Archive for the ‘Why I hate insurance’ Category

Driverless cars – insurance for the future?   Leave a comment

Sammy driving

The Insurance Dogger isn’t sure if she’s ready to jump out of the driver’s seat just yet!

As you may have noticed, there is a lot of news coming out lately about driverless cars – Google is one of the main players in the field,  but Carnegie Mellon University made a big splash locally and nationally when it unveiled a very successful test-drive in the Cranberry area nearly two years ago.  A lot has been written in the last couple years about the various pros & cons of driverless cars, so I won’t rehash them here – a simple Google search will reveal just about anything you’ve ever wanted to know about the future of driverless vehicles.

However, as an insurance agent, one of the first things that comes to mind whenever the topic comes up is, how will the insurance policy, and the liability coverage in particular, function when it comes to insuring driverless vehicles?  This is not an easy question to answer, as there are many facets to consider, and much of it is based on speculation because the technology has not put forth a viable “ready for the public” option yet.

There are several legal considerations that, for the most part, I will set aside for now – primarily for the sake of expediency.  One of the big issues at hand is that, generally, each state has autonomy over how insurance laws & coverages are mandated.   I will address issues as broadly as possible, but the situation is still largely theoretical and developing as the technology progresses.

From an insurance standpoint, one of the largest liability concerns is the question of who is at fault (“liable”) when a driverless car is involved in an accident – is it the “driver” of the vehicle?  The engineering firm that put together the software operating the vehicle?  The manufacturer of the vehicle?  All of the above?  This is not an easy question to address, and seems to generate more questions than answers.  Was there an error in the software?  Was the driver able to manually override the vehicle and didn’t?  Did the steering system or brakes fail to receive or comprehend the instructions the software passed along?  Some of these questions will sort themselves out as the technology becomes more “concrete” and less speculative.  But the truth is, I fear, legal liability concerns will not actually be resolved until after the rubber hits the road and accidents occur.

Another concern along those lines is who is responsible for damages to the driverless car itself if it is responsible for an accident in which it gets damaged?  As above, should the software design firm pay for your damages?  The car company?  Are you responsible, as the owner of the vehicle?

A bit more disconcerting – what if your vehicle’s software is hacked?  If the vehicle is dependent upon mobile maps & directions to get from point A to point B, what if mobile/cellular service is lost?  How will the vehicles navigate, and in particular, how will it respond to the ever-changing conditions of roads and construction, closures, traffic, etc?

Lloyd’s of London published a market-watch article (along with its far more lengthy corporate report) about some of these very issues.  While the article isn’t conclusive, it does provide some key insights into considerations and factors at hand: “liability will be a key issue because autonomous and unmanned vehicles involve the transfer of control from direct human input to automated or remote control.  ‘In many cases the technology is there to create fully autonomous vehicles, but the legal and regulatory environment needs to be developed further, and public trust will also need to be fostered,’ says Maran.”

One thought I see being repeated consistently is that, ultimately, the increased safety offered by autonomous vehicles will rapidly outweigh the legal and insurance liability concerns: “Many of the routine claims that currently drive the cost of motor insurance will reduce or almost disappear entirely, explains Powell. The resulting decreased exposure for insurers would probably require underwriters to change the design and pricing of motor insurance products, he says.”

At the end of the day, because the technology is a relatively long way off, the “problems” of insuring driverless cars still bring up more questions than answers.  Regardless of the characteristics of the final product, the technology is coming, and the insurance companies that are able to quickly analyze and adapt to the new risks will be a huge step ahead of their competitors.

Some additional resources, reading, and even some videos to watch:

Insurance Information Institute study, Feb 2015

Wall Street Journal article, August 2014

Auto Insurance Center (undated)

CNBC / AllState CEO, Jan 2015

CNET / YouTube – great review of pros & cons of self-driving cars

Google self-driving car – A First Drive

Wall Street Journal YouTube article

CMU driverless car driven around Pittsburgh

Bill Shuster rides in driverless car

 

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Identity Theft, Flood Insurance, and antique coverage – Part Two   Leave a comment

Hello everyone, we’re back again! This time we are going to briefly review the debacle that is flood insurance.  Operated by the National Flood Insurance Program (under the auspices of FEMA) or NFIP for short, flood insurance has gone through quite the upheaval lately.  This is due, in large part, to the fact that the program is about $20 BILLION in debt.

As a result, Congress passed the Biggert-Waters Act in 2012 in an attempt to bring the NFIP’s budget deficit back in line.  This was to be accomplished primarily by removing subsidies from policies in heavily flood-prone areas so the premium reflected the real risk of insuring a homeowner in such an area.  As you can imagine, this created quite a bit of backlash from property owners along the coast, particularly those in Louisiana.

The resultant premium increases imposed by Biggert-Waters were shocking and dramatic, far higher than what was originally predicted.  Instead of removing subsidies over time, as was initially proposed, they were yanked all at once for thousands of property owners nationwide.  For example, one of our clients saw her premium jump from a little less than $500 to nearly $3,000 in one year.

Thus Congress & the Senate recently passed the Homeowners Flood Insurance Affordability Act.  Boiled down, the HFIAA basically sets annual limitations on premium increases to attempt to raise rates in (very small) steps.  However, even a glance at FEMA’s overview page outlining the changes reveals confusing and challenging definitions and procedures.  When I called the company about getting our client’s premium scaled back due to the change, I was told, almost word for word, “We don’t know whether the new act is going to affect her premium, so we are going to wait until FEMA tells us to do something.”

Very simply, I would summarize all the changes to flood insurance this way:  Our government took a program that was quite literally drowning in debt, put together a knee-jerk and poorly executed solution, and reversed it in a similarly ineffective fashion in response to public outrage.  This article puts it all together perfectly.

The government had a chance to fix a broken program that had previously served constituents relatively well.  It had its problems, as most government programs do, but it was completely blindsided by the severity of storms like Katrina and Sandy.  Instead of scaling up property owner premiums over 5 or 10 years to more accurately reflect the risk that they carry, a “NOW NOW NOW” followed by a “LATER LATER LATER” mentality prevailed.  As usual, it will ultimately be the property owners and tax payers who foot the bill.

Sammy is this covered

Sammy thinks these flood changes are all wet….

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!

3 Things I really hate about Insurance   2 comments

I mean, who doesn’t hate insurance, right?  You know what I’m barking about.  All the money paid out, and for what?  Make my agent rich!  Go figure.

This blog is devoted to my top 3 bones to pick (get it, bones?).  What do you mean, my daddy has to pay more for his policy?  That’s less treats, less trips to the doggy park (and less trips to the kennel.  This may not be all bad).  What do you mean, the claim is denied?  Who’s gonna pay for it now…. me??  I think not!

Without further ado:

  • I haven’t had a claim in forever!  I’ve NEVER had a claim, for that matter.  Why does my premium keep going up?  This is one my daddy cries about all the time – he gets this question a lot, and he comes home and has to bend my ear at least once or twice a week about it.  So, believe me, I know ALL about this one.

I’ll keep it simple.  Basically, when my daddy pays his insurance premium, that money goes into a bucket – a big bucket full of money from everyone’s monthly premiums.  Claims are paid out of that same bucket.  So when there are too many claims, or the claims are too expensive, the bucket gets empty.  When the bucket gets empty, then my daddy’s premium goes up a little, even if he hasn’t had a claim.  Those who have had claims pay more, but everyone sees a little bit of an increase:  that’s what insurance is – the spread of risk of a large loss over a large number of people paying premium.  And so, that’s why, some times, premiums go up even if you haven’t had a loss!

  • What am I even paying for here?!  My claim was denied!! This is one that really stresses my daddy out.  There are a lot of reasons that a claim could be denied, and he says that some times there’s a lot to explain.  Insurance can be difficult to understand, but basically, a claim would be denied if the policy does not provide the coverage.  Insurance does not cover everything, and that’s something that more people like my daddy need to help clients to understand.  For example, insurance is not meant to be a warranty – if your car breaks down, the cost of repair would not be covered.  Also, apparently, if the dog chews up his mommy’s glasses (who would do something like that?!), that also wouldn’t be covered.  Another thing to keep in mind is that not every policy is comprehensive, but in most cases, the coverage can be added.  For example, any surface water (overflowing rivers, heavy rains, an above ground pool that bursts [yes, that HAS happened!]) that comes into our house and does damage is NOT covered by homeowners; however, if you purchased flood insurance, it WOULD be.
  • This might as well be written in Chinese.  I don’t understand how insurance works at all! Daddy tells me that I should be more patient with people.  I just don’t get why people don’t want me to jump up and say hello, a few kisses to the face, that sort of thing.   He says that not everyone likes that, and not everyone understands that it’s my love language.  Insurance is kinda like that – it has it’s own language, and most people don’t get it.  What people need is someone who can translate all the mumbo jumbo and make some sense out of everything.  There IS a logic behind it, and all it takes is someone who is patient enough to sit down and explain it all, answer questions, etc.  There ARE answers out there, there ARE translators out there… it just takes some time, effort, and patience to find them and listen to them.

That’s all for me today.  It’s been a busy day, and I’m dog tired (enough already!!).  I hope you have a wonderful evening!

insurance sucks

Who did that?! Not me, that’s for sure…. *shhhhhh!*

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