Archive for August 2012

Comparing prices…………   Leave a comment

Dog Blog

We may look the same, but our insurance rates won’t!

Good morning one and all!

This is a quick thought for those who compare pricing with your neighbors/friends/relatives etc to see whether or not your policy premium is competitive.  Can we please stop doing this?  It’s like comparing apples to galoshes.  Apples and oranges are probably much more similar than you and your neighbor’s insurance rating basis. 

“But we live in the same neighborhood, we drive similar cars!”  you may protest. 

“That’s all very true,” Sammy counters, “but insurance premium is based on several hundred different factors.  Even though you may seem very similar on the surface, looking deeper into the matter reveals quite a few important differences.”

Just one example that happened recently – we had a client call in, frustrated by the increase in their rates due to purchasing a new vehicle.  One thing that they kept coming back to was the fact that their granddaughter had also just purchased a new vehicle, and was paying substantially less.  As I pointed out, this is an impossible comparison to make, because you are talking about over 50 years difference in age, totally different types of vehicles owned, different credit ratings, different driving records and claims history, different lengths of time with the insurance company (remember our discussion on loss ratio?), and on and on and on.  Let’s not forget that different companies offer different discounts.  And we don’t even know if the granddaughter has the same insurance company! 

Crazy as it may seem, you could take twin siblings, driving the same vehicles, with similar driving histories, living next door to each other, and they will still be paying different amounts of money for their insurance.  If you want to know whether your rates are competitive, contact your agent and request quotes from multiple carriers.  Rather than comparing with friends/neighbors/relatives, who are dramatically different (from an insurance rating point of view), you are comparing YOUR information with multiple companies!

Advertisements

A quiet time at the Dog Blog – Gas Well blog in the works!   Leave a comment

Good morning!

Just a quick note to let you know that, with the exception of maybe a quick hit short blog, there’s going to be relative radio silence over here at the Dog Blog for a couple of weeks.  We are collecting information to put together a blog (most likely a series) about the effects of Marcellus Shale gas wells on insurance coverages, and how the industry is responding.

If you miss us, please send us an email (berneysm80@gmail or scott@poleskyagency.com) or follow us on Facebook

Should be an interesting and enlightening time, and I look forward to writing more soon!

dog blog

Working hard to enlighten you!

4 ways NOT to save on your insurance (and what you should’ve done) – Part 4 (Severity)   2 comments

Insurance Claim

Sammy attempts to demonstrate a major claim

This week Sammy and I are going to finish up our discussion on how your claims history affects the premium you pay for your insurance policies.  As you may recall, last week we discussed how the number of claims that you file can drive up your premium.  This week, we are going to discuss how the severity (ie – total dollar value) of individual claims affects your premium.

Just a quick search on Google   and you will find there is a lot of information out there about severe (major) insurance claims – the top causes of major homeowner’s claims, other blogs about major insurance claims, and even a website that lists the top 10 biggest insurance claims ever.  When reviewing a large claim, especially in light of your future premiums, companies will generally consider a couple factors.

  • Cause – I’ll make this as simple as possible.  In the event of a large claim, the cause of the claim can be a factor that is considered with regard to premium change – although, this primarily applies to business insurance.  Basically, if you have a large claim, but it’s not something that would be considered “your fault” (ie – a weather claim, an uninsured driver hits you),your agent can make an argument with the underwriter that this large claim was something outside of your control and not easily prevented.  It’s not always successful, but it’s still worth having a discussion.
  • Prior Claims – This ties into cause, in a way.  If you have a large claim, but no prior claims, your agent can again make an argument that this was a one-time event that could happen to anyone, especially if you were not at fault.  It’s definitely not always going to be successful, but it helps.  However, if you have a couple prior claims, regardless of size, it makes it much more likely that you will see a premium increase (or potentially a non-renewal notice) upon expiration of your current term.
  • Loss Ratio – Loss ratio is the calculation a company makes to determine your “net” expense to them.  The most simple calculation takes the total dollar amount paid on every claim you’ve ever had while insured with that company (for THAT particular line of coverage – auto, home, etc), and divides it by the total amount of premium you’ve paid while insured with them (again, for THAT line of coverage).  For example, let’s say you had a $1,000 claim and a $45,000 claim.  You’ve been insured with the company for 25 years, and paid $23,000 of premium.  Your loss ratio calculation would be $45,000 + $1,000 = $46,000, divided by $23,000. $46,000/$23,000 = 2, or 200%.  Another example – the company paid out $8,000 in claims, and you’ve paid in $16,000 in premium.  $8,000/$16,000 = .5, or 50%.   Obviously, the higher your loss ratio is, the more likely it is your premium goes up.  This is one argument for having longevity with a company – the longer you stay, the lower your loss ratio will be – and thus, the greater chance that a loss, even a large one, will not have a dramatic effect on your premium.

One last thought – claim history is something which “travels” with you.  Similar to your driving record with the DMV or your credit score, ALL insurance companies provide claims information with a central database.  When you change insurance companies, the new insurance company will contact the central database and have access to basic information about all of the prior claims that were filed.

In summary – two different factors are the biggest influence on how your claims history can affect your annual premium – frequency and severity.  Obviously, the more that you do to reduce those two factors, the more favorable your insurance premiums will be!  I’ll stress filing numerous small claims – the more small claims that you file, the less flexibility there will be in the pricing of your coverage.

A little dry these last two weeks, but I hope it helps you to understand how insurance works!

insurance blog

Man, I’m worn out! That’s a lot of info

4 ways NOT to save on your insurance (and what you SHOULD have done) – part 4 (Frequency)   1 comment

Insurance Claim

Sammy attempts to demonstrate a minor claim

The fourth & final installment of our 4 ways not to save thread may ruffle your fur a little bit.  Keep in mind while reading that it’s simply a different perspective to consider.  We are going to address the issue of whether or not you should file an insurance claim.

There are quite a few websites that offer thoughts to consider, especially when it comes to whether you should file a claim on your auto insurance policy.  Truth be told, there are scant few solid answers that apply to every situation.  99% of the time, it’s ultimately going to end up being a (hopefully) well-educated decision.  Oftentimes, personal preference also plays a significant role.

Agents are always asked “If I file this claim, will my rates go up?”   As I said above, there’s hardly ever a concrete answer that’s going to apply in every situation – it’s heavily circumstance-dependent.  If you ask your agent this question, you are often going to receive the answer, “Well, maybe….  If thus & so happens, then …..”

Insurance rates are a very complicated calculation, and do not simply involve whether or not you’ve ever filed claims before.  I’ve addressed this very briefly, only glancing across the surface of the issue.  That being said, your claim history IS a major factor behind how much (or little) you are paying for your insurance coverage.

Your claim history is based on two different factors, from a premium perspective – frequency and severity.

This post is going to address frequency.  I will write a short post early next week to address severity.

Frequency of claims is something that insurance companies keep a close eye on.  With regard to auto insurance, companies often have very specific measurements they follow, monitoring things like claims frequency and your driving record (speeding tickets & other violations).  Obviously, the higher the number of claims & violations, the more likely it will be that you will either A) be paying more for your coverage, or B) not be able to obtain insurance with a desirable company.  This happened to a person I was obtaining quotes for recently.  They had not ever had any major claims, and only had one violation.  However, in the past two years, they had filed four separate, small (under $1000 each) claims.  As a result, I had a very limited number of companies I could obtain quotes from, and they ended up paying a substantial amount for coverage.

Similarly, companies watch the frequency of claims on policies like home owners or business/commercial propertyFiling multiple claims is something that will often drive your premium up – in essence, the company views you as more at risk of having at least one claim in a given year.  This is one of the reason that the rates for coverage with a higher deductible are often substantially lower (as I briefly addressed in part one of this series) – if you have a higher deductible, it significantly reduces the frequency of claims.  Unfortunately, even if you had no control over the cause of loss (IE – a windstorm or lightning strike caused damage), if you file a number of claims, your premium will in all likelihood go up.

If you are in a claim situation, I would recommend that you pull together all the applicable information – date, circumstances, item(s) damaged, estimates for repair/replacement, etc – then contact your agent.  Your agent will review the data about the loss, your personal claims history, and the guidelines of your insurance company.  They will be able to offer you thoughts & suggestions, but as I said about, in most cases, you are going to have to make an educated decision about how you want to proceed.

That’s all for this week – we are going to review severity shortly!

Natalie Breuer

Natalie. Writer. Photographer. Etc.

Rare Historical Photos

And the story behind them...

coldbike

Cycling with kids, sometimes in the cold.

German is easy!

The blog for all who want to learn German...

frugalfeeding | Low Budget Family Recipes, UK Food Blog

n. frugality; the quality of being economical with money or food.

A Dog's Blog

Sammy Bo Journey, Insurance Dogger

Bucket List Publications

Indulge- Travel, Adventure, & New Experiences

The Butchered Pig

Food and musings...

Denise Minger

Rescuing good health from bad science.