Auto insurance rates vary widely for same driver

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Auto insurance rates vary widely for same driver

Unread postby RatPak11 » Tue Jun 19, 2012 10:20 am

http://www.chicagotribune.com/business/ ... 7010.story

Auto insurance rates vary widely for same driver
By Becky Yerak
Tribune staff reporter
12:45 p.m. CDT, June 18, 2012

The nation's biggest insurance companies charge wildly different prices to similar, or even the same, drivers in the same city, a new study shows.

In Chicago, as well as 14 other cities, "good" drivers -- with no accidents or moving violations -- are quoted what the Consumer Federation of America says are high auto insurance rates for the minimum liability coverage required by states.

But those quotes are highly variable.

In Chicago, for example, Web quotes to the same hypothetical woman ranged from $680 a year for Geico to $1,806 from Allstate. Progressive and State Farm quoted $832 and $734, respectively, CFA found.

It gathered quotes for two hypothetical customers: the man hadn't had a moving violation or accident in seven years, nor the woman in 12 years. Both had good credit ratings, were single with one dependent, rented in areas with median income around $30,000, had a high school degree, and drove a paid off 2002 Honda Civic with 10,000 miles on it. He was a 27-year-old laborer, and she was a 35-year-old bank teller.

In Chicago, the man's quotes ranged from $637 for Geico to $1,910 for Allstate. Progressive's quotes were $867 and $1,582, respectively.

"It's difficult to understand why the same driver is being quoted rates from different insurers that vary so considerably," CFA Executive Director Stephen Brobeck said. "Insurers say rates reflect risk and cost, but if this in fact is the case, why do their assessments of these factors differ so radically?"

More than half of the rate quotes on Web sites to the two drivers were over $1,000, and 32 percent of the quotes exceeded $1,500, the study said.

Allstate didn't have an immediate comment.

byerak@tribune.com | Twitter: @beckyyerak
RatPak11
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Re: Auto insurance rates vary widely for same driver

Unread postby RatPak11 » Tue Jun 19, 2012 10:25 am

http://www.paramuspost.com/article.php/ ... 8163957772

Auto Insurers Charge High And Variable Rates For Minimum Coverage To Good Drivers From Moderate-Income Areas
By Mel Fabrikant
Monday, June 18, 2012, 04:39 PM EDT

State Insurance Commissioners Urged to Investigate High Rates and Take Measures to Make Auto Insurance Affordable for All Good Drivers

Research released today by the Consumer Federation of America (CFA) reveals that most good drivers -- those with no accidents or moving violations -- who live in moderate-income areas in 15 cities are being quoted high auto insurance rates by major insurers for the minimum liability coverage required by those states. Over half (56%) of the rate quotes to two typical moderate-income drivers were over $1000, and nearly one-third of the quotes (32%) exceeded $1500.

The research, which uses the websites of the four largest auto insurers nationwide -- State Farm, Allstate, Progressive, and GEICO -- also reveals that rate quotes are often highly variable: Quotes to the same consumer differ considerably. For example, in one city price quotes from these companies to the same woman ranged from $762 to $3390.

"It is difficult to understand how insurers can justify charging more than $1000 a year for minimum insurance coverage to drivers who have perfect driving records for many years," said CFA Executive Director Stephen Brobeck. "It is also difficult to understand why the same driver is being quoted rates from different insurers that vary so considerably. Insurers say rates reflect risk and cost, but if this in fact is the case, why do their assessments of these factors differ so radically?"

J. Robert Hunter, CFA's Director of Insurance and former Texas Insurance Commissioner, called on state insurance commissioners to thoroughly investigate these issues: "Given the fact that all states except New Hampshire require drivers to carry auto insurance, insurance commissioners have the responsibility to ensure that these drivers are charged fair, affordable rates. Our research suggests that most rates charged moderate-income drivers are neither fair nor affordable."

This auto insurance rate research followed up the release last January of CFA's report, "Lower-Income Households and the Auto Insurance Marketplace: Challenges and Opportunities." Among the findings of this extensive study, based on government, industry, and academic research and data, were:
• For the large majority of lower-income households, academic research clearly indicates, automobile ownership greatly increases economic opportunities, particularly access to jobs.
• The minimum liability insurance that drivers in all but one state are required to purchase effectively provides no real benefit to them except compliance with the law. The coverage pays only the costs incurred by other drivers who are hit by the insured.
• Auto insurance premiums reflect not only considerable disparate impacts on low- and moderate-income households but also some discriminatory treatment.
• The high premiums and disparate treatment help explain why an estimated one-quarter to one-third of lower-income drivers are uninsured.

High Auto Insurance Rates Largely Explain High Uninsured Rates

A recent survey commissioned by CFA and administered by ORC International highlights the relationship between high rates and the uninsured. In this survey of more than 1000 representative adult Americans conducted June 7-10, 13 percent of respondents said they know someone "who drives without insurance." (This percentage was 22 for those with incomes between $25,000 and $50,000.) And among those who did know someone who drives without insurance, nearly four-fifths (79%) agreed that "they [the uninsured drivers] do so because they need a car but can't afford the insurance."

Marty Schwartz, longtime President of Vehicles for Change, which makes reliable inexpensive cars available to lower-income families, did not find this surprising: "The biggest barrier to car ownership for many lower-income drivers is not the price of the car but the price of car insurance. Insurance charges often exceed the cost of car payments. This is an important reason that some drive without insurance."

"Rather than reducing uninsured driving by increasing insurance affordability, many states are ramping up criminal penalties," said CFA's Hunter. "Fourteen states now even have jail penalties for driving without insurance coverage. For a start, they should lower the required minimum coverage and take action to ensure that this coverage is being fairly priced. Our earlier research suggests that it often is not."

The latest estimates (2009) by the Insurance Research Council are that 14 percent of drivers nationwide do not carry insurance coverage. All research focusing on income differences has found that those with lower incomes are much more likely to be uninsured that those with higher incomes.

Most Rate Quotes Are High and Vary Widely

CFA's research on rates sought quotes for minimum liability coverage from the websites of the four largest auto insurers. State Farm, Allstate, Progressive, and GEICO have 48 percent of the auto insurance market nationwide and more than 60 percent of the market in a number of states, including three that we surveyed -- Florida, Maryland, and the District of Columbia.

CFA created two hypothetical consumers. Both had good driving records, with no accidents or moving violations in the seven years (man) and 12 years (woman) they had driven. Both also had good credit ratings, were single with one dependent, rented in moderate-income areas (median income around $30,000), had a high school degree, and drove a paid-for 2002 Honda Civic 10,000 miles a year. He was a 27-year old laborer, and she was a 35-year old bank teller. (About one-third of U.S. households have annual incomes less than $30,000.)

The 15 cities surveyed were selected to ensure regional and size diversity. They are Boston MA, Washington DC, Baltimore MD, Atlanta GA, Miami FL, Charleston WV, Louisville, KY, Chicago IL, Sioux Falls SD, Denver CO, Houston TX, Phoenix AZ, Las Vegas NV, Los Angeles CA, and Oakland CA.

As can be seen from the following summary of the price quotes:
• Over half (56%) of the dollar quotes are at least $1000, while nearly one-third (32%) are at least $1500.
• There are more rate quotes at $3000 and over (4) than under $500 (3).
• The man was quoted somewhat higher rates overall than the older woman but the difference, surprisingly, is not very large -- 57 percent of the man's quotes, and 53 percent of the woman's quotes, were at least $1000. And all quoted rates $3000 and over were to the woman.

Rates Quoted in 15 Cities To Man To Woman Both

$3000 and up 0 4 4
$2000-2999 8 5 13
$1500-1999 11 7 18
$1000-1499 12 13 25
$500-999 21 24 45
Under $500 1 2 3
No Quote 6 4 10
Insurance Not Available 1 1 2

As can be seen from the following specific annual price quotes, there are often substantial differences among rates quoted by the four insurers to either the man or the woman in the same city. In fact, in 13 of 30 instances (15 cities for the man and the woman), this price range exceeds $1000.

Rates Quoted to Man Prog State Farm Allstate GEICO

Boston 2058 NA NQ 2290
Baltimore 2152 NQ 2020 1288
Washington DC 1738 1335 1644 1352
Atlanta 1334 NQ 1430 524
Miami 1978 2430 NQ 1759
Charleston 891 961 1596 620
Louisville 1723 1482 2220 1760
Chicago 876 1582 1910 637
Denver 795 NQ NQ 582
Houston 1092 1999 1426 760
Sioux Falls 718 595 624 325
Phoenix 1281 1390 1644 610
Las Vegas 978 1462 1510 780
Los Angeles 1078 2278 922 841
Oakland 844 2049 700 681

Rates Quoted to Woman

Boston 1274 NA 1740 2067
Baltimore 2704 1801 NQ 804
Washington DC 1260 1335 1622 1400
Atlanta 1670 921 1326 448
Miami 2822 2203 NQ 3457
Charleston 951 905 1714 598
Louisville 2130 1425 3354 1827
Chicago 832 734 1806 680
Denver 929 NQ 1028 575
Houston 1242 1292 1388 551
Sioux Falls 712 553 660 318
Phoenix 1449 981 3458 609
Las Vegas 1160 1300 3390 762
Los Angeles 800 600 676 649
Oakland 638 NQ 500 589

CFA Urges State Commissioners to Address This Issue

CFA is sending this research to all state insurance commissioners and urging them to do their own research to learn if low- and moderate-income drivers, with good driving records, are being charged rates that are high, unfair, and unaffordable.

CFA's January report suggested several steps these commissioners could take to make rates lower, fairer, and more affordable:
• Urge state legislatures to lower required minimum liability coverage then make certain insurers are charging fair rates for this coverage. The earlier report found that in some instances consumers were being charged more for less liability coverage.
• Eliminate disparate treatment that effectively discriminates against lower-income and minority families. For example, prohibit the use of rating factors such as occupation and education. Additionally, require that those who drive the least -- e.g., low-income households -- be charged lower rates.
• Create programs in which good low- and moderate-income drivers can purchase required liability coverage for affordable rates. California has such a program with rates that are usually lower than $300 a year and that covers the program's costs with no subsidy from other drivers.


The Consumer Federation of America is an association of nearly 300 nonprofit consumer groups that was established in 1968 to advance the consumer interest through research, advocacy, and education
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Re: Auto insurance rates vary widely for same driver

Unread postby RatPak11 » Wed Jun 20, 2012 1:05 pm

http://www.insurancejournal.com/news/na ... 252110.htm

Rates for Good Drivers in Cities Too High, Too Variable, Says Consumer Group
June 19, 2012

The Consumer Federation of America (CFA) says that most good drivers — those with no accidents or moving violations — who live in moderate-income areas in 15 cities are being quoted what the group maintains are high auto insurance rates by major insurers for the minimum liability coverage required by those states. More than half (56 percent) of the rate quotes to two typical moderate-income drivers topped $1,000, and nearly one-third of the quotes (32 percent) exceeded $1,500.

CFA said its research, which used the websites of the four largest auto insurers nationwide — State Farm, Allstate, Progressive, and GEICO — also revealed that rate quotes are often highly variable. Quotes to the same consumer differ considerably. For example, in one city price quotes from these companies to the same woman ranged from $762 to $3,390.

“It is difficult to understand how insurers can justify charging more than $1,000 a year for minimum insurance coverage to drivers who have perfect driving records for many years,” said CFA Executive Director Stephen Brobeck. “It is also difficult to understand why the same driver is being quoted rates from different insurers that vary so considerably. Insurers say rates reflect risk and cost, but if this in fact is the case, why do their assessments of these factors differ so radically?”

But insurers said it’s not that difficult to understand why the same good driver might receive price quotes ranging from $700 a year to more than $1,900 as the CFA report cited.

“The CFA wants to know why the same person, with a good driving record, is receiving price quotes that vary so widely. The answer is simple. The markets for auto insurance are highly competitive. In addition, the experience of insurers in these markets will differ, leading insurers to price the risk of a prospective policyholder differently,” said Dr. Robert Hartwig, president of the industry-backed Insurance Information Institute (III) and an economist.

Hartwig also noted that the CFA research looked at coverage for what a policyholder is legally obligated to pay as the result of bodily injury or property damage to another person. Bodily injury and property damage related insurance claims payouts are generally higher in U.S. cities compared to payouts in suburban and rural communities, according to the III, which said the CFA study did not explore this issue.

“More importantly, increases in the cost of auto insurance nationwide remain in line with the Consumer Price Index (CPI), rising by less than 3 percent so far in 2012,” Hartwig added.

J. Robert Hunter, CFA’s director of insurance and former Texas insurance commissioner, called on state insurance commissioners to investigate the pricing and variability issues highlighted in the report.

“Given the fact that all states except New Hampshire require drivers to carry auto insurance, insurance commissioners have the responsibility to ensure that these drivers are charged fair, affordable rates. Our research suggests that most rates charged moderate-income drivers are neither fair nor affordable,” said Hunter.

This latest CFA auto insurance rate study comes after the release last January of another CFA report, “Lower-Income Households and the Auto Insurance Marketplace: Challenges and Opportunities.” This report said that for the large majority of lower-income households, “high premiums and disparate treatment help explain why an estimated one-quarter to one-third of lower-income drivers are uninsured.”

For its latest research, CFA sought quotes for minimum liability coverage from the websites of the four largest auto insurers. State Farm, Allstate, Progressive, and GEICO have 48 percent of the auto insurance market nationwide and more than 60 percent of the market in a number of states.

CFA created two hypothetical consumers. Both had good driving records, with no accidents or moving violations in the seven years (man) and 12 years (woman) they had driven. Both also had good credit ratings, were single with one dependent, rented in moderate-income areas (median income around $30,000), had a high school degree, and drove a paid-for 2002 Honda Civic 10,000 miles a year. He was a 27-year old laborer, and she was a 35-year old bank teller. (About one-third of U.S. households have annual incomes less than $30,000.)

The 15 cities surveyed Boston, Washington D.C., Baltimore, Atlanta, Miami, Charleston, Louisville, Chicago, Sioux Falls, Denver, Houston, Phoenix, Las Vegas, Los Angeles and Oakland.

The results included the following:

•More than half (56%) of the dollar quotes were at least $1,000, while nearly one-third (32%) were at least $1,500.
•There were more rate quotes at $3,000 and over (4) than under $500 (3).
•The man was quoted somewhat higher rates overall than the older woman but the difference was not very large — 57 percent of the man’s quotes, and 53 percent of the woman’s quotes, were at least $1,000. And all quoted rates $3,000 and over were to the woman.
There were often substantial differences among rates quoted by the four insurers to either the man or the woman in the same city. In 13 of 30 instances (15 cities for the man and the woman), this price range exceeds $1,000, according to CFA.

Comments:

Roger says:
They are charged alot because even if they tap someone at 5mph there will be suffering, pain, lawyers……

June 19, 2012 at 2:27 pm Agent says:
There are many variables in the rating systems of companies to determine the proper rate to charge a consumer. Their credit score has a lot to do with it along with moving violations, accidents and even the area they live in. Some carriers have it down to a science on loss frequency in an area and the zip code of garaging comes into play. Sometimes the type of vehicle being insured has an impact on premium with damageability in an accident. It is indeed a complex system in place. Everytime we do a quote, I am amazed at the discrepancy in premium between 5 carriers on the same risk. Some carriers give more credit if we do the HO with it so that is really the way to go if an agent can quote both.


June 19, 2012 at 3:00 pm Auto Product Manager says:
You also have to remember that all insurers do not possess the same degree of sophistication or capability when it comes to pricing. The larger, more sophisticated insurers will have more segmentation in place to help better price a given risk; smaller insurers will not have that capability. That leads to the potential for very large differences in quotes and increases the probability of adverse selection occurring to smaller carriers who can’t “defend” against it with similar segmentation.

June 19, 2012 at 1:32 pm Dan says:
Roger hit the nail on the head. The CFA needs to be pressuring the lawyers that are being awarded outrageous settlements that don’t truly reflect a person’s injuries. Our agency sees $500 PD claims with $15,000 BI payouts. How does that add up? The carriers are paying out policy limits day in and day out and people wonder why rates are what they are in these cities.

June 19, 2012 at 1:45 pm Barry Rabkin says:
Auto insurance rates, or any insurance rates for that matter, do not have to be “fair” or “affordable.” They must, however, meet actuarial requirements to cover both expenses and profit. Insurance is not a utility. Insurance rates should not be calculated on the basis of regulators or politicians keeping their jobs.

June 19, 2012 at 2:04 pm Pat Foley says:
Instead of spending their time and money attacking insurers for charging (state-approved) rates, why don’t they spend their resources educating consumers to seek the best deal they can find?

June 19, 2012 at 2:17 pm Chris Taylor says:
My bigger concern here is that the CFA tried to come up with a ‘normal’ or ‘typical’ scenario for comparative purposes and they used state minimum limits!

June 20, 2012 at 9:57 am Agent says:
We have carriers who will quote a lower rate for limits higher than state minimums. Carriers don’t like to have customers who are bottom lining the limits strictly for price. They are generally not loyal and go elsewhere for a dollar savings. We don’t like minimum limits either since we would have more E&O exposure in case of a serious at fault claim. The customer/attorney will say we didn’t recommend higher limits. We have to document our files that they were offered and get a sign off by the customer when they buy.

June 19, 2012 at 3:11 pm Wild Bill says:
Barry is right. It is the overall aggregate rate compared to losses and expenses that dictate the reasonablenss of the rate. Good drivers in big cities with higher payouts and more losses will pay more than the same good driver in a lower risk and loss environment, so this is an exercise in futility. Perhaps the CFA is troubled by the concept of spreading the risk and doesn’t want to accept that good drivers everyhwere pay the losses of the bad drivers. If they need an even stronger example they should look at health care premiums and the small percentage the insured population that consumes the overhwelming majority of services.

June 19, 2012 at 3:22 pm Agent says:
You know what? In this country, a consumer can always go somewhere else if they think the rate they are being charged is too much. With the advent of the internet, one can go onto it and get all kinds of quotes. Of course, many don’t know what they are buying and end up with a bottom line quote with inadequate coverage. The GEICO’s, Progressives, 21st Century people on the phone aren’t even agents, they are order takers and give little advice on what to have or even recommend proper coverage. Independent Agents do the best job of explaining coverage to a consumer. Geek buyers are not loyal and will shop on the net and change in a heart beat if they think it will save them money. Flo is on the tube telling consumers to pick the price they want to pay. What a joke.

June 19, 2012 at 4:43 pm SWFL Agent says:
Everything in your post makes sense and most of us that read this publication understand why rates vary. But we all have clients, friends, and relatives that ask the same question about why rates can vary so much. It’s really unexplicable from a customer perspective. And now that auto insurance is just a commodity to most people there’s no patience on their part to listen to an explanation. Let’s face it, 21st Century’s TV advertising admits there is no difference between repairs or service. They just promote “the same repair but with a lower rate”.

We have one carrier that began using a new credit model on renewals. Rates have doubled in some cases. I’m a proponent of the use of credit as an underwriting variable but even this one is hard to swallow.

June 19, 2012 at 5:22 pm Agent says:
The problem with using the Credit Score as a major tool in determining the price is that we have a poor economy currently and many people’s credit scores have deteriorated as they have lost wealth in the past 3 1/2 years. Companies will put someone in a higher rate tier based on their score, so the poor customer gets a double whammy at a time when they are struggling to make ends meet. I think that is patently unfair and if the customer is not having claims and pays their premium, they should not be uprated.

June 20, 2012 at 11:50 am Ins Guy says:
Agent you are exactly right. I read this article from another source earlier which contained 2 rebuttal paragraphs from a NAMIC spokesperson which said exactly the same thing. I’m not sure why IJ chose not to include that.

Oh by the way, 5 quotes – now that’s statistically credible isn’t it! They probably did more than than but it probably adversely skewed their conclusions, so they eliminated it.

June 20, 2012 at 12:31 pm Agent says:
Guy, We are living in a very complicated world now and technology is very hard to stay up with. About the time you think you have a handle on it, it will change. Our salvation is that we use a comparative rater to give us an indication of which carrier is likely to give the best quote and then we have to finish it off in the company system. Our CSR’s are competent, but they are challenged to make sure the quotes stand up and are issued. With the companies taking rate right and left, it is a wonder we can do anything and make it come out.

June 19, 2012 at 3:19 pm Steve says:
At a time when price shopping has never been easier or more promoted, the consumer advocates should let the free market play out. Regarding the variance among company rates, it’s a reflection of the variance in company loss results, expenses, underwriting and financial return requirements tied to the legal entity structure. Let the market weed out the expensive and inefficient.

June 19, 2012 at 5:55 pm thomas murphy says:
Nevada is an example of auto rates to high. What they need in Nevada is an elected insurance commissioner who will represent the consumer. That is the only way to lower the rates. At present the commissioner is in BED with the auto insurance companys.

June 19, 2012 at 6:02 pm Agent says:
I am not sure a Commissioner in bed with the industry is not just as bad as one in bed with consumer groups like Robert Hunter was when he was Commissioner in Texas. He wore his welcome out in Texas in a few years so he could continue to be a consumer advocate elsewhere. Consumer advocates don’t seem to understand that companies have to pay claims, defend insureds and then somehow pay their overhead to stay in business. They have to charge a rate that they feel will allow them to succeed. Sometimes they run off good business, but it is their choice.

June 20, 2012 at 8:55 am youngin' says:
What does “rates are too high” mean?

June 20, 2012 at 9:11 am Tom says:
So.. an online application for an imaginary customer was able to get a “good credit rating”?

Sence when did we start assigning “good credit” to fictitious customers?

These rates are inflated and do not reflect the benefits of having good credit.
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