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There are times when you get an overview and then it hits you, “Somethings just don’t add up.” Well, you remember Wellpoint, don’t you? This is the friendly company that, around January or February, announced it was going to increase premium rates by up to 39% in a number of states around the Union. President Obama got himself all worked up, citing them as the real reason why all the Democrats in Washington should band together and take a stand against the insurance industry. Then, sure as eggs is eggs, there was a stampede to get the healthcare reform bill to the President for him to sign it into law. Those Democrats sure did have fun beating on Wellpoint. So the big question is what happened next? Here’s one of the largest corporations in the insurance market demanding premium increases. Did it get its way?

The answer starts off in California where the maximum rate of 39% was due to take effect. The state referred the proposed increase to independent auditors for an opinion. The answer came back negative. It seemed Wellpoint couldn’t add up. Well, that’s oversimplifying things a little. But the reality is that the numbers Wellpoint offered to support their premium increases were based on some very shaky mathematical assumptions. When news of the report became public, Wellpoint withdrew the proposed increase. Acting on this, Kathleen Sebelius who is Secretary of the Department of Health and Human Services sent out a letter to all state insurance commissioners encouraging them to review every proposed premium increase. This is the first sign that the balance of power is shifting against the insurance industry and in favor of the consumer. For too long, insurance companies have hidden behind complicated mathematical explanations and gamed the system. With the Affordable Care Act now law, Sebelius is encouraging every state to give itself the power to approve rate increases. The first sign of continuing good news for consumers comes out of Connecticut where Attorney General Blumental forced an audit of Blue Shield and Anthem Blue Cross, both Wellpoint subsidiaries. Connecticut’s Insurance Commissioner Sullivan rejected these companies requests for increases last year. It seems likely the same thing will happen this year. Read the rest of this entry »

Somewhere in the dim and distant past of learning English, an idiom surfaced referring to gift horses and their mouths. The translation is that, when someone gives you a gift, it’s ungracious of you to publicly examine it too carefully. Yet, in the case of Prop. 17 which appears on the ballot in California, we should perhaps open the horse’s mouth and examine it’s teeth. It may prove to be an old Trojan horse and a gift we should reject.

Why be suspicious? Because the force behind Prop. 17 is not a consumer advocate, it’s the Mercury General Corp. Yes, friends, we’re supposed to believe that an insurance company wants voters in California to pressure lawmakers so that the insurance industry can give millions of dollars in discounts to policyholders. There’s another of those idioms that comes to mind at this point. It’s something about pigs suddenly sprouting wings and taking to the air in the joy of flight. Indeed, so committed is Mercury to Pro. 17 that it’s paying millions of dollars in TV ads to persuade everyone to vote for it. Bless its little cotton socks. It’s trying so hard to do right by Californians.

So just what does Prop. 17 say? Well, it’s one of these deceptively simple suggestions. As the law stands, Prop. 103 says insurers can only offer continuous or persistent (sometimes called “loyalty”) discounts to their own customers. The idea is straightforward. Instead of trying to poach customers from each other by offering discounts, insurers should try to attract new business by offering low rates. This has the advantage that insurers are competing equally on premium rates for both established and new drivers. If passed, Prop. 17 would allow insurers to match the current persistent discount based on the number of claims-free years. This would lure established customers from competing companies. At first sight, this looks like a good deal for any experienced driver who wants to switch insurers. But the price is paid by the inexperienced new drivers. If persistent discounts are to be paid for, the premium rates for new drivers must increase. Indeed, the premium rates could be increased for anyone who does not have a continuous history of insurance coverage. Read the rest of this entry »

The world of insurance is ruled by statistics. Actuaries collect all the information they can about every traffic accident in the US. Then, because everyone wants the most complete information possible, the insurers share the information about their own claims and the accidents they have found where no claim was made. It makes for an impressive amount of data. The majority of the information about claims is routed through the Comprehensive Loss Underwriting Exchange (CLUE). Because this is a national resource, all the major insurers from around the country search it before making quotes for new business. If there are no claims registered against your name, the premium will be the standard rates for someone of your gender, age and driving experience with local variations based on where you live. But if one or more claims are registered, the new insurers may decide you are a high-risk driver and try to deter you with a high premium. There’s nothing illegal or unethical about this. It’s just the way the business works.

Because it’s a national resource, the quality of the information is usually quite reliable. When a search is made, your history over the last seven years is supplied. If you are worried about what data is stored about you, the Fair Credit Reporting Act gives you the right to a copy. Write to Consumer Disclosure, PO Box 105108, Atlanta, Georgia 30348-5108, or you can call (866) 527-2600 toll free. If you find any of the information is wrong, you are either allowed to have it put right or to have an explanatory note attached to the information explaining how the loss came to be made. Unfortunately, some of the insurers run private exchanges in individual states. It can be more difficult to police the accuracy of this information. That’s why it’s good news to see Attorneys General policing the system. In Massachusetts, for example, ten insurance companies have agreed to pay penalties for failing to correct records in their private exchange. The initial findings of at-fault were accurate, but the companies then failed to record when appeals reversed the findings. This left thousands of motorists wrongly recorded as at fault. So, if you have any reason to suspect your local insurance industry is relying on inaccurate information about your claims history, it’s vital you take action. Failure to have the record set straight can cost you thousands of dollars over the years. If the information in CLUE is correct, get your local state’s Department of Insurance to check into any local databases. Read the rest of this entry »

Having car insurance is mandatory in the vast majority of states, regardless whether it’s a personal or commercial auto you are driving. There are numerous enterprises that have their own vehicles used for commercial purposes as well as for personal use of their senior staff. Smaller home based businesses are also using commercial vehicles to a great extent and this segment of the market is currently on the rise.

Regardless of the size of the enterprise, it is mandatory to carry the necessary amount of auto insurance coverage in order to assure that any damages the commercial auto has caused will be paid for no matter what. Of course, liability coverage is a must and the policy should carry the state specified minimum amount of bodily injury and property damage liability as indicated in minimum state requirements. Of course, one can assume that if the vehicle is owned by the enterprise it’s the enterprise that will pay for the damage due to the accident. However, not all companies can assume such financial responsibility, especially if speaking about smaller home based businesses, and there’s no other way to gain the necessary financial support other than purchasing commercial auto insurance. Read the rest of this entry »