be exceedingly hard to justify.

The fact fail takes slightly longer to confirm: a few seconds of online searching:

http://www.insuranceforums.info/lyin...ce-t16693.html

http://www.irmi.com/expert/articles/...practices.aspx

http://www.ehow.com/how_5811440_obta...cancelled.html

http://thismatter.com/money/insuranc...good-faith.htm

http://www.peaceinastorm.com/article...-accident.html

http://www.michiganautolaw.com/auto-...titan-v-hyten/

http://ezinearticles.com/?Dont-Lie-o...rms&id=1977184

As these and countless other reports indicate, lying can seem fine--you can go for years without getting caught. But when you do get caught, it will be because of a ruinous claim (e.g. personal injury, as stated upthread) and you will have voided your policy. That will ruin your life, if it's not already ruined by then.

CathyJune

It is the lower the axle, the less acceleration the car had. A low axle ratio had a higher top speed but it took a while to get there. The economy V-8 engines in the 1960's had low axle ratio (say 2.55) that were good highway cars but were slow off the line. They got relative decent gas mileage compared to the fast accelerating high axle ratio cars in the day with the high horsepower engines. The high axle ratio cars (say 4.11 that were favored by the drivers that wanted the car go accelerate quickly off the line) accelerated quickly off the line but used alot of fuel.

I knew someone in college in the 70's that had a 1968/69 Plymouth Roadrunner that had a hemi engine in it. His insurance was very expensive because of the high performance engine in the 2 door Roadrunner. He totalled his Roadrunner and then put his Hemi engine into a immediate Dodge/Plymouth station wagon and the insurance company gave him very low rates because they did not care what size engine was behind the hood. A lot of consumers at the time ordered a large engine in the station wagon to tow trailers/5th wheels, etc and those were classified as "family" cars.

He was unbeatable due to the "perception" that he could be beat (drag racing at stop lights), etc.

I was quite conservative and drove 6 cylinder cars/pickups in those days. My insurance was very inexpensive (even as a teenager) at that time.

redtop43

In the older rating plans, there were surcharges for "high-performance" cars but the criteria for "high-performance" were very stringent. Pretty much only two-seaters could qualify.

By the early 1980's, the Insurance Services Office was taking cars and adding or subtracing up to three "symbols" from their rating, so that a "Symbol 8" (cost new $6500-$8000) could be as low as a Symbol 5 if it had very good loss experience, or as high as Symbol 11. However, that still rated a Camaro less than a Cadillac. And these adjustments were for collision and comprehensive coverage only, not for liability.

Vehichles with significant modifications were supposed to be underwritten on a "refer to company" basis.

The real glue in the machine were the underwriters. They truly believed that they could tell who were the good risks that wouldn't have claims, and the bad risks who would. Actuaries were viewed as the green-eyeshade guys, obscure and incrutible. Adopting statistical programs like credit scoring threatened the very existence of the idea of underwriting, which of course threatened the underwriters. I believe that Progressive was the first large company to adopt credit scoring. Prior to the mid-1990's, Progressive was largely a "nonstandard" company writing bad risks. I'm not sure who at Progressive decided to change their business model, but the rest of the industry eventually realized that if they didn't follow Progressive, they would get clobbered, as Progressive would cherry-pick all the risks with low loss potential.

jeanie

I am an Amica customer. Today, I got my insurance renewal in the mail, and it listed the criteria for using insurance scores. They pulled Equifax for me. It said that I could get a free copy of my Equifax report if I disagreed with my renewal premium. I plan on getting the free credit report. Here are the pertinent parts. I am interested to see how people interpret the first paragraph. Do you read it as new accounts in the past 6 months, or all accounts on your credit report?


"Number of Accounts Reported Within 6 Months - Industry research shows that consumers with a large number of reported accounts have more insurance losses. Our score considers the number of accounts reported by your creditors within the last 6 months. To improve this aspect of your score, open new accounts only when needed.

Age of Newest Account - Industry research shows that consumers with recently opened accounts experience more insurance losses. Our score considers how long it has been since you opened your last account. To improve this aspect of your score, consider keeping your oldest accounts active and only open new accounts when needed. In order to achieve the best rating, the age of your most recently opened account must be at least 3.5 years old.

Number of Department Store Accounts - Industry research shows that consumers who open more accounts with department stores experience more insurance losses. Our score considers the number of accounts you have opened with department stores. These accounts can be currently opened or closed. To improve this aspect of your score, open new accounts only when needed, as once you have opened the account and regardless of whether you use it or not, your score will be impacted by this factor.

Percent Open Bankcard Accounts to All Open Revolving Accounts - Industry research shows that consumers who have a higher proportion of open bankcard accounts to open revolving accounts have fewer insurance losses. Bankcard accounts are defined as revolving accounts for banks, bankcard companies, national credit card companies, saving and loan associations and credit unions. Revolving accounts include credit cards and credit lines and are considered open if they have not been reported as closed. Our score considers the number of open bankcard accounts relative to the number of open revolving accounts on your credit report. To improve this aspect of your credit score, consider using fewer sources to obtain goods and services. In addition, be careful not to maintain high balances on bankcard accounts."

Thanks.

SuperDudley

Insurance company's perspective is that you are opening a number of credit cards because you are anticipating using them as a means for living within the next few months. People who rely heavily on their credit cards for living, instead of having cash in the bank, are more likely to file claims. They don't have the means necessary to handle losses out of pocket when the situation arises. That's also the reason why credit (insurance) scoring is a valid loss predictor.