Auto Insurance

Florida Enacts Auto Insurance Reform

On March 9, 2012, the state of Florida enacted a major reform to its no-fault auto insurance law in an effort to stop rampant abuse of personal injury protection cases, a veritable cottage industry for fraud that has led to exorbitant coverage rates for Florida drivers.

The PIP law, which dates to 1972, was created to guarantee that anyone suffering injuries in a car crash would quickly receive the funds needed for treatment of their injuries. Insurers were required to pay up to $10,000 for medical expenses and lost wages in the wake of an accident regardless of which driver was at fault.

Since 2008, PIP costs in the state have shot up by a staggering $1.4 billion in the face of an epidemic of fraudulent, staged accidents, especially in the areas around Tampa and Miami. In fact, more staged car crashes occur in Florida than in any other state in the nation.

New Legislation Limits PIP Benefits

The new legislation requires that a driver involved in an accident seek treatment within 14 days either in an emergency vehicle like an ambulance, or in a hospital. The treatment must be administered by a medical, osteopathic, or chiropractic physician, or a dentist.

The injured party will only receive the $10,000 PIP benefit if one of those professionals, a physicians assistant, or an advanced registered nurse practitioner determines that an “emergency medical” condition exists. If that certification is not obtained, the PIP benefit will be only $2,500.

Follow-up care and services will require the referral of a doctor, osteopath, chiropractor, or dentist. Neither massage or acupuncture therapies will be covered by PIP benefits.

Critics Decry Benefit to Insurers

Critics, like Florida Consumer Action Network spokesman Bill newton say that the measure’s real effect will simply be to benefit insurers themselves. “Floridians are in for a rude awakening,” he said, “Instead of measures aimed at preventing true fraud, we’re left with a bill that pads the pockets of big insurance companies.”

Senate President Mike Haridopolos admitted passage required calling in some favors. “I was focused on getting PIP passed and delivering those votes to the governor,” he said . “When I had to call in a couple of favors today on a tough vote that will lower the cost on auto insurance, some people on the fence said, ‘you know what Mike, I’m going to give you this vote.”’

Florida Governor Rick Scott, who has made PIP reform his signature issue for this session of the legislature, sent hand-written thank you note to the 23 senators and 80 state representatives who voted in favor of the PIP reform. The principle architect of the bill in the Senate, Sen. Joe Negron said, “I think it’ll make a big difference in cutting down on fraud.”

Homeowners Insurance

Homeowners to Face Major Rate Hikes in 2012

The Insurance Information Institute is predicting a 5 percent jump in homeowners insurance premiums in 2012, taking the national average to $1004. The rise will be a further economic blow to homeowners already coping with falling real estate prices and the high cost of maintaining a property.

The Institute is forecasting even larger increases for some states, with Georgia set to see a hike of 12 percent. In Texas, Farmers Insurance has raised rates 10 percent, while Allstate’s premiums are up 15 percent in Pennsylvania. Citizens Property Insurance in Florida is now charging 21 percent more on some residences, while North Carolina rates have climbed 6 percent.

Many Americans remain underwater on their mortgages, barely hanging on to their homes through the Great Recession, but unwilling to sell at a loss. Others are already behind on their mortgage payments, making the projected increases all the more serious. Since carrying homeowners insurance is a requirement of most mortgages, dropping their insurance policies is not an option for these hard-pressed homeowners.

In explaining the increased rates, insurers point to their own rising costs, including insured catastrophic losses in the U.S. in 2011 totaling $35.9 billion. On average, comparable losses for the period 2000 to 2010 averaged only $23.8 billion.

Additionally, companies are paying more in premiums to reinsurers, the entities that provide insurers coverage for catastrophic events on a large scale. Going into the spring storm season in the south and Midwest, the chances of even more of these types of costs to the industry are high.

Auto Insurance

Three States Allow No Auto Insurance, But Is It a Good Idea?

Although it’s taken as an article of faith that auto insurance is required to legally operate a motor vehicle in the United States, there are exceptions. New Hampshire, for instance, does not force drivers to buy car insurance, but drivers must be able to financially cover the costs of any damage they cause behind the wheel.

Both South Carolina and Virginia allow drivers to skip buying auto policies, but they must pay a $500 – $550 fee. During a traffic stop, a driver would produce proof that the fee was paid, and would not be ticketed for driving uninsured, but would still be responsible for any damages.

Isn’t It Cheaper Just to Pay the Fee?

Since the fee must be paid every year, it’s not really a matter of saving money, but more a statement of protest or civil disobedience. There are approximately 5.4 million licensed drivers in Virginia. In 2011, only 2,435 chose to pay the fee over buying an auto insurance policy. South Carolina has offered the optional fee since 1999, and only 41 drivers have opted to pay over the entire 13-year period.

There Are Still Potential Penalties

In South Carolina, drivers who don’t have insurance and who don’t pay the fee to drive uninsured face a $200 fine and $5 a day up to another $200 until they have either secured coverage or paid the fee. There are also stringent requirements for those who can opt to pay the fee over actually being insured.

Opting to pay the fee even once, just to make a point, can also have serious future consequences. Almost all insurers reward customers for continuous coverage with no gaps. If a policy is allowed to lapse, when you go back to get another policy, you will likely be facing higher rates.

Carrying Auto Insurance is the Better Option

Even in states where drivers have an “out” when it comes to auto insurance, actually carrying coverage is always the better option. Given the high cost of medical care and steep repair costs, the risk of driving uninsured is much more potentially painful than finding comprehensive affordable auto insurance and paying the premiums.

Auto Insurance

Inflated Auto Accident Claims a Major Source of Insurance Fraud

The Insurance Research Council estimates that each year insurers lose $5 billion to $7 billion to inflated auto accident claims alone, although the real cost of insurance fraud likely runs to tens of billions. Insurers pass those losses on to consumers via raised premiums, making fraud a multi-victim crime.

Most insurance companies maintain fraud detection departments whose only function is to prevent scams and to recover benefit monies paid out to scammers. The two major categories of fraud with which they deal most often are inflated claims and a too-high risk to premium ratio.

While inflated claims are the primary source of company losses, the second problem is more serious. Essentially, insurance clients hide or fail to disclose risk factors when they apply for their insurance coverage. Consequently, their premiums are lower than they should be.

In order to combat all instances of fraud, insurance companies have “whistle-blower” phone lines where anonymous calls can be recorded. Claims analysis and an examination of clients’ claims histories can also yield evidence of fraud.

In some cases, however, insurance company actually watch their clients. While this is most common in disability or other forms of health claims, surveillance can be used in a variety of insurance fraud cases.

All methods of combating fraud, however, involve a lot of effort and leg work on the part of insurers. While some expense for maintaining fraud detection departments may also be passed on to consumers, insuring accurate benefit payments and honest applications are a vital aspect of keeping auto and other insurance premiums at a fair level


Car Type Does Affect Premium Rates

Consumers are mistaken in their belief that smaller, more fuel-friendly vehicles are cheaper to insure. In a price-by-price comparison, larger cars, trucks, and SUVs routinely return lower premium levels because they are perceived to be safer in insurer risk profiles.

For instance, the half-ton GMC Sierra K1500 pick-up, on average, can be insured annually for $1,121. The Honda Civic, which is a well-respected four-door sedan with a reputation for good gas mileage and low maintenance rings up a yearly premium of $2,353.

Why does the insurance industry see a car like the Civic as a greater risk? The Civic is most often chosen by younger drivers who live in urban environments and have no children. Add to that the compact form factor, which will sustain a greater degree of damage in an accident, and the Civic becomes, to the insurance industry, a “dangerous” car.

The Toyota Sienna LE, a minivan, and a likely choice for families with children can be insured for $1,111 a year. It benefits both from its form factor, the perceived driver profile, and the high crash-test scores it receives. On the other end of the spectrum, the Audi R8 Spyder Quattro, a machine obviously designed for speed that would be incredibly expensive to repair, runs up an annual insurance bill of $4,384.

Location is also a factor in determining rates. Rural areas have a lower incidence of accidents even along isolated roads that may have a high speed limit, but low traffic density. And some cost factors are completely out of drivers’ hands. When your 16-year-old son or daughter learns to drive and is added to your auto insurance, your rate will go up, period.

While you may not be able to move to the country, and you certainly can’t keep your children from growing up, you can think about the kind of car you’re driving, and research the likely insurance rates ahead of any new car you might purchase. There are many ways to find auto insurance discounts, but some aspects of pricing have nothing to do with your driving record or whether or not you get your statements on paper or electronically.

Auto Insurance

Low to Mid-Income Americans Paying Too Much for Auto Insurance

According to figures compiled by the Consumer Federation of America, low to mid-level income Americans may be paying too much for their auto insurance policies, a situation which lowers their employment opportunities because they cannot legally drive an uninsured vehicle. On average, this class of driver pays $700 and up for their auto coverage.

Insurers rely on a variety of factors to determine premium levels including the location of the primary residence, the driver’s occupation, and their level of education. Insurers insist that when taken as a whole, these facts contribute to the degree of risk associated with the driver’s operation of a motor vehicle.

Stephen Brobeck, CFA president, said in a statement accompanying the release of the study, “As a society, we must figure out a way for lower-income families to purchase affordable liability coverage so that they don’t face the choice between breaking the law and giving up access to job opportunities.”

Unfortunately, this is too often a case of presumed “guilt” on the part of the car owner rather than innocence. One option for low-income drivers is to investigate the newly emerging class of “pay as you drive” coverage.

This insurance model includes the installation of a device on the car to collect data about miles driven, the time of day the car is in operation, and rate of speed. It may also look at behavior like abrupt stops and accelerations.

The policy’s premium levels are tied to actual driver behavior, which the motorist can monitor on the company’s website. Studies have shown that already safe drivers become even safer when they can see data about their own habits behind the wheel.

The “pay as you drive” model offers one solution to what would appear to be a “class-based” insurance dilemma. Every state in the union except New Hampshire and Wisconsin require motorists to carry insurance. Given the effects of the on-going recession, more drivers are having to weigh the dangers of breaking the law and driving uninsured because they cannot afford their auto insurance premiums.

The CFA study, “Lower-Income Households and the Auto Insurance Marketplace: Challenges and Opportunities” can be accessed at

Homeowners Insurance

Be a Responsible Dog Owner to Minimize Your Home Insurance Problems

Across the nation dog bite cases are on the rise, with major cities like Houston reporting a 79 percent increase in incidents in 2011. The effect such incidents can have on homeowners insurance for all dog owners is considerable.

Insurers maintain lists of breeds regarded as “most dangerous” and will refuse coverage to owners of those animals, or will exclude claims related to the dog’s behavior. Some suspicious breeds include: Doberman, Rottweiler, chows, pitbulls, and German shepherds.

Other breeds are considered “borderline” or moderately dangerous, and may also be regarded as presenting too great a risk. This list often incudes Great Danes, various types of mastiff, and even the Siberian Husky, In this breed group, having a certificate indicating the dog has had obedience training will often satisfy the insurer.

When adopting a dog from a rescue entity, inquire into the dog’s history or if there has been any evidence of abuse. Biting is often a fear response in dogs. The animal interprets the incident as threatening, and defends themselves in the way that comes most naturally to them.

Homeowners who are also responsible pet owners should have no trouble with their insurance company. When you get a new puppy, make sure you attend a training course with the dog. Unless you have a fenced yard, keep the dog on a lead when it’s outside the house.

If you know that certain situations make your dog nervous — like groups of people or squealing children — protect both your animal and your guests. Confine the dog for the duration of the event. “Love me, love my dog,” is a fine philosophy until you find yourself involved in a dog bite lawsuit.

Always remember that your insurer is in the business of assessing risk. Your own behavior can be as suspect as that of the dog himself. If you recklessly endanger the safety of others by being a poor dog owner, don’t expect your insurer to pay benefits when something happens. And remember, they can use your animal’s behavior as an excuse to revoke your home coverage completely.


In the Coming Year Insurance Regulators Will Be Busier than Lawmakers

For the most part, public attention on insurance-related matters in 2012 will center on the on-going health care debate. This is a presidential election year, and the conservative opposition to the Obama administration will drive home the “failure” of the “Obamacare” package, which has actually caused an 8-9 percent increase in health care premiums. There will also be considerable focus on the Supreme Court’s review, scheduled for March, of aspects of the Patient Protection and Affordable Care Act. Off the radar, however, other elements of insurance regulation are still on the table.

Flood Insurance

Texas Wildfires Paradoxically Create Greater Need for Flood Insurance

According to the Insurance Council of Texas, the wildfire that destroyed 1,673 homes while laying barren 33,000 acres around Bastrop Texas, in September 2012 will likely result in $325 million in insured losses, making it the most costly wildfire in the state’s history. About half of the claims have been settled and some residents are already rebuilding. They are doing so, however, on a dramatically changed landscape that may make new insurance costs part of the price of starting over.


Insurance Companies Work Death Benefits to Their Own Advantage

Investigators from the New York State Department of Financial Services have determined that life insurers in the state have been holding back more than $52 million in life insurance benefits to the survivors of deceased policy holders — in some cases for as long as 40 years. This practice, however, is not limited to New York.