Category Archives: Auto Insurance

Study: One third of Americans lie on auto insurance applications

Most people agree that honesty is the best policy, but when it comes to filling out insurance applications, many consumers are willing to fudge the truth to get a better rate. According to a study from finder.com, an estimated 35 million Americans have lied on an insurance application.

Almost one in three (29 percent) of the people who have lied on an insurance application have done so for car insurance. That amounts to 10.2 million Americans who were willing to lie to get the best coverage for the road.

Following car insurance, false information is most likely to appear on applications for health insurance (22 percent), life insurance (21 percent), income protection insurance (8 percent), travel insurance (7 percent), home and contents insurance (7 percent) and pet insurance (5 percent).

More men lie than women, but women are more likely than men to lie on an application in five of seven categories: health insurance, income protection insurance, travel insurance, home and contents insurance and pet insurance. Men lead women when it comes to lying on car insurance and life insurance applications.

“Taking creative liberties on your insurance application may seem like an innocent white lie, but it’s actually considered fraud, and the repercussions can be serious. If found out you may be charged a higher premium, denied a policy or even charged with fraud, requiring you to pay a fine or even do jail time,” said Finder’s consumer advocate Rachel Dix- Kessler.

There are numerous ways to save money on car insurance. The Insurance Information Institute has these tips for shopping around for the best policy.

For more information on insurance fraud click here.

The dog ate my couch: animal damage and insurance

always scheming

You may have read the recent story featured in the I.I.I. Daily about raccoon damage and homeowners insurance. The gist: raccoons got into a house and caused $80,000 worth of damage. The homeowners were surprised to learn that their insurance wouldn’t cover any of it.

So what’s the deal with animal damage and insurance?

Homeowners insurance

Let’s start with the easy stuff. If your dog Fido rips through your couch or pees all over the wall, you’re out of luck. Standard homeowners policies won’t cover any damage to your house or personal property caused by a pet. And”pet” is a pretty broad term. Doesn’t matter if it’s a Shih Tzu or a Clydesdale horse, pets are any animal you own.

What about animals that aren’t pets, like deer or birds or – God forbid – rats? That’s where things get interesting.

Building damage: You probably aren’t covered for any damage to the building caused by birds, rodents, insects, or vermin. There also probably won’t be coverage for any nesting or infestation. Insurance policies can vary widely, however, so make sure you ask your agent what is and isn’t considered a rodent or vermin (some insurers will say raccoons are vermin, some will say they’re not). The specific details of your policy will determine your coverage.

Damage to the building from other wild animals could be covered, though. If a moose runs through the sliding door to your deck, the damaged door would be covered.

Personal property damage: Unfortunately, your personal property is probably not covered no matter what kind of animal does the damaging. If a moose runs through your sliding door and wreaks havoc on grandma’s china, then you’re covered for damage to the door, but not the china.

Liability: You go to your friend’s house and bring Fido for a dog playdate. Fido then rips through your friend’s couch. Are you covered? Yes. Homeowners liability protection will cover the damage to other people’s property caused by your pets. Just not your property. Friendship saved.

Personal auto insurance

A squirrel chews through the wiring in your car. Fido dents your door chasing after a squirrel. A moose rams your car in a fit of rage, smashing the windshield. (Why do I keep thinking of moose scenarios?)

Does personal auto insurance cover animal damage? Yes, if you have optional comprehensive coverage. If you only have collision coverage, then you’re not covered.

Collision only covers damage when a car overturns or hits another car or object. Comprehensive covers…more or less everything else: damage from falling objects, fire, explosions – and birds and animals.

So if you paid the extra premium for comprehensive coverage (like most Americans do), then you’re covered for damage from chewing squirrels, incautious Fidos, and rampaging moose (meese?).

Florida’s assignment of benefits crisis: PowerPoint slides now available

On December 11, 2018 the Insurance Information Institute (I.I.I.) published a report documenting Florida’s assignment of benefits crisis – what the crisis is, how it’s spreading and how it’s costing Florida consumers billions of dollars.

You can download and read the full report, “Florida’s assignment of benefits crisis: runaway litigation is spreading, and consumers are paying the price,” here.

Today we also published PowerPoint slides accompanying the report. We hope the slides will help illustrate the depth and breadth of the abuse. You can download the slides via this link.

An assignment of benefits (AOB) is a contract that allows a third party – a contractor, a medical provider, an auto repair shop – to bill an insurance company directly for repairs or other services done for the policyholder.

The process is innocuous and common throughout the country. But as our report notes, Florida’s unique legal systems richly rewards plaintiff’s attorneys and vendors when they submit inflated bills to insurance companies and then file lawsuits when those bills are disputed.

Not just a few lawsuits. Lots of lawsuits. The numbers are staggering. There were roughly 1,300 AOB lawsuits statewide in 2000.  There were more than 79,000 in 2013, and nearly 135,000 through November 9, 2018, a 70 percent increase in just five years.

Inflated claims and massive volumes of lawsuits have the predictable result of driving up insurance companies’ legal costs. Insurers are forced to then pass those costs on to consumers. In the study, we estimate that Florida’s auto and homeowners policyholders have paid about $2.5 billion more for insurance over the past dozen years to cover the increase in legal costs.

That doesn’t even count the billions more in excess claim settlements that are at the heart of the problem.

Many of these inflated bills and lawsuits are driven by a select number of contractors and their attorneys. Florida insurance customers can protect themselves – and their fellow citizens – by being very cautious when signing away their benefits under an AOB.

I.I.I. Study: Florida’s assignment of benefits crisis is spreading – and is costing consumers billions of dollars

Ah, Florida. Home to sun-washed beaches, Kennedy Space Center, the woeful Marlins – and one of the costliest tort systems in the country.

A significant driver of these costs is Florida’s “assignment of benefits crisis.”

Today the I.I.I. published a report documenting what the crisis is, how it’s spreading and how it’s costing Florida consumers billions of dollars. You can download and read the full report, “Florida’s assignment of benefits crisis: runaway litigation is spreading, and consumers are paying the price,” here.

An assignment of benefits (AOB) is a contract that allows a third party – a contractor, a medical provider, an auto repair shop – to bill an insurance company directly for repairs or other services done for the policyholder.

The process is innocuous and common throughout the country. But as our report notes, Florida’s unique legal systems richly rewards plaintiff’s attorneys and vendors when they submit inflated bills to insurance companies and then file lawsuits when those bills are disputed.

Not just a few lawsuits. Lots of lawsuits. The numbers are staggering. There were roughly 1,300 AOB lawsuits statewide in 2000.  There were more than 79,000 in 2013, and nearly 135,000 through November 9, 2018, a 70 percent increase in just five years.

Inflated claims and massive volumes of lawsuits have the predictable result of driving up insurance companies’ legal costs. Insurers are forced to then pass those costs on to consumers. In the study, we estimate that Florida’s auto and homeowners policyholders have paid about $2.5 billion more for insurance over the past dozen years to cover the increase in legal costs.

That doesn’t even count the billions more in excess claim settlements that are at the heart of the problem.

Many of these inflated bills and lawsuits are driven by a select number of contractors and their attorneys. Florida insurance customers can protect themselves – and their fellow citizens – by being very cautious when signing away their benefits under an AOB.

Florida’s Department of Financial Services has published a “red flag” checklist for spotting fraudulent or abusive AOB solicitations. But the most important thing you can do is to talk to your agent before you sign anything!

To learn more about the crisis, download our report: “Florida’s assignment of benefits crisis: runaway litigation is spreading, and consumers are paying the price.”

Ridin’ with the Waymos

In Phoenix last week, I did what insurance folks do in Phoenix. I hunted down an autonomous vehicle. I even took a picture:

The ‘W’ on the rear window stands for Waymo, the Google/Alphabet division that is probably the leader in developing driverless technologies.

Depending on which insurance thought leader you talk to, driverless vehicles will revolutionize our business or destroy it. I’m a skeptic: We will have driverless cars; everyone will use them, but not for another 20-plus years; and they will not be the death of auto insurance.

Google’s not-so-secret testing facility is just south of Phoenix, in Chandler. I couldn’t find it on Google Maps (it’s a secret, surprise surprise), but I could find Chandler City Hall. In an adjoining lot sat three or four bubble-headed Waymos. They are eerily identical Chrysler Pacifica minivans. Each is white. Each has the same bubble brain on the same spot of the hood and the same aqua-and-sea-green W logo. And, though they are white, the desert sun reveals no hint of grime.

I parked across the street and began my stake-out. Continue reading Ridin’ with the Waymos

Auto Results: Ups and Downs

While the spike in auto accident rates appears to have eased in the past year or so, increases in claim size continue to present challenges. The folks at Gen Re weigh in:

Industry loss ratios suggest that many carriers are still playing catch-up. With ultimate liability loss ratios above 70% and combined ratios several points above 100%, the industry still has work to do.

Here at I.I.I. we note that for the first half of the year, liability loss ratios have fallen 3 percentage points for personal auto, to 64 percent, but risen 4 points for commercial auto, to 70 percent.  (This comes from NAIC data sourced from S&P Global Market Intelligence. Q3 data isn’t out yet.)

Physical damage loss ratios have fallen 5 percentage points, to 60 percent. Physdam results don’t get split between commercial and personal auto on financial statements until year-end, but the improvement is probably weighted to the personal auto side, since personal physdam is more than 90 percent of total volume.

So the landscape seems to be improving for personal auto but not so much for commercial . . .

. . . Which explains why the Council of Insurance Agents and Brokers reports that commercial auto rates are 7 percent higher than a year ago. It’s the 29th consecutive quarter (more than seven years) of rate increases.

Gen Re spotlights the following trends, most of which transcend personal and commercial lines:

  • Economic Recovery and Miles Driven – The improvement in the unemployment rate puts more cars and a worse mix of drivers on the road.

  • Driver Shortages – The trucking industry estimates a shortage of over 50,000 drivers by year-end, which leads to reliance on inexperienced drivers entering the industry.

  • Distracted Driving – Cognitive distractions and smartphone addiction have contributed to higher accident severity, with statistics often being underreported.

  • Drugged Driving/Marijuana – Studies from Washington, Colorado and Oregon find that accident frequency increased in the years after marijuana was legalized, and more states have since enacted similar legislation.

  • Escalating Repair Costs – Advances in vehicle safety systems, including cameras and sensors, have grown repair costs significantly.

  • Litigation/Jurisdiction – An active plaintiff’s bar, restrictive medical records laws, cost shifting, and litigation funding can drive up settlement values substantially.

We’ve seen similar trends at I.I.I. and highlighted them in this presentation last March in Chicago. The key graphic from that presentation is atop this article. We add speed to the mix, because as cars get more powerful, people drive faster.

 

Drivers are underprepared for car accidents, new survey finds

Nobody wants to be in a car accident, but they happen to almost all of us. According to a new survey from Esurance, 77 percent of U.S. drivers have been in at least one accident (which aligns well with previous research showing the average driver will be in 3 to 4 accidents in a lifetime).

The survey also found:

Drivers aren’t taking post-accident precautions to ensure their well-being.

  • More than half neglected to file a police report or document the damage.
  • Only 42 percent talked to the police after their incidents.
  • And, of respondents who suffered injuries in an accident, fewer than half (47 percent) sought medical attention.

And drivers are underprepared before an accident even happens.

  • 75 percent of drivers believe they’re well covered by insurance but may have gaps since 3 out of 4 drivers experience some out-of-pocket costs (and 16 percent know they have coverage gaps but choose to take the risk).

Ideally no one should be involved in a collision, but since car accidents are still a fact of life, the I.I.I. has advice on steps to take after an accidents here.

 

What motivates people to shop for auto insurance? A study conducted by Facebook and comScore

To discover what motivates people to shop for auto insurance in the U.S., Facebook and comScore teamed up to survey 1,010 U.S. adults who had purchased a car in the last 6 months. Our guest blogger, Brad Auerbach, provides key insights from the survey, which we think will help insurance producers and marketers target potential customers.

By Brad Auerbach, Head of Industry, Facebook

Mobile devices are facilitating consumer research

Smartphones and other mobile devices clearly play a major role in how customers research their insurance options. Thirty-nine percent of survey respondents reported being heavy mobile users, and 64 percent said that they have previously used a smart phone to shop for auto insurance.

But it appears that most customers aren’t using mobile to buy insurance online. Sixty-one percent of respondents reported that they believed research to be important before selecting their provider, but less than half reported that they actually purchased auto insurance online. Of the respondents who purchased offline, 45 percent said they purchased through an agent and 10 percent through a call center.

Key takeaway: The relative lack of online sales activity may be an indication that auto insurers need to improve their online purchasing experience, such as providing a faster and more streamlined design and experience for their users. Note that survey respondents pointed to a good website (25 percent) and mobile app (15 percent) as potential reasons for why they chose their auto insurance provider.

Consumers don’t shop around for very long

Thirty percent of respondents reported that they selected their provider within a single day, and 60 percent said that their shopping window lasted less than one week.

Advertising is one way that affects which insurance provider consumers choose. Almost half (49 percent) of respondents who recalled seeing or hearing auto insurance ads reported that the ads helped them discover new insurance brands. Forty-four percent agreed that encountering ads motivated them to consider an insurance provider that they hadn’t previously considered.

Key takeaway: Insurance producers and marketers should be prepared for consumers to make quick decisions once they’ve found an auto insurance provider that meets their needs.

The 4 major types of buyers and their motivations

We identified 4 major buyer-types in our survey. They included:

Millennials

33 percent of respondents

Millennials are actively seeking out others’ opinions before buying auto insurance. They’re more likely to be motivated by price. Important triggers for them to begin shopping for insurance include life events, such as buying a new car or moving to a new location.

Loyalists

55 percent of respondents

Loyalists are loyalists for a reason.  They are less likely to do deep research, but instead may place a high emphasis on customer service. Their triggers include contract renewals (51 percent), followed by a new car purchase (34 percent).

Switchers

37 percent of respondents

Switchers are motivated by pricing above all else. They’re receptive to advertising and they’re likely to research multiple channels such as friends and family, insurance company websites, social media, etc., to ensure that they’re getting the best deal.

Heavy mobile users

39 percent of respondents

The heavy mobile user intuitively turns to their mobile platforms to conduct their auto insurance research. As expected, they tend to be younger, with lower incomes and credit scores. Their triggers include a recent car purchase (41 percent) and the desire for lower pricing (39 percent). 44 percent also reported that they’ve switched auto insurance providers in the past.

Conclusion
Auto insurance producers and marketers can improve their sales performance by understanding who their customers are, including their motivations and how they’re using technology to buy auto insurance.

For more insights on the path to purchasing auto insurance, download the full report.

 

Brad Auerbach is the Head of Industry at Facebook, where he is focused on leading the operational excellence, revenue growth and strategic partnerships with the largest U.S. financial services and insurance companies. Brad’s team consults with marketers to empower mobile connections that drive business results. Brad is a regular speaker at the McKinsey Property & Casualty Leaders Forum, TransUnion Digital Disruption Summit and Northwestern University’s Kellogg Marketing Conference. Brad attended Indiana University and lives in Chicago with his wife and their two children.

What will legal marijuana mean for Canada’s road safety?

don’t drive stoned.

As you’ve probably heard, recreational marijuana will be legal across Canada come October 17, 2018. Will stoned driving increase? Will this lead to more accidents and fatalities?

We can’t divine the future, of course.  But perhaps we can learn something from the past. Did roads become more dangerous after states began legalizing recreational pot in the U.S.?

The short answer: probably, to some degree.

  • The more stoned a driver is, the more likely she is to be involved in an accident. Motor and cognitive skills are important for safe driving. Getting stoned makes both these skills worse – and the more stoned a person is, the more these skills deteriorate.
  • The number of “THC-positive” drivers on the road increased after legalization. In Washington state, at least. There’s evidence that the percentage of stoned drivers went up noticeably after the state legalized recreational pot.
  • Fatal crashes involving drivers who tested positive for THC increased. Some studies indicate that more people with “detectible” levels of THC in their bloodstreams were involved in fatal accidents after legalization.
  • Collision claim frequency appears to have increased. Early analysis suggests that states with legal marijuana have higher rates of car collisions than they would have had without legalization.

There is an important caveat to all this. You’d think that figuring out when someone is stoned would be easy. It’s not. Unlike alcohol, measuring marijuana impairment is complicated. THC can remain in a user’s bloodstream for days, even weeks, after getting high. Having THC in her bloodstream at the site of an accident does not automatically mean a driver was stoned at the time of a crash.

To make matters worse, to what degree marijuana impacts one person’s driving skills is also not so clear-cut as you’d think. Marijuana impacts different people differently. Researchers are currently trying to figure out how to account for things like THC tolerance when they measure how much marijuana increases crash risks.

But despite these complications, most evidence suggests that stoned driving is a bad idea – it endangers the driver, passengers, and other drivers. For this reason, Canadian provinces have begun revising their impaired driving laws to come down harder on stoned driving.

So what does this mean for road safety in Canada? It’s still too early to tell, but marijuana legalization in the U.S. should serve as a warning.

Your car got flooded. Will your insurance help?

flooded cars are bad news.

So your car got flooded and two thoughts immediately flash in your head: how am I going to get to work and how am I going to pay for this mess?

I can’t help you with the first question, but the answer to the second is easy: insurance.

Comprehensive auto coverage: If you’re one of the 78 percent of Americans that opted to purchase comprehensive auto coverage, you’re in luck. Standard comprehensive coverage will pay for damages to your car caused by water or flood, subject to a deductible. It’ll even cover you if hail smashes your windows to pieces and rain ruins your leather seats.

If your car is so water-logged that it’s inoperable, then it might be a “total loss” – meaning that paying to fix it is greater than how much your car is worth. If it’s a total loss, your insurance will pay you the actual cash value for the car (that’s the purchase price minus any depreciation since you bought the car) and then salvage it.

Not everything is covered: But comprehensive coverage is not all sunshine and roses. It won’t cover you for any of your electronic equipment in the car that’s not permanently installed (think: your GPS navigation if for some reason you don’t use your smartphone for that – but your smartphone isn’t covered either). Comprehensive is also probably not going to help you out if you left your windows open during a rainstorm, so keep your eye on that weather forecast.

What if I don’t have comprehensive coverage? Unfortunately, if you didn’t opt in for extra coverage, you’re probably out of luck. Basic auto insurance doesn’t cover flood and water damage. Your homeowners and renters policies probably also won’t help: these policies don’t cover damage from floods. If you have a newer or higher-value vehicle, this lack of coverage could be a serious problem.

As FEMA puts it, “anywhere it can rain, it can flood.” The odds are good that you live in a place where your car can get damaged from water or floods. Speak to your insurance agent or carrier about whether comprehensive coverage is the right move for you and your vehicle.