by: Shannon Stockdale
The insurance industry is an ever changing world. In the past nine years I have witnessed several of those changes. The movement to a "insurance score" based rating system, rating based on tiers from 20 -120+ depending on the company as well as processing procedures once "snail mail" based, now Internet based. The changes don't end there.
It seems sometimes that the navigation through a product that people are required to have by law but few understand can lead to pit falls that cause headaches from added paperwork to added fees. So, how do you maximize your cost vs. benefit when choosing which product you purchase and which company to purchase it from? Only a well seasoned industry professional really has those answers and even then.... they may be elusive.
The topic of the insurance score is one that would require it's own individual post. The short of it...each company has it's own private "black box" which indicates what characteristics bring that score up or down. Yes, each company has it's own individual score. The company is not required to publish which factors are weighed in this process. However, we do know that it may include not only loss history and vehicle type but also bill payment history and in general terms your financial history. Knowing this can give you an advantage to ensure that you are getting the best rates. Bottom line, if you are able to, enroll in the automatic withdrawal program, be diligent about making the payments on time. This can make a significant difference in your insurance rates!
You probably know that NYS requires that you carry an insurance policy for any vehicle that is registered in your name. Did you know the penalties for NOT carrying that policy? $8 per day, per vehicle (or plate) that is registered to you. Our state does not care where those plates may be. You may have sold the car and the plates are sitting on your counter waiting for the day you actually have the time to stop at the DMV. Maybe you moved out of state and have already registered the car there or you let your policy cancel because you figured you didn't own the car, why would you need to pay for the insurance? Unfortunately, the state says you do. Think of it as the insurance policy is on the plates and not necessarily the vehicle in the eyes of NYS. It is imperative that you return those plates to the DMV before cancelling your insurance policy to avoid these fines and a possible suspension of your drivers license.
Now, to that "tiering" thing. No, I am not talking about curtains. This practice came along with that "insurance scoring" based rating system. As an example, think of you and your neighbor. You may be married, drive a Ford Explorer, clean driving history but you tend to pay your bills a little late. Your neighbor is married, drives a Ford Explorer and has a few tickets and an accident. You each fall into a separate rating tier. Depending on the company your rate with a clean driving history may actually be higher than your neighbor who has a few blemishes. Why? The insurance industry has spent several years and millions of dollars to determine that there is in fact a correlation between financial responsibility and loss history. In other words, those with a higher financial score are less likely to submit claims and of course they are confident that you will pay the premium.
This is a highly controversial practice within the industry. Some companies didn't jump on board with the practice until they realized if they didn't they would be left in the dust. The insurance industry is also extremely competitive. The ebb and flow indicates when one company lowers rates, the next company will follow to prevent loss of market share. But only if their loss experience indicates lowering rates for a certain "group" or "tier" would prove to be financially beneficial. In other words, if a company has had terrible loss experience with single females ages 24-30 then they are going to increase rates for that group. Of course this equation works the other way as well. If loss experience was good for married couples aged 30-40 rates go down in that area.
The days are gone when we could say yes, when you turn 25 or when you get married your rates will decrease. It's hard to foresee the impact of accidents or traffic infractions on future renewals. We just have no way of knowing anymore due to the tiering. So, what are we to do? Bottom line, the financial piece is the key. It's the one variable with a constant foreseeable outcome. If you pay your bills on time, your rates will reflect this in a positive manner. It may even be what saves your rates should you have that accident or major traffic infraction.
Just a couple of tips to give you the edge!
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