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Injury Costs in Vehicle Accidents Skyrocket

Sep 1st 2010

By: MelB

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The Center for Disease Control and Prevention took a look at a year’s worth of data on vehicular accidents and came up with some startling numbers, in terms of costs, that more than speak for themselves:

- Medical treatment and losses to productivity associated with auto accidents: $99 billion

- Cost of car and light truck crashes: $70 billion

- Cost of motorcycle crashes: $10 billion

- Cost of pedestrian involved accidents: $10 billion

- Cost of cyclist involved accidents: $5 billion

- Fatal motor vehicle-related injuries: $58 billion

- Non-fatal injuries requiring hospitalization: $28 billion

- Inuries treated in the ER and released: $14 billion

- Injuries and death among men: 74% of all accidents, cost $74 billion

- Injuries and death among teens and young adults: 28% of all crashes, cost $31 billion

And these numbers represent injury-related costs ONLY. They do NOT include vehicle or other property damage.

Is there any wonder auto insurance is expensive? If you took the total bill and parcled it out over every licensed driver in the United States, we’d all have to come up with $500 to cover the tab.

Among other preventive recommendations, the CDC mentioned:

- Graduated driver licensing.
- Improved child safety seats.
- Primary seat belt statutes.
- Improved seat belt enforcement.
- Mandated helmets for motorcylist and bikers.

Bottom line. Nothing is going to help you keep your insurance premiums lower than maintaining a clean driving record. The industry has to recoup its expenses somewhere and while we’re all going to take a hit with these kinds of bills, drivers who have higher risk will definitely pay more to get coverage.

Auto Insurance
Military Death Benefits: When Principle Should Outweigh Profit

Aug 30th 2010

By: MelB

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Sometimes it’s not the money, it’s the principle, which is exactly what a group of military families are trying to say to Prudential Insurance in an amended lawsuit filed today to include more plaintiffs and an outright allegation of fraud in the handling of the death benefits of U.S. servicemen.

The company claims to follow an industry standard practice of putting death benefits in so-called Alliance Accounts on which beneficiaries may draw as desired. In reality, the monies stay in the company’s general accounts earning 5 to 6 percent interest and are only transferred into the Alliance Accounts as needed. Those accounts earn 0.5 to 1.5 percent.

If you do the math, it actually just comes down to a few thousand dollars difference, but that’s not the point. This “industry standard” practice amounts to earning money on the deaths of American servicemen. About half a billion dollars worth so far, according to the plaintiff in the suit.

One mother quoted in a story in the New York Times by Dan Frosch described the behavior as a “dishonor [to] my son, who died serving his country.” While Prudential did not comment on the story or the lawsuit, they have, over the past month, vigorously defended the manner in which they have treated military families, insisting they have provided a safe and reliable repository for death benefit funds at a time when families are not thinking clearly about finances.

Prudential has administered life insurance policies for soldiers since the 1965 creation of Service Members’ Group Life Insurance and also works with a program for veterans. The law requires the company to either offer a lump sum or 36 monthly installments when paying benefits.

It is most likely entirely true that Prudential has obeyed the letter of the law, but there is a larger spirit involved in this issue that corporate executives seem to be missing. It’s a matter of respect.

Nobody will argue the point that insurers are in the business to make a profit, but profit should stop where compassion and sensitivity begin. Insurance companies always seem puzzled when they do not have a good relationship with the public. Perhaps they should turn their razor sharp accounting practices on their own behavior and see how the math works out when viewed from the other side of the equation.

Life Insurance
Auto Insurance Fraud Harms All Drivers

Aug 27th 2010

By: MelB

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Depending on the source to which you turn, people are either defrauding insurers right and left as a consequence of the recession or things are rocking along about like normal. How much fraud goes on in the industry each year? Oh, anywhere from $80 billion to $200 billion. Yes, that’s right, the best estimate has a $120 billion margin of error. What’s up with that? Simple. Unlike car accident statistics, there is no national system in place for investigating insurance fraud so there simply are no good numbers.

Right now private companies, state insurance departments, and the federal government all conduct separate (and occasionally joint) investigations of insurance fraud and maintain separate records on different systems. About the safest thing we can say is that some types of fraud are up as a result of tough economic times, notably smashed car windows and staged auto accidents.

According to data compiled by the National Insurance Crime Bureau, claims for broken windows with questionable provenance are up about 14% for the first six months of this year. Why does this kind of thing go on? Simple. There is a common perception among consumers that they are forced to pay for auto insurance because it’s required by law. They shell out hundreds of dollars for years on end and never see a return on those dollars. A vast majority of people who engage in relatively minor instances of auto fraud express some variant on the idea that they were getting their own money back.

That’s a difficult point to argue. Insurance is one of those things you hate until you need it. Few people don’t resent paying for coverage and most of us, if we’re lucky, never actually file a claim. The flawed thinking in the minds of the people perpetrating the fraud, however, is that their actions are actually the major cause of high auto insurance rates. Insurers try to recoup their losses to fraud by raising premiums across the boards for all consumers, not just the ones who have actually tried to pull a fast one.

So, if you have a valid auto claim in the midst of the recession, be prepared for an extra stringent examination of the incident, especially a smashed window. While insurance fraud statistics as a whole are difficult to determine, fraud in these two areas is clearly on the upswing and clearly linked to economic frustration.

Auto Insurance
A Good Sense Product: Pay as You Go Auto Insurance

Aug 25th 2010

By: MelB

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It’s not too often that you get a chance to talk about an insurance product with the potential to be good for the planet, but I have one for you — pay-as-you-go auto insurance. These are policies with the premium rate tied to the number of miles (or sometimes hours) the car is driven per month. All the other pricing factors apply, but the equation in terms of risk is so simple you have to ask why it hasn’t always been done this way. The less time you spend behind the wheel, the less chance you have of being in an auto accident.

That’s a good thing on many levels. First off, less chance of an auto accident, less chance of you waking up in a hospital. But, the savings to the insurance industry in accident-related damage claims could be as much as $60 billion a year if insurance by the mile became the standard format instead of the current lump sum sort. The Brookings Institute estimates that in that scenario, driving in the United States would drop 8 percent.

But now, consider some corollary figures in that same scenario. Carbon dioxide emissions would drop 2 percent and oil consumption would drop 4 percent — all while the average American family was saving about $270 per car on insurance expenses. A less expensive insurance model tied to verifiable data with broader environmental and economic implications? Why aren’t we doing this?

Well, 34 states are supporting this model with some impressive results. Progressive, for instance, offers its MyRate program in Alabama, Louisiana, Kentucky, Michigan, Maryland and Minnesota, with low-mileage drivers seeing savings of as much as 60 percent. GMAC’s OnStar program, which uses the system’s monthly data report to verify miles driven, is knocking about 54 percent off the cost of auto coverage for people enrolled in the program.

And that’s the bottom line requirement for this insurance model to be widely adopted — verifiable data. Onboard computer systems like OnStar are the ultimate and most logical means of gathering the data, although some companies continue to use certified odometer readings or employ GPS readings to determine rates and monitor usage. (All guarantee that data gathered about customers’ driving habits is kept confidential.)

Other companies offering pay-as-you-drive policies include Liberty Mutual and MileMeter. While not yet as widely available as it could or should be, this type of coverage makes perfect sense in the face of better automotive technology and it has not just a cost-saving component, but an environmental one as well. A solid evolution of a tried and true and legally required insurance product, and one we hope to see more readily available in coming months.

Auto Insurance
Carrie-Anne’s Story: Instructive in Insurance Terms

Aug 23rd 2010

By: MelB

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On Sunday, August 15, 27-year-old Carrie-Anne Dudbridge was on her honeymoon in Corfu. After finishing a romantic dinner with her new husband, Michael, she stepped out on the balcony of their first-floor room, lost her footing, and fell 30 feet, fracturing her spine in three places.

As if the pain of her injuries were not enough, Dudbridge, a citizen of the UK, did not have travel insurance. She did have a European Health Insurance Card, but it would not pay the cost of the air ambulance that would be necessary to get her back to Britain

In the end, Michael Dudbridge and family and friends at home had to appeal for donations to raise approximately 16,000 British pounds to get the young woman back to the UK. Just hours after the entreaty was posted online, the couple had their money and a flight via Mediaviation was arranged.

Thankfully, it does not appear that Carrie-Anne will be paralyzed, although one of her fractures has been termed “serious.” The British government, in the wake of the incident, has taken some pains to make sure that its citizens understand that an EHIC card is not a substitute for private travel insurance.

Americans don’t even have the luxury of that degree of coverage, however, especially when traveling abroad, and can easily face an even more serious and complicated situation than that with which the young British couple was forced to deal.

Travel insurance is, at best, an uneven insurance product, fraught with conditions that must be met and limitations that are imposed on coverage. It is not a type of coverage that should be taken out automatically, but neither should it be ruled out as an option without careful consideration. (For our previous commentary on this subject, see “Let the Traveler Beware” from August 4.)

While no one can anticipate falling off a balcony, it’s a good exercise to ask yourself what travel-related health or medical expenses you could reasonably afford to cover. Weigh your personal finances against the benefits of your health insurance coverage and carefully research what travel insurance can and can’t do for you.

Carrie-Anne’s tale is an instructive one. In the long run, she benefited from good fortune and the kindness of strangers, but both she and her husband no doubt suffered unbelievable anxiety not only as a result of her injuries, but also from their financial predicament. This is precisely the kind of case well-chosen insurance is meant to alleviate and a good example on which to base your own thinking about the wisdom of travel insurance.

Health Insurance, Travel Insurance
Insurance and Dog Bites

Aug 20th 2010

By: MelB

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The old saw in the journalism business is that dog bite stories aren’t news. “Man Bites Dog,” however, is a story. In insurance terms, dog bites are actually a big story — a $400 million story in 2009. Now, granted, records on these kinds of claims have only been kept since 2003, but there’s still enough data to prove that a third of all insurance liability claims filed by homeowners are on account of Rover taking a hunk out of the company.

The average per claim cost of these incidents if $24,840, an increase of 1.5 percent from 2008. According to the Insurance Information Institute, that jump can be attributed to increases in medical costs and bigger settlements awarded by juries. At any rate, we are not talking about minor claims expenses, and more significantly, we’re talking about the kind of incident that — in the absence of getting rid of the animal — will increase an individual policy holder’s risk profile and thus his or her premiums.

If your dog has already done the deed and you’re shopping around for a better insurance rate, talk to animals groups and determine which insurer are going to be most dog friendly. Some companies are more willing to hear an explanation of how the event occurred and give you a second chance if you can show the animal was frightened or provoked and has in the interim received training (or that you have a way to effectively restrain or contain the animal when company is on the property.)

If your pet has misbehaved multiple times, you may have to mitigate your homeowners rate situation by investigating specific dog liability insurance. This will be an added expense for the duration of your dog’s life, but can help to bring your homeowner’s premium back to a reasonable level. (For as callous as it sounds, when your pet dies, inform the insurer that the risk no longer exists, and go after a reduced premium.)

We all love our animals and we all understand that they do not react to situations they do not understand as we would. These incidents will occur. The best policy, especially when young children are present, is simply remove your pet to a contained, quiet area — for the safety and peace of mind of all concerned, including the dog.

Homeowners Insurance, Pet Insurance
Alternate Use Vehicles Meet with Resistance

Aug 18th 2010

By: MelB

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The evolution of alternative fuel and alternative use vehicles is going to force changes in both insurance laws and insurance coverage as evidenced by a case in Portland, Maine involving a young man and his golf cart.

Matt Rand, 19, has been providing rides for people getting off the Peaks Island ferry in exchange for tips for the past two years. The city council now says his golf cart must be licensed as a taxi and that he must carry the same kind of insurance any taxi driver would need. That would cost him about $5,000 a year, money Rand says he doesn’t have.

What’s the more likely reason that the city council has become involved in Rand’s harmless business? The Peaks Island Transportation System, a non-profit group that sunk $20,000 in city money into buying a van for the same purpose, is losing business to Rand.

Rand, quoted in a story by wmtw.com, was stoically philosophical about the situation. “I think the people out here would appreciate it if I did fight it because they like what I’m doing, but for me, I’m just going to move on from this. I’m obviously not liked by the people in power, so I’m not going to keep causing problems this way.”

The new ordinance won’t go into effect for 30 days and Rand leaves for college in two weeks, so until that time it’s business as usual. One would hope it will be a landslide business that makes a real point to the city council. That would be the same council that is:

- Opposing a young man’s entrepreneurial spirit.
- Ignoring the efficiency and environmental soundness of his solution.
- And using insurance as a weapon to protect economic gain.

The last point is the most egregious. More and more golf-cart like vehicles are going to start showing up on American streets. There’s one such “neighborhood vehicle” in my own area that I see frequently at the grocery store. I’ve spoken with the owner, who says the electrical vehicle is perfect for running simple errands, cuts down on wear and tear to the family car, and helps trim the gasoline budget.

And yes, the vehicle has to be insured. A tedious process as reported by this gentleman, one that required him to present copious information on the machine’s capacities as well as to educate his own insurance company about state laws governing the use of such vehicles. (Most are limited to operating on streets with a speed limit of 30 miles per hour or less, although these restrictions vary from state to state.)

Matt Rand’s story and my neighbor’s account illustrate that concepts of personal transportation are changing and that resistance from the “old ways” is inevitable. If you are interested in an alternative fuel, neighborhood vehicle, be prepared to fight for the right to use the machine and to have it insured properly and at a reasonable expense.

Auto Insurance
Grants for Health Insurance Premium Oversight

Aug 16th 2010

By: MelB

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As health care reform moves forward, one of the most important functions the federal government will fulfill is that of watch dog. In a way, you really can’t blame insurers. They are in business. But in an effort to counterbalance the provisions of the new federal laws that cut into their profits, the companies are apt to engage in price excesses that will be harmful to consumers.

Health and Human Services Secretary Kathleen Sebelius has announced that forty-five states and the District of Columbia will each receive $1 million in federal funds for insurance premium monitoring. The idea is to watch out for unreasonable increases and to take action against them swiftly.

Over the past ten years insurance premiums have doubled, shooting skyward well ahead of the wage levels and the pace of inflation. That situation has priced health insurance well beyond reach for millions of Americans and is the very situation federal reform is seeking to correct.

Currently, twenty-six states and the District of Columbia have the legal authority to reject proposed premium hikes they deem excessive, but in many cases, they lack the funds to enforce the decision. Under the terms of the Affordable Care Act, some $250 million in Health Insurance Premium Review Grants are available over the next five years.

Ultimately the goal of the reform is better competition in the industry, lower overhead for insurance companies, and risk pooling in insurance exchanges. By 2014, experts expects premiums to fall by 14-20%. In the meantime, however, the appropriate government role is one of vigilance.

Health Insurance
High Theft Risk, High Auto Insurance Premiums

Aug 13th 2010

By: MelB

No comments

In the recently released J.D. Power and Associates survey on consumer satisfaction with auto insurance coverage, the statistics showed a big drop — a full 10 points — over 2009. Most people are unhappy with their auto policy because it just costs too much. People are comparison shopping and looking for deals.

One thing people may not want to hear, however, is that if they’re driving the most-stolen vehicle in America, that sucker has “risk” written all over it in 10-foot high letters. That’s going to translate to a higher premium no matter how much you shop for the best rate.

The questionable distinction of “most-stolen” goes to the Cadillac Escalade. And that’s not just for last year, but for the last ten years. Priced from $60,000 to $190,000, the Escalade is a popular heist. From 2007 to 2009, for every 1,000 Escalades insured in this county, 10.8 were reported stolen. Next in line was the Ford-F250, followed by the Infiniti G37, and then the Dodge Charger.

Drive a family car or something with a high miles-per-gallon rating? You can breathe a little easier. (Think Toyota Prius, Nissan Murano, Toyota Sienna, Volvo S80.) As a spokesman for the Highway Loss Data Institute put it, thieves want “chrome, horsepower, and Hemis.”

So what’s the lesson in insurance terms? As much as anyone hates to be driven by crime statistics, you do need to think before you buy. Getting adequate coverage for a vehicle with a high-theft reputation will be more expensive. That can be offset with advanced security options — both on the car and in the location where it will be parked or stored — but those things cost money, too.

Simply put, during a recession, when every dollar counts, and a monthly insurance bill is more of a hardship than ever, you may need to defer driving the high-powered car of your dreams unless you’re prepared to take high-powered options to protect it and spend high dollars to insure it.

Auto Insurance
Tuition Insurance: Take a Pass on That One

Aug 11th 2010

By: MelB

No comments

As Chuck Jaffe of MarketWatch.com’s “Stupid Investment of the Week” pointed out on August 6, sometimes the best insurance advice is in what not to buy. Jaffe’s article for the day looks at a highly specialized form of coverage, and one into which worried parents will all too easily buy — tuition insurance.

I’ll hasten to offer the same caveat Jaffe offers. In fact, I’ll quote him.”Stupid Investment of the Week highlights the conditions and characteristics that make an investment less than ideal for the average consumer, and is written in the hope that spotlighting trouble in one case will make easier to sidestep trouble elsewhere. While obviously not a purchase recommendation, neither is the column intended as an automatic sell signal; someone who has purchased tuition insurance may get some peace of mind from the coverage, even if it’s not particularly sensible or cost-effective.”

That being said, it’s hard to argue with the position that this type of specialty policy is just unnecessary coverage. The idea is to provide a degree of refund for tuition, fees, room, board, and other covered expenses when a full-time college student unexpectedly withdraws from school. Sounds like a great idea, however. . .

Most colleges will actually reimburse all or a very large chunk of tuition if students withdraw by a certain date. Beyond that date, the refund works on a prorated scale. That alone makes the coverage unnecessary because it’s redundant.

Plus, these policies have some of the finest fine print you’ll ever want to see. Drop out because you get sick? You get your money back. Drop out for a mental health reason? You get 75% of your money back. Voluntary withdrawal? — You’re just not happy. — Not covered in pretty much all cases. Some policies do allow for homesickness as a viable reason to leave, but don’t expect to get more than 60% of the amount of your tuition back with the coverage — in fact, expect less.

To get a full sense of the overlapping, convoluted, and often contradictory nature of tuition insurance, read Jaffe’s column. Bottom line, there are better life, medical, homeowners, and rental policies to protect your college age child and some level of tuition refund is standard operating procedure at colleges with or without a special insurance policy.

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