Insurance Quotes & Advice

Much attention has been in the news recently as Congress focuses on the topic of federal regulation for the insurance market.  Currently states are in charge of regulation with different degrees of oversight, especially in the auto insurance market.

Yesterday, the Consumer Federation of America(CFA) released a national study on auto insurance regulation and it’s effect on premiums.  It claims that consumers fair better in states that use pre-approval for rates and that premiums rose more slowly over the sixteen year study.

“It is very clear that consumers fare best under a system of prior approval of insurance rates. Not only are rate changes held down, but competition is not dampened and profits are reasonable for the insurers,” said J. Robert Hunter, CFA’s director of Insurance and a former federal and state insurance regulator. It is also clear that as regulation is weakened, insurance consumers are worse off, he said.

The insurance industry has refuted these claims by the CFA with the National Association of Mutual Insurance Companies(NAMIC) releasing this statement.

We hold exactly the opposite view than the CFA as there is a large body of rigorous, independent research that arrives at the opposite conclusion , said Neil Alldredge, vice president-state and regulatory affairs.  Prior approval laws, such as those found in California and New York, harm consumers by keeping rates high and discouraging competition.

So, who is right?  Unfortunately, it’s not that simple, every state will have different demographics and varying degrees of the relative wealth of it’s residents.  That’s why you see such a wide range of premiums across the country.

Massachusetts for example has some of the highest auto insurance premiums in the country but it would be unfair to say that it was due solely to it’s regulatory structure.  It’s residents are comparatively wealthy compared to much of the country and are more likely to own more expensive vehicles than residents living in a relatively rural state.

It’s used to have the country’s strictest regulatory structure, in which the state set the rate auto insurers could charge but it recently changed to an open competition system.  In a year from now, it may give concrete evidence to one side or the other but currently it’s still too early to judge it’s effects on premiums.

Many Americans are overpaying for home and car insurance and don’t even know it.  It is important to review your policies at least once a year.  Here are a few things that anyone can do to help save money on their insurance.

Compare prices

Property and auto insurance rates have been on the decline recently, so it might be good time to shop around and see if you can’t get a better deal somewhere else.

Purchase the proper amount of coverage

For homeowner’s insurance especially it is important to get an accurate value to what you are insuring and the amount of coverage you actually need.  Instead of using property value as the basis for coverage amounts you should use the estimated replacement or reconstruction costs.  With housing prices in a sharp decline, some people may actually be under insured.

Increase your deductible

It can increase what you pay for an incident but it can significantly lower the cost of your premiums.

Use a single insurer

In some cases it may be cheaper to get both types of coverage from a single insurer.  Check to see which companies offer package deals.

Look for discounts

Many companies offer discounts for a variety of different reasons.  For instance, a company may offer government employees a special discount. Make sure you receive any that you might be entitled to.

On Friday, a Florida appeals court ruled that Florida’s Office of Insurance Regulation had the right to suspend Allstate Insurance from writing new polices in the state.  Allstate had been appealing a suspension that was imposed on Jan. 16 by the state’s insurance commissioner.

At the heart of the matter are the company’s internal documents that pertain to the company’s claims paying practices.  Florida regulators have asserted that Allstate had failed to comply with their subpoena to release these documents back in October.

Allstate has maintained that these documents contain trade secrets it will not release.  It is alleged that these documents detail a business strategy created by the consulting firm McKinsey & Co. back in the 1990’s that is believed to have been widely used in the insurance industry.

Supposedly the “McKinsey” strategy outlines practices to pay as little as possible for claims and how to keep costs down.  It is believed to revolve around making low initial claim offers and using delaying tactics, with customers who refuse the initial offer, up to and including legal action if necessary.

Whether these documents show any illegality or not, they would certainly damage Allstate’s reputation if they were to come to light.  They could also have a measurable impact on any ongoing or future lawsuits that the insurance industry has over claims.