Insurance Policy Reviews

Courtesy of iii.org

There are four events that should trigger a review of your policy:

1. When your policy comes up for renewal

Don’t just automatically send a check to your insurance company. Take the time to review your coverage and call your agent with any questions or concerns that you may have regarding your homeowners insurance. Ask yourself the following questions:

  • Has the company made any changes in coverage since last year?
  • Does my policy now include a separate deductible for risks like hurricane or hail?
  • Should I raise the deductible to save money?
  • Am I taking advantage of all available discounts?
  • Do I need to raise the amount of coverage for liability, personal possessions or the structure?
  • Should I comparison shop for a cheaper rate?
  • Do I need flood, earthquake or an umbrella policy?

2. When you’ve made major purchases or improvements to your home

If you have made any major purchases, make sure that you have the proper coverage. And, don’t forget about gifts. If you have received a diamond engagement ring or if a member of your family has bought you expensive artwork or a computer, talk to your agent about either increasing the amount of insurance you have for your personal possessions or purchasing a floater/endorsement for these items. A floater will give you higher and broader coverage for these items than you have under your homeowners policy.

If you have made major improvements to your home, such as adding a new room, enclosing a porch or expanding a kitchen or bathroom, you risk being underinsured if you don’t report the increase in square footage to your insurance company. Don’t forget about new structures outside of your home. If you have built a gazebo, a new shed for your tools or installed a pool or hot tub, you need to speak to your agent. Keep receipts and records in case you need to forward copies to your company.

3. When you’ve made your home safer

If you have installed a state-of-the art fire/burglar alarm system or upgraded your heating, plumbing or electrical system, make sure that your insurance company knows about these improvements. You may qualify for a discount.

4. When you experience major lifestyle changes

Marriage, divorce, or adult children who move back into the family home, can all affect your homeowners insurance. When people move in or move out, they take their belongings with them. And you may need additional coverage if there is a sizable increase in the value of the belongings in your home.

Starting a home-based business can also trigger changes in your coverage. You will need to get additional coverage for business liability and equipment. If the business is your primary source of income, you may need a Businessowners Package Policy (BOP). You may also need professional liability coverage, which is excluded under in-home business and businessowners policies. For more information, see Business Insurance.

Car Insurance-8 Questions

Courtesy of iii.org
Make sure your car coverage reflects your needs and budget

The vehicle you own, your personal priorities and your budget all factor into your unique auto insurance needs. Before comparing policies and insurers, evaluate how you use your car and what risks you face to figure out what options make the best sense for you.

1. How much do you drive?

Do you absolutely need your car every day—for instance, to commute to work or drive the kids to school and activities? Do you drive 100 miles a month or closer to 1,000 or more? Make sure your policy reflects how much you use your car. If you don’t drive a lot, you may want to opt for mileage-based insurance.

2. Will you be using your car for work?

If you use your car not just to get to work, but to perform tasks for which you get paid, commercial auto insurance is a necessity. A personal auto policy will not provide coverage if you transport paying passengers through a ride-share service, deliver pizzas, drive as a courier or use your car for other commercial activities.

3. What type of car do you drive?

Insurers have mountains of data, and they know in precise detail what types of cars, makes and models are more—or less—likely to incur claims. A flashy sports car with a powerful engine may be more likely to be stolen and its bodywork costs will be more than on a mid-sized sedan—and your insurance will be priced accordingly. Some types of cars—such as modified or classic cars—require special insurance. By the same token, you may receive discounts if you have a “safe” car—one with the latest safety features and a good safety record.

4. How much do you love your car?

If you love the way your vehicle looks and take pride in its appearance, you’ll likely want it fixed perfectly—or replaced with the same model—if it gets damaged. That means you’ll probably to consider the fullest range of insurance—including collision, comprehensive and glass coverage. On the other hand, if you drive a beater, see cars merely as transportation and want to save on premiums, you might prefer to limit your policy to liability.

5. Where do you live—and park your car?

Where you live will impact your insurance rates—and it may be a factor in what coverage you purchase. For example, cars parked on the street in urban areas face a greater risk for theft or vandalism, so comprehensive coverage might be a good option. You may discover that your premium rates are lower if you move from a city to a suburb.

6. Who else will be driving the car?

Generally, your car insurance will cover other occasional drivers. However, if other drivers live with you and use your car—whether a spouse, a teen driver or a housemate—they should be listed on your policy.

7. What are your legal obligations?

Nearly every state requires that you carry minimum liability coverage for your car. At the very least, you need to make sure your policy complies with state mandates. However, the levels of required coverage are generally pretty low. Keep in mind that, if you are involved in a serious accident, you may be sued for a large sum of money. Depending on your assets and financial risk tolerance, to be safe, you’ll probably want to purchase a higher level of liability coverage.

8. Is your car financed or leased?

If you still owe money on your car or have to return it in good condition when a lease expires, you’ll likely be required to insure the car for its full value—and even for any gap between what you owe and the car’s market value. Collision and comprehensive will cover damage to your car—and supplemental gap insurance will cover the rest.

Keep in mind that your insurance options and costs will also be affected by your age, gender and driving record. Be aware too that your credit score can also impact your insurance rates. Once you’ve looked at your needs and priorities, and understood how insurance options will match them, you’ll be better prepared to make an informed decision about the types and levels of coverage to buy.

Epidemics & Personal Insurance

Courtesy of iii.org
In this article, we discuss how personal insurance policies address communicable diseases and epidemics. In a later article, we’ll look at how commercial insurance policies address these issues.

Coronavirus is all over the news. Measles are back with a vengeance. It’s gotten so bad in one New York county that the local government tried to ban unvaccinated children from public spaces.

Little known fact to people outside the insurance world: many personal insurance policies address communicable diseases and epidemics. Let’s walk through some of them.

Homeowners liability insurance: probably not covered

If you crack open your handy HO-3 standard homeowners policy and flip to Section II – Liability Coverages, you’ll notice that the transmission of a communicable diseases that causes any bodily injury or property damage is not covered by the policy. What this basically means is that if you (the insured) cause someone to get hurt (i.e. sick) via a communicable disease, whether you knew you were sick or not, then the policy won’t cover you for any liability if you get sued.

So if someone without a measles vaccination throws a party and ends up getting several guests sick, that person’s homeowners policy probably won’t cover any liability arising out of their actions. Doubly so if the person did this purposely: intentional acts are excluded from pretty much every insurance policy on earth.

Personal liability umbrella: probably not covered, but it depends

A personal liability umbrella policy is basically an extra layer of liability insurance. It will cover some types of liability your homeowners insurance excludes – and will also cover higher payments, sometimes up to $1 million (homeowners is often limited to $300,000).

Personal umbrella policies will also often exclude liability arising out of the transmission of a communicable disease. But not always, since what constitutes a communicable disease often depends on the specific policy. Some policies only exclude sexually transmitted diseases; others will exclude any communicable disease.

Travel insurance: could be covered, depending on the situation

Travel insurance policies can vary dramatically, depending on the insured’s needs. Two of the more common coverages are for trip cancellation and emergency medical treatment.

Will travel insurance cover you if a trip gets cancelled due to an epidemic or pandemic? Again, depends on the policy, but probably not. Many travel policies will exclude losses caused by disease outbreaks.

What if you get sick and need to cancel your trip? Unfortunately, you’re probably not covered if you got sick because of an epidemic. But for other diseases, you could be covered, depending on the insurer and a whole laundry list of conditions. For example, a sickness that would be covered often requires that the sick person be so ill that they can’t travel (a mild cough won’t pay out); the sick person is also often required to have a medical professional confirm that they were, in fact, too sick to travel.

If you have emergency medical treatment coverage, then you’ll be covered for any covered medical care, including illness. However, these kinds of policies can get very complicated; it’s important to talk to your agent to make sure you are getting the coverage that you need.

Umbrella Insurance Policy-What is It?

Courtesy of iii.org
If you are ever sued, your standard homeowners or auto policy will provide you with some liability coverage, paying for judgements against you and your attorney’s fees, up to a limit set in the policy. However, in our litigious society, you may want to have an extra layer of liability protection. That’s what a personal umbrella liability policy provides.

An umbrella policy kicks in when you reach the limit on the underlying liability coverage in a homeowners, renters, condo or auto policy. It will also cover you for things such as libel and slander.

For about $150 to $300 per year you can buy a $1 million personal umbrella liability policy. The next million will cost about $75, and $50 for every million after that.

Because the personal umbrella policy goes into effect after the underlying coverage is exhausted, there are certain limits that usually must be met in order to purchase this coverage. Most insurers will want you to have about $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy before selling you an umbrella liability policy for $1 million of additional coverage.

Auto Insurance & Classic Cars

Courtesy of iii.org

A classic, custom, collectible or antique car requires insurance that reflects your vehicle’s uniqueness and value. If you own—or are thinking of owning—a special set of wheels, find out about the kind of policy you need.


What types of vehicles need special insurance?

A classic, collectible or antique car is no ordinary car—and regular auto insurance is not sufficient to protect such a vehicle against damage or loss.

That said, there is no uniform definition of a classic car. If a car’s value exceeds its original selling price, then it might be considered collectible and a candidate for specialized classic car insurance. In general, vehicles that might warrant classic car auto insurance include:

  • Antique and classic cars, usually at least 25 to 30 years old
  • Hotrods and modified vehicles
  • Exotic and luxury autos—think James Bond
  • Muscle cars
  • Classic trucks

You might also seek specialized insurance for vintage military vehicles, classic motorcycles and antique tractors.

Qualifying for classic car coverage

A car’s age is not enough to qualify for specialized classic car insurance. While requirements differ from company to company, most cars need to meet the following criteria in order to qualify:

  • Limited use – Your classic car cannot be used for everyday commuting or errands, and your policy may include mileage limitations and proof the car is being properly garaged if you do travel with it. In some cases, insurers may require that you also own a primary car for everyday use.
  • Car shows and meetings – The limited use provision of a classic car policy allows for travel to car shows and auto club meet-ups; however, this coverage may be restricted by some insurers. If this is the case, there are insurers that can provide specialized coverage for car shows and meetings. Before choosing a classic car insurer, it’s worth checking whether they have travel restrictions if you plan to take your car on regular, multi-day, high mileage drives.
  • Secure storage – When not in use, your special vehicle must be stored in a locked, enclosed, private structure, such as a residential garage or storage unit.
  • A clean driving record – You may be disqualified from classic auto insurance if you have serious offenses on your driving record, such as reckless driving, repeat speeding violations or driving while intoxicated.

Not every vehicle, however special, will meet the qualifications of every insurer. For instance, some insurers may not cover vintage off-road vehicles. Insurers may also decline to insure vehicles that are in poor condition or have been previously damaged.

What you should know about classic car policies

Your classic car policy will include provisions found in standard auto insurance policies, notably property damage and bodily injury liability coverage. But there are some differences, as well:

  • Your car’s value – Because each car’s condition is unique, there is no set “book value” for specific makes and models. The first step in insuring your classic car is for you and your insurer to reach an agreement on the value of the vehicle. This value will be specified in your policy and your car will be covered up to that value without depreciation.

Note that, unlike everyday vehicles that depreciate over time as you add miles to them, classic cars may gain value. Make sure you adjust your coverage as the value of your auto appreciates.

  • Specialized repair or restoration – Your policy should you the flexibility to bring your vintage Mercedes, Ferrari or Corvette to a specialist—even if the rates may be twice, or three times, the cost of a typical car repair at a traditional auto body shop.
  • Special towing and spare parts – Coverage for towing is commensurate with the special demands of transporting a classic car. Spare parts coverage, too, needs to be aligned with the cost of replacing valuable and perhaps hard-to-find vehicle components, such as wheels, transmissions, and engine parts.

Join Us to Reduce Drowsy Driving

Courtesy of http://www.iii.org/fact-statistic/distracted-driving

Results of fatigue from any cause include impaired cognition and performance, motor vehicle crashes, workplace accidents, and health consequences. Research shows that fatigue is a significant factor in motor vehicle, commercial trucking and rail collisions.

  • Drowsy driving is a serious problem in the United States. According to a 2014 Centers for Disease Control and Prevention survey among nearly 150,000 adults in 19 states and the District of Columbia, about one in 25 adults reported that they had fallen asleep while driving at least once in the previous 30 days. People who snored or usually slept 6 or fewer hours per day were more likely to report falling asleep while driving.
  • The National Highway Safety Traffic Administration (NHTSA) has found that determining a precise number of drowsy-driving crashes, injuries, and fatalities is not yet possible and relies on police and hospital reports to determine the prevalance of drowsy-driving crashes.
  • NHTSA reports in 2017 there were 795 fatalities in motor vehicle crashes that involved drowsy drivers. Between 2013 and 2017 there were a total of 4,111 fatalities that involved drowsy driving. In 2017, there were 91,000 police-reported crashes that involved drowsy drivers. Those crashes led to about 50,000 people being injured.
  • A December 2016 study by the AAA Foundation for Traffic and Safety found that drivers who usually sleep for less than 5 hours daily, drivers who have slept for less than 7 hours in the past 24 hours, and drivers who have slept for 1 or more hours less than their usual amount of sleep in the past 24 hours have significantly elevated crash rates. The estimated rate ratio for crash involvement associated with driving after only 4-5 hours of sleep compared with 7 hours or more is similar to the U.S. government’s estimates of the risk associated with driving with a blood alcohol concentration equal to or slightly above the legal limit for alcohol in the U.S.
  • The Governors Highway Safety Association issued a report in August 2016 concluding that the estimated annual societal cost of fatigue-related fatal and injury crashes was $109 billion. This figure does not include property damage.
  • A 2014 AAA Traffic Safety Foundation study found that 37 percent of drivers report having fallen asleep behind the wheel at some point in their lives. An estimated 21 percent of fatal crashes, 13 percent of crashes resulting in severe injury and 6 percent of all crashes, involve a drowsy driver.
  • A 2013 study by the Federal Rail Administration found that fatigue greatly increases the chances of an accident in which human factors play a role, with the risk of such an accident rising from 11 percent to 65 percent.
  • Although sleepiness can affect all types of crashes during the entire day and night, drowsy-driving crashes most frequently occur between midnight and 6 a.m., or in the late-afternoon, according to NHTSA.
  • NHTSA found that many drowsy-driving crashes involve a single vehicle, with no passengers besides the driver, running off the road at a high rate of speed with no evidence of braking. Drowsy driving accidents frequently occur on rural roads and highways.
  • The beginning of daylight savings is linked to an increase in auto accidents, according to an analysis by the University of British Columbia and a study by researchers at John Hopkins and Stanford University.
  • In 2017, 1,306 drivers who were involved in fatal crashes (or almost 3 percent) were reported as being drowsy, as shown below:

Driving Behaviors Reported For Drivers And Motorcycle Operators Involved In Fatal Crashes, 2017

BehaviorNumberPercent
Driving too fast for conditions or in excess of posted limit or racing8,85616.9%
Under the influence of alcohol, drugs, or medication5,50710.5
Failure to keep in proper lane3,8267.3
Failure to yield right of way3,7117.1
Distracted (phone, talking, eating, object, etc.)2,9945.7
Operating vehicle in a careless manner2,9615.7
Failure to obey traffic signs, signals, or officer2,0954.0
Operating vehicle in erratic, reckless or negligent manner1,9963.8
Overcorrecting/oversteering1,8373.5
Vision obscured (rain, snow, glare, lights, building, trees, etc.)1,5813.0
Drowsy, asleep, fatigued, ill, or blacked out1,3062.5
Driving wrong way in one-way traffic or wrong side of road1,1872.3
Swerving or avoiding due to wind, slippery surface, etc.1,1032.1
Making improper turn4981.0
Other factors6,22511.9
None reported13,42125.7
Unknown11,71022.4
Total drivers (1)52,274 (1)100.0% (1)

(1) The sum of the numbers and percentages is greater than total drivers as more than one factor may be present for the same driver.

Source: U.S. Department of Transportation, National Highway Traffic Safety Administration.

View Archived Tables

Explaining Auto Insurance Rates

Courtesy of iii.org

Car insurance premiums have risen steadily since 2009 at a faster pace than inflation, according to a recent paper in the Journal of Insurance Regulation.

Transportation is essential to opportunity in the United States. Cost of driving, therefore, isn’t a trivial issue.

When you hear a stat like that, what’s your instinctive response? To blame “greedy insurers” who are making money hand over fist and still aren’t satisfied? It might be, if you don’t follow insurance profitability trends. If you do, you know they’ve been losing money on auto insurance for years, despite increasing rates.

Rising rates have caused some to call for regulation to help make car insurance more affordable. Transportation is essential to opportunity in the United States, and most Americans rely on cars. Cost of driving, therefore, isn’t a trivial issue.

But the authors of the paper – Cost Trends and Affordability of Automobile Insurance in the U.S. – found rate regulation could do more harm than good.

Frequency and severity

The year 2009 was the beginning of the end of the “Great Recession.” In a recovering economy, more people drive – to work, stores, restaurants, et cetera. More vehicles traveling more miles means more accidents and more insurance claims.

The insurance term for this is “frequency.” In addition to more cars on the road, the report finds, distracted driving due to use of digital devices may contribute to increased accident frequency.

In an improving economy, more cars are on the road. More vehicles mean more accidents and insurance claims. Distracted driving due to use of hand-held digital devices also may contribute to increased accident frequency.

Another key term is “severity” – the average cost of claims. Severity has been high for several reasons:

Safety and fuel efficiency are expensive. Cars are safer and cheaper to operate than ever before – thanks to sensors and computers and new materials, all of which are expensive to repair or replace after an accident. This affects loss costs, which are reflected in premiums.

Medical costs are on the rise – especially for hospitalization. The paper cites U.S. Bureau of Labor Statistics data showing that medical and auto insurance inflation growth track closely and hospital cost inflation by far outstrips both. Since many crash victims wind up in the hospital, it’s possible these costs aren’t fully reflected in insurance rates. The paper also cites research indicating that hospitals may charge insurers more than other payers.

Litigation and generous juries. The report doesn’t go into detail about litigation, but the trend known as “social inflation” – marked by growing jury awards and “litigation funding,” in which investors pay plaintiffs to sue large companies in return for a share in the settlement – is well documented.

These factors drive up rates as insurers seek a return that justifies risk taking and operational spending. Nevertheless, the report finds no correlation between rising rates and insurer profitability.

Cracking the affordability nut

Literature on insurance affordability is diverse, with little consensus on the key term. The paper cites research that strongly suggests aggressive rate regulation actually reduces affordability.

“When rate regulation suppresses costs for the riskiest insureds,” the study states, “average premiums, losses, and injuries increase.”

So, what might improve auto insurance affordability?

Some contributors to rising rates – such as repair costs – “should partially self-correct over time,” the paper says. Others, like medical costs and “non-economic” damages (pain and suffering awards) could be addressed through changes in personal injury protection (PIP) laws, antifraud efforts, transparency in medical pricing, or civil justice reform. Stricter “distracted driving” laws and improved enforcement of existing ones could help reduce losses and premiums.

Insurers are investing in technology and improved analytics to streamline their workflows, improve service, and bolster their bottom lines. Some are even discussing getting out of auto entirely – which, should it become a trend, would not bode well for affordability or availability.

Car Insurance Rates Explained

Courtesy of iii.org

Car insurance premiums have risen steadily since 2009 at a faster pace than inflation, according to a recent paper in the Journal of Insurance Regulation.

Transportation is essential to opportunity in the United States. Cost of driving, therefore, isn’t a trivial issue.

When you hear a stat like that, what’s your instinctive response? To blame “greedy insurers” who are making money hand over fist and still aren’t satisfied? It might be, if you don’t follow insurance profitability trends. If you do, you know they’ve been losing money on auto insurance for years, despite increasing rates.

Rising rates have caused some to call for regulation to help make car insurance more affordable. Transportation is essential to opportunity in the United States, and most Americans rely on cars. Cost of driving, therefore, isn’t a trivial issue.

But the authors of the paper – Cost Trends and Affordability of Automobile Insurance in the U.S. – found rate regulation could do more harm than good.

Frequency and severity

The year 2009 was the beginning of the end of the “Great Recession.” In a recovering economy, more people drive – to work, stores, restaurants, et cetera. More vehicles traveling more miles means more accidents and more insurance claims.

The insurance term for this is “frequency.” In addition to more cars on the road, the report finds, distracted driving due to use of digital devices may contribute to increased accident frequency.

In an improving economy, more cars are on the road. More vehicles mean more accidents and insurance claims. Distracted driving due to use of hand-held digital devices also may contribute to increased accident frequency.

Another key term is “severity” – the average cost of claims. Severity has been high for several reasons:

Safety and fuel efficiency are expensive. Cars are safer and cheaper to operate than ever before – thanks to sensors and computers and new materials, all of which are expensive to repair or replace after an accident. This affects loss costs, which are reflected in premiums.

Medical costs are on the rise – especially for hospitalization. The paper cites U.S. Bureau of Labor Statistics data showing that medical and auto insurance inflation growth track closely and hospital cost inflation by far outstrips both. Since many crash victims wind up in the hospital, it’s possible these costs aren’t fully reflected in insurance rates. The paper also cites research indicating that hospitals may charge insurers more than other payers.

Litigation and generous juries. The report doesn’t go into detail about litigation, but the trend known as “social inflation” – marked by growing jury awards and “litigation funding,” in which investors pay plaintiffs to sue large companies in return for a share in the settlement – is well documented.

These factors drive up rates as insurers seek a return that justifies risk taking and operational spending. Nevertheless, the report finds no correlation between rising rates and insurer profitability.

Cracking the affordability nut

Literature on insurance affordability is diverse, with little consensus on the key term. The paper cites research that strongly suggests aggressive rate regulation actually reduces affordability.

“When rate regulation suppresses costs for the riskiest insureds,” the study states, “average premiums, losses, and injuries increase.”

So, what might improve auto insurance affordability?

Some contributors to rising rates – such as repair costs – “should partially self-correct over time,” the paper says. Others, like medical costs and “non-economic” damages (pain and suffering awards) could be addressed through changes in personal injury protection (PIP) laws, antifraud efforts, transparency in medical pricing, or civil justice reform. Stricter “distracted driving” laws and improved enforcement of existing ones could help reduce losses and premiums.

Insurers are investing in technology and improved analytics to streamline their workflows, improve service, and bolster their bottom lines. Some are even discussing getting out of auto entirely – which, should it become a trend, would not bode well for affordability or availability.

Explaining Auto Insurance Rates

Courtesy of iii.org

Car insurance premiums have risen steadily since 2009 at a faster pace than inflation, according to a recent paper in the Journal of Insurance Regulation.

Transportation is essential to opportunity in the United States. Cost of driving, therefore, isn’t a trivial issue.

When you hear a stat like that, what’s your instinctive response? To blame “greedy insurers” who are making money hand over fist and still aren’t satisfied? It might be, if you don’t follow insurance profitability trends. If you do, you know they’ve been losing money on auto insurance for years, despite increasing rates.

Rising rates have caused some to call for regulation to help make car insurance more affordable. Transportation is essential to opportunity in the United States, and most Americans rely on cars. Cost of driving, therefore, isn’t a trivial issue.

But the authors of the paper – Cost Trends and Affordability of Automobile Insurance in the U.S. – found rate regulation could do more harm than good.

Frequency and severity

The year 2009 was the beginning of the end of the “Great Recession.” In a recovering economy, more people drive – to work, stores, restaurants, et cetera. More vehicles traveling more miles means more accidents and more insurance claims.

The insurance term for this is “frequency.” In addition to more cars on the road, the report finds, distracted driving due to use of digital devices may contribute to increased accident frequency.

In an improving economy, more cars are on the road. More vehicles mean more accidents and insurance claims. Distracted driving due to use of hand-held digital devices also may contribute to increased accident frequency.

Another key term is “severity” – the average cost of claims. Severity has been high for several reasons:

Safety and fuel efficiency are expensive. Cars are safer and cheaper to operate than ever before – thanks to sensors and computers and new materials, all of which are expensive to repair or replace after an accident. This affects loss costs, which are reflected in premiums.

Medical costs are on the rise – especially for hospitalization. The paper cites U.S. Bureau of Labor Statistics data showing that medical and auto insurance inflation growth track closely and hospital cost inflation by far outstrips both. Since many crash victims wind up in the hospital, it’s possible these costs aren’t fully reflected in insurance rates. The paper also cites research indicating that hospitals may charge insurers more than other payers.

Litigation and generous juries. The report doesn’t go into detail about litigation, but the trend known as “social inflation” – marked by growing jury awards and “litigation funding,” in which investors pay plaintiffs to sue large companies in return for a share in the settlement – is well documented.

These factors drive up rates as insurers seek a return that justifies risk taking and operational spending. Nevertheless, the report finds no correlation between rising rates and insurer profitability.

Cracking the affordability nut

Literature on insurance affordability is diverse, with little consensus on the key term. The paper cites research that strongly suggests aggressive rate regulation actually reduces affordability.

“When rate regulation suppresses costs for the riskiest insureds,” the study states, “average premiums, losses, and injuries increase.”

So, what might improve auto insurance affordability?

Some contributors to rising rates – such as repair costs – “should partially self-correct over time,” the paper says. Others, like medical costs and “non-economic” damages (pain and suffering awards) could be addressed through changes in personal injury protection (PIP) laws, antifraud efforts, transparency in medical pricing, or civil justice reform. Stricter “distracted driving” laws and improved enforcement of existing ones could help reduce losses and premiums.

Insurers are investing in technology and improved analytics to streamline their workflows, improve service, and bolster their bottom lines. Some are even discussing getting out of auto entirely – which, should it become a trend, would not bode well for affordability or availability.

Cyber Insurance Facts

Courtesy of iii.org

There’s a road in my town that’s widely regarded as a speed trap. We all know drivers who say they were unfairly stopped and ticketed on it. I’ve never been and, come to think of it, neither has anyone I talk to about it. Maybe it’s because we live in town and “everyone knows” about the trap.

Cyber is a relatively new, evolving risk. Insurers manage their exposures, in part, by setting coverage limits and excluding events they don’t want to insure.

Sure, people get ticketed. The road is straight and wide, and I guess some feel they should be able to drive faster than the clearly posted speed limit. Or maybe they think the “real” limit is somewhat north of the number posted.

Is that really a “speed trap”?

I think of this road when I hear people say they don’t buy cyber insurance because “everyone knows” cyber claims don’t get paid.

Poster child for “cyber” denial

The example on everyone’s lips when this topic comes up is Mondelez International, the food and beverage giant hit by the NotPetya ransomware attack in 2017. Mondelez incurred losses exceeding $100 million, and its insurer denied coverage based on a war exclusion.

The irony? The policy in question covered property, not cyber. One can argue – as Mondelez does in a lawsuit – that the war exclusion is being unfairly applied, but businesses aren’t ceasing to buy property insurance on account of it!

Cyber claims data are hard to come by, but for nine years NetDiligence has published a Cyber Claims Study analyzing paid claims. The 2019 study looks at more than 2,000 such claims aggregated in over 20 ways, including types and amounts of losses, incident causes, data types exposed, business sectors affected, revenue size of claimants, and financial impact.

Verisk, whose cyber products help insurers write coverage based on their policyholders’ risk characteristics, doesn’t publish claims data but aggregates and incorporates them into its analytics.

NetDiligence publishes an annual Cyber Claims Study. Verisk aggregates and incorporates claims data into its analytics. Why do so many believe cyber claims don’t get paid?

Why the perception/reality gap?

Cyber is a relatively new, evolving risk. Insurers manage their exposures, in part, by setting coverage limits and excluding events they don’t want to insure. Indeed, in a recent survey by J.D. Power and the Insurance Information Institute, small-business owners named “too many exclusions” among the top reasons they don’t buy cyber coverage.

Claims are often denied because of exclusions policyholders might not have known about or understood. Some insurers, for example, include “failure to follow” exclusions for claims arising from inadequate security standards.

Everyone’s responsibility

If insurers want businesses to buy cyber policies and not be hit with unpleasant surprises at claims time, they need to be aggressively transparent about what’s included and excluded. Relegating this to fine print is not a good strategy.

Brokers and agents need to educate themselves about their clients’ needs and be fastidious in aligning coverage recommendations with those needs.

And insurance buyers – those with most at stake – need to understand cyber perils and insurance. For example, insurers require a cyber hygiene self-assessment from applicants. If, after an incident, that assessment proves inaccurate – say, if encryption practices were misrepresented – coverage can be denied.

Insurance isn’t a replacement for cyber diligence. But it can complement it as part of a well-planned risk management program.