// Rant On

Insurance rates are figured in rare and mysterious ways. Here's a blurb from our web site describing how rates are made. Quick and dirty, applies to CA, but will give you an idea.


How does an insurance company determine my auto premium?

They track their losses by driver, car, and location. All combine to produce your rate. You are profiled by age, years of driving experience, tickets and accidents, and how much you drive. Cars are by value, cost of repair, and frequency/severity of losses. The most controversial portion of the rating system is by territory. Politicians make press with this, call it redlining, but the fact remains that densly populated areas have more traffic and therefore, more claims.

Hey, that's not fair, I've never had an accident!

Go to the head of the class. That's the flaw in any averaging system (know anyone with 1.7 kids?) But the laws of large numbers take over: a hundred people who are 40, with no tickets, drive Camry's, and live in the country have lower claim costs than the hundred who are 20, have two tickets, drive Corvettes, and live in the city.

But there are other factors, too.

After a 5 year legal battle, the California Department of Insurance has ruled against Mercury (and several other companies) that offer a 'persistency' discount.

This discount applies to policyholders that have kept their coverage in force for the last x number of years; longer = more discount. The companies say this has been one good indicator of claims frequency, but the Department ruled that since a new customer was charged more and this was tantamount to a surcharge on those who did not qualify. All I know is our best long time clients will be taking a hit.

Don't get me wrong; this is good for me. The rates go up and I make more money. The rates will be lower for new clients, so we will attract more clients and grow. But the logic of 'unfair discounts' just eludes me. Other discounts on the line are 'good student' (hey, ya charge my kid more cauz he cant speel??) homeowners, alarm systems, and more.

I'm gonna go read Ayn Rand again.

Thats is some idiotic BS. I am still trying to figure out the system out here. Something about "Tort". More like tort-ure. Like I need an extra subject to learn

The Insurance companies spread this shit all over everyone that asks. 30 years ago it was a valid concept. In the computer age, it is pure unadultrated bull shit. Tracking *each* of their clients driving or claims record is now a piece of cake.....except for brand new drivers. Good drivers are profit centers for them....even if they get tickets as long as it doesn't cost them anything in claims.

Personally, I've never had a wreck (knocking wood here) or a claim. My insurance went right thru the roof when I was commuting Seattle to Vancouver during the 55mph speed limit days. I've been with the same ins. company for 30 years. According to them, I was accident waiting to happen. They were wrong, but I still had to pay.....the fuckers. I still have to pay more for driving a sports car.....go figure.

I can understand the thinking behind the ruling, though I doubt it works out in practice. The thinking would be that this practice is anti-competitive. Once you get a customer locked in with the first discount drop, they'll be more reluctant to switch to another company. So, you can start treating long-time clients like crap, because they'll know their rates will go up if they switch to another company. Since they can't just do without insurance, they have to put up with the crap or pay more to get less crap, knowing all the while that they'll have to switch again after that company ends up treating them like crap, too.

The old system is also rather a disincentive to the insurance company to keep treating customers right, since having them hanging around actually costs them money (short-term), so they'd be more inclined to find ways to dump long-time customers (perhaps my REALLY treating them like crap so they'll leave), in favor of new ones that pay more.

Basically, there's no incentive to treat customers well in the old system.

Gee, JP, tell us how you really feel
As a broker, I have to argue with insurance company assholes every day to protect our clients, so no love lost there, but what you're saying is...

The school board would be just as safe hiring bus drivers with lots of tickets? DUI OK if he never hit anyone? Not for my kids, thanks. As I said, it's just one indicator.

And don't you think you had a greater chance of being in an accident with that humungous commute? If not, you could (in CA, anyway) just post a bond, go uninsured, and save all that money.

To over simplify: Let's say one out of 1000 houses burn down each year. Cost to rebuild is $500,000 when you consider the construction, loss of personal property, living expenses etc.

It ain't rocket science from here. You are the insurance company. If you charge $500 to insure each house, chances are you will break even. You could go a year with no fires and make $500k. There could have 2 fires and you lose $500k. And you don't do this for fun, you want to make a profit. So you charge each $1000 per year and know the odds are in your favor.

But 999 good people still pay the bill for the one asshole who decides to BBQ inside the house.

My only point was that a discount is being taken away from the people who earned it so they don't pay lower rates than people who haven't. That's horseshit.

QUOTE (lapuwali @ Nov 13 2005, 06:12 PM)

I can understand the thinking behind the ruling, though I doubt it works out in practice.  The thinking would be that this practice is anti-competitive.  Once you get a customer locked in with the first discount drop, they'll be more reluctant to switch to another company.  So, you can start treating long-time clients like crap, because they'll know their rates will go up if they switch to another company.  Since they can't just do without insurance, they have to put up with the crap or pay more to get less crap, knowing all the while that they'll have to switch again after that company ends up treating them like crap, too.

Point taken, but it really doesn't work that way. Companies (and their agents/brokers) kiss up to hold on to their long time profitable clients. About 96% of our people renew with us, so I guess it's not working

Let me try to rephase this another way to make my point. We represent two companies that give a discount to engineers and scientists with 4 (or more) year degrees. Some bean counter is betting that this group's enhanced analytical skills would make them better drivers. So they get a 15% discount.

The Department is saying that this is not fair to the non engineers that must pay 15% more

Since we in CA are required to have liability insurance, if insurance co's were reaping windfall profits surely there would be law suits galore. But there aren't, because there is little profit to be made. People are can only afford to pay so much, yet there is alot of fraud and uninsured drivers, as well as a high, dense population that drive expensive cars. I read an article recently that insurance co's use other forms of insurance to cover losses in car insurance.

Howard:
There are 3 kinds of lies:

Lies
Damn lies
Statistics.

The school bus driver is a bad example that proves my point.
Bad stuff by an INDIVIDUAL should be reflected in his rates.....and is. Good stuff from an individual should also be reflected is his rates....and isn't...all you get is some statistical average for an ok (by their terms) driver. No one is superior here, just bad and average. The lie of statistics in your long commute example is distance. You would be safer with me coast to coast than with someone with a lot of claims going across town.

I have assholes try to kill me every day during my 32 mile work commute. None of then lay a glove on me....but keep trying.
It can happen as I get to the end of the block or just before I pull into work.

Now you might think that one of these assholes will eventually get me...prolly have statistics to
prove it too. I submit that the more they try, the better I get at makin' them miss....practice, practice, practice

Not me JP. At the risk of turning this into a private conversation.

A long time ago, in a Galaxy far away...

Howard, age 21, got a job as a convention salesman for a Reno Hotel/Casino. My job was to travel west of the Rockies and entice groups to come to our joint to hold their next event.

Lots of driving, needed an economical car, drove some, but voted for a new Porsche. This was big $$$; $3800 out the door mitt Blaupunkt. Well, it was bright yellow, and you may find it hard to believe but I drove 100,000 miles and received 5 speeding tickets in a little over 2 years.

Goddamn insurance company wanted over $2000 per year to cover me. Think about paying over half of the cost of a new Porsche now for insurance. Never had an accident, yada yada. Had to go to work for an insurance company just to get coverage I could afford.

I'm still paying for this 'effed up system. I coulda been somebody. I coulda been a contender

Who is John Gault?

QUOTE (Howard @ Nov 13 2005, 08:18 PM)

Not me JP. At the risk of turning this into a private conversation. A long time ago, in a Galaxy far away... Howard, age 21, got a job as a convention salesman for a Reno Hotel/Casino. My job was to travel west of the Rockies and entice groups to come to our joint to hold their next event. Lots of driving, needed an economical car, drove some, but voted for a new Porsche. This was big $$$; $3800 out the door mitt Blaupunkt. Well, it was bright yellow, and you may find it hard to believe but I drove 100,000 miles and received 5 speeding tickets in a little over 2 years. Goddamn insurance company wanted over $2000 per year to cover me. Think about paying over half of the cost of a new Porsche now for insurance. Never had an accident, yada yada. Had to go to work for an insurance company just to get coverage I could afford. I'm still paying for this 'effed up system. I coulda been somebody. I coulda been a contender

HA! When I bought my first NEW motorcycle I could have financed it for $49/mo at like .9% APR. Sounded good, but I needed full coverage and that would have cost me $220/mo. There should be a law against the insurance being more than your car payment.
Another example would be my first car. '82 Ford escort, manual tranz. Rate for liability at age 20 = $135/mo.....the car cost me $600 to purchase

I love my current company, USAA, but you have to have been in or connected to the military.

I don't blame you or your insurance pushing kind, your just the messenger.

Yeah, And I bought a $50 VW Bug and had to pay the fucking damn pukes at the california DMV $51 to transfer and register it. The state got more than the seller. Fucking pukes!!!!

We'll flip for it.

Heads I win.

Tails you lose.

I thought about buying car insurance once. Then I thought ah the hell with it. What do I need car insurance for?
Cheers, Elliot