Auto policy from scratch

[northwoods2]

Hello everyone:
I am working with a group of individuals both professional auto insurance people and industry outsiders. We are testing the waters on writing an auto policy from scratch, and are looking for input from both the general public and professionals. Over the next several days or weeks we will be publishing some ideas - one at a time- on what the features might be and looking for feedback and suggestions for additional features.

I will start off the list with:

pay as you drive

· For experienced drivers monitoring miles driven only. No “acceleration events".

Progressive has had this feature for many years, yet my own and others' experiences have been poor at best, largely as a result of the sensitivity of the telematic device's programming (Snapshot). It's not so much the acceleration rate that triggers the event (7MPH/second), but the duration of the event. The result was no rate discount for me as it becomes nearly impossible to avoid getting pinged for little more than stopping at a stop sign. One online complaint stated that he was pinged when his car downshifted going up a hill. It also conditions drivers to go light on turning and braking - like when you need to do this to avoid a collision!

Have at it!

 

[marindependent]

Interesting

1. Scratch Auto might be a great name for your Company. Its certainly better than some of the other insuratech company names!

2.

pay as you drive

-personally I am not a fan of these programs for my clients, but for folks that are obsessed with saving money - it might work for them.

3.

For experienced drivers monitoring miles driven only. No “acceleration events".

Not really sure how then this is any different than just reporting the miles driven manually once a year????

sensitivity of the telematic device's programming

I believe that you are correct about this, this whole industry has a long way to go.

Lastly I will add the following statement: If a mature driver has not had a claim in ten years - and they park their car in s safe location, have no moving violations on their record, and have a safe car...then - Who cares how many miles they drive? That is always my question to the insurance carriers.

 

[fed up]

There HAS to be a cost for insuring a vehicle that is sitting still, at least for Comp & Collision, and a liability for a vehicle that could roll down the driveway or street that collides with another object. It would be wonderful for a reverse premium that reduces as long as a policy is in place without a claim but what customer pays for the catastrophic claim? 1 client with a catastrophic event could wipe out your reserves if the others are getting a reduced premium due to claim free and usage free.

 

[adjusterjack]

We are testing the waters on writing an auto policy from scratch

Implying that you intend to rewrite the auto policy yet you segue into how auto insurance is priced.

Which is it?

Pricing or policy provisions?

Not really sure how then this is any different than just reporting the miles driven manually once a year????

Because customers will lie about how many miles they drive a year.

If a mature driver has not had a claim in ten years - and they park their car in s safe location, have no moving violations on their record, and have a safe car...then - Who cares how many miles they drive?

Because your rates aren't just based on your experience, they are also based on your potential exposure to accidents based on the use of your car. The more miles you drive the greater the risk of having an accident whether you are at fault or not. The when and the where also count. Especially commuting on urban highways where drivers routinely go 10 or 15 miles over the limit. Mid day driving is also risky with people hurrying to get to lunch and back.

 

[northwoods2]

Thanks for the replies. I will comment

The policies will have a minimum cost attached to them, determined by actuarial analysis, to keep the company from being ruined by catastrophic losses. If it's parked, comprehensive should cover any losses. If it's rarely driven , a minimum monthly cost - say a fixed fee and 2,000 miles of coverage - is charged. It's another tag line in the features, but there will not be any float. Who pays for 6 months of a phone, electric or other bill? I will get back to this.

A company called MileMeter tried the tactic of people reporting their own usage as part of their business model. So, everyone drives 5,000 mi/yr, right?

Both policy provisions and cost will be better. Previous actuarial studies show that for cars driven over 20k/yr could save 20%, while one driven 5k/yr or less could save 40%. These are not my numbers. My pickup gets driven less than 4k, yet I pay as much as the guy who racks up 25k or more. Show me a policy that does this and I will fight to be first in line.

Marinindependent, another feature not yet mentioned is that after ,say 25k/yr is reached, no additional mileage charges are made. The collision rates drop off the more miles that are driven as they are mostly on divided highways. Crash rates are highest for those driving less than 5k/yr.

 

[northwoods2]

Fed Up:

The policies will not be given away. A catastrophic claim will be paid the way they are now - from the reserves. Actuarial data and state laws force insurance companies to maintain sufficient reserves to prevent financial ruin. Not saying it cannot happen, as it has.

 

[marindependent]

Because customers will lie about how many miles they drive a year.

Yes, Customers may lie about this, agents too, in fact some insurer effectively lie about this not allowing agents to put proper figures in. That is why we use evidence to prove the mileage. Inspection records, Photots etc.

Because your rates aren't just based on your experience, they are also based on your potential exposure to accidents based on the use of your car. The more miles you drive the greater the risk of having an accident whether you are at fault or not.

Thank you for the education - all I am saying is that I am not certain that a driver that has ten years of accident free driving, no tickets in the past five year, and lives in a safe zip code needs to be questioned over the difference between driving 7000 and 8000 miles per year.

Especially commuting on urban highways where drivers routinely go 10 or 15 miles over the limit.

Countng miles driven will never tell you the speed driven over the limit for anyone.

another feature not yet mentioned is that after ,say 25k/yr is reached, no additional mileage charges are made.

Interesting. Good Luck with your product. Still think you should call it Scratch Auto Insurance.

 

[adjusterjack]

If it's rarely driven , a minimum monthly cost - say a fixed fee and 2,000 miles of coverage - is charged.

You'd better have an electronic device to record the exact miles driven and collect the additional premium every month or you'll be out of business in a year.

Previous actuarial studies show that for cars driven over 20k/yr could save 20%, while one driven 5k/yr or less could save 40%.

Several companies already sell insurance by the mile so you aren't reinventing the wheel.

all I am saying is that I am not certain that a driver that has ten years of accident free driving, no tickets in the past five year, and lives in a safe zip code needs to be questioned over the difference between driving 7000 and 8000 miles per year.

Your original comment was "Who cares how many miles they drive?"

That's a far cry from a difference between 7000 and 8000 miles a year.That would be relatively inconsequential and both can fall into a 5000 to 10000 mile per year rate classification. Within that classification of course nobody is going to care how many miles a year they drive.

But a difference between 5000 and 20000 miles a year is statistically very important.

 

[marindependent]

Your original comment was "Who cares how many miles they drive?"

How dare you use my own words ! ;-)

I guess my point is that people that meet all those criteria, no claims in forever, no tickets, solid zip code, [did I mention safe auto?] - I fail to see how their mileage plays too much of a consideration. Yes 5K to 20K that I can see, start driving for Uber, sure - but so many of these insurers, in these situations, get so caught up in 8K vs 10K.

@northwoods2 - best of luck with the business plan - wish you the best. Keep us all updated on how this is going. [And let us know what you name it]

 

[adjusterjack]

How dare you use my own words ! ;-)

At least I don't attribute words to you that you don't say.

start driving for Uber, sure

Carrying passengers for money is excluded by the personal auto policy which is why ride share companies provide insurance for their drivers while the drivers are carrying passengers.