Archive for the ‘rate’ Tag

A defense for the insurance industry…. based on my own experience   Leave a comment

I wrote this blog on the day that the incident occurred.  I decided to wait a few weeks and give myself time to cool down so I wouldn’t be posting in anger.  Nearly a month after the fact, I’m keeping it intact, as it’s mostly not about anger so much as it is informative about what’s going on out there.  On with the show:

Hello estranged readers!  (all 3 of you)

I’m going to describe an incident in my life today, to defend my industry.  I’m going to eliminate many of the identifying details; the situation is on-going.  However, I think the lesson it holds is an important one.

Very simply, one of my vehicles is in a repair situation that normally would be resolved via the insurance company.  It is, however, being paid out of pocket by the party responsible.  To make a long story short, I was told by the garage that I am being charged a higher rate for my repair.

When I asked why, I was told “Because the insurance companies will pay the higher rate.” 

“How is this a defense of the insurance industry?!  They are paying higher rates than necessary when they could negotiate reductions in cost!”  you might ask.

“While that may be accurate on the surface, there are some factors at play that make that not necessarily correct.”  Sammy would rebut.

To make it as straight forward as possible – the increased cost that’s being charged is lower than cost of negotiating the correct amount.  If an insurance company were to take the time and manpower necessary to haggle for better prices, they would pay more for the hourly pay/salary of their employee than the increased cost of repair – in my case, about $75 total.  It may not seem like much, and in my case, it’s not.  But when you multiply that by hundreds of cases a month (see “A form of insurance fraud” at bottom), every month of the year, well, you can see how it adds up.

One very important point needs made – not every repair shop operates in this fashion.  I was not aware this was going to be the case in my situation, or I would not have gone to the garage that I did.  Now, I’m stuck overpaying (albeit slightly), but I’m aware that it happens, and I’m aware that I need to be more wary of where I go to get repairs done.

Most importantly, I want you all to be aware that in a world of rising insurance costs, it’s not simply a case of the insurance company raking you over the coals.  Insurance companies are being nickel and dimed in this fashion quite often, and there is no simple solution to the problem.  To be blunt, some repair firms will take advantage of this situation, and that results in all of us paying higher rates for insurance.

And to the shop in question, Sammy only has one thing to say:

**Pbbbbbb**

**Pbbbbbb!**

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!

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