February 3rd, 2010
Officials in three Florida counties are searching for a 21-year-old man who falsely claimed to work for GEICO, selling fictitious insurance documents.
Alex Shankar Feliciano has outstanding warrants in Orange, Osceola and Polk counties, according to the Orlando Sentinel. The Polk County Sheriff’s Office said Feliciano issued fake GEICO auto insurance documents to about 54 people, but did not indicate how much he received from his alleged victims.
The sheriff’s office said Feliciano has never been a GEICO employee and is not licensed to sell insurance in Florida, according to the report.
Categories: Auto Insurance |
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February 3rd, 2010
I’ve had my car insurance through Nationwide for almost 30 years. My parents used Nationwide when I started driving, so that’s who I used. Of course, back then there was no Internet or easy way to compare auto insurance quotes. You had to call agent after agent to get rates. Today, comparing auto insurance is a snap.
In fact, searching for the lowest rates is so easy, it’s worth doing every year. A few years back I called Geico to see if they could beat the rates I was getting from Nationwide. Despite their commercials, they couldn’t. Still, it was worth the 15 minute call. Just last month, Nationwide decided to bump up my insurance rates by $100 a year. So I’ll be comparing rates this year, too. Here’s how to do it.
Compare Quotes Online
A few weeks ago, we discussed most of the coverages available for auto insurance and showed a few different scenarios of just how your auto insurance provider works. Once you’ve given some thought to the types and amounts of coverage you need, it’s time to compare quotes. Finding the best auto insurance quote is painless, thanks to the Internet.
With hundreds of available auto insurance carriers in the US today, comparing them online before making a decision is a must. To make the process easier, several websites have been developed that let you shop for auto insurance from multiple carriers at one time. While there are many insurance related sites, the two that stand out to us are insurance.com and insureme.com.
These sites basically work the same way. After you give them your basic information, they get quotes from about a dozen different carriers (the actual number depends in part on where you live). They then present you with the lowest three to five quotes. It’s really that easy.
There is one difference between insurance.com and insureme.com worth noting–they represent different insurance carriers. For example, insureme.com can get quotes from familiar names such as Nationwide, Farmers, and State Farm. In contrast, insurance.com covers Progressive, MetLife, Liberty Mutual, and Travelers, to name a few.
So you have a couple of options. You can get quotes from both insurance.com and insureme.com. There is no cost or obligation for the quote, so using both is not a problem. Alternatively, since they both represent first rate insurance companies, you can just pick one. Either way, by comparing auto quotes, you stand a much better chance of getting the best available price, and so comparing them side by side can save your hundreds each year.
It’s important to keep in mind that getting multiple quotes is just the starting point. Using the quotes to narrow down your choices, the next step is to contact the auto insurance providers directly. There are several reasons for this. First, the quote you received online is never 100% accurate. Even though you have given your personal information and answered a few questions, there is still more research that an insurance provider needs to conduct before issuing a final premium. You also want to inquire about possible discounts off the quoted premium. One common discount applies when you have multiple types of insurance with the same carrier. Insurance companies also discount the premiums when you pay the premium in full each year rather than monthly. And things like good grades, anti theft devices and a clean driving record can save you big money, so make sure you ask about these discounts. Finally, you’ll want to make sure that this provider has a body shop close to you so that if your car needs repairs you don’t have to travel far to get it done.
Whatever decision you make, you should have enough information in front of you to feel comfortable about your auto insurance carrier. Often times, your six-month or one year premium will fluctuate from time to time and if you find that it’s higher than you would like, contact your insurer to see how they can accommodate you. There’s a good chance that if their policy went up you can find another provider whose policy for you costs less.
Categories: Auto Insurance |
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February 3rd, 2010
Auto insurance companies did not make a profit in New Jersey in 2008 as they battled for customers, one factor that is causing drivers to pay higher rates after several years of declines, according to state and industry sources.
After five years of double-digit profits, insurance companies here flatlined in 2008, down from a 10.1 percent profit in 2007, according to the Auto Insurance Report, to be released tomorrow.
Far from being bad news, the low profits and rate increases show the New Jersey market is healthy after reforms in 2003 attracted more companies to the state, said Brian Sullivan, editor of Risk Information, which covers the insurance industry.
“It’s the strongest indication that what the reforms set in motion to do has worked,” Sullivan said. “Currently, insurance companies aren’t making money because of their own folly. That is, they’re competing so hard for customers, they’re charging too little. This is exactly what you want if you’re the people who drew up New Jersey’s reforms.”
The reforms, championed by Assemblyman Louis Greenwald (D-Camden), allowed insurers to make higher profits and cut down the time state regulators are given to decide on companies’ requests for rate changes. Those reforms made New Jersey more attractive to auto insurance companies, and soon several big names such as Geico and Progressive entered the market and sparked aggressive price wars.
Two years ago, the pendulum began to swing the other way. The rate increases were driven mainly by higher medical costs, according to the state Department of Banking and Insurance, which must approve rate increases. The department improved rate increases averaging 2.14 percent in 2008 and 6.86 percent in 2009.
But the tough competition also played a part, said Chuck Leitgeb, vice president of the Insurance Council of New Jersey, which represents insurance companies.
“As the market evens out, you realize you might have to increase prices here because you were too low, but that’s part of the market working,” Leitgeb said.
Drivers should expect even more increases, said John Dyke, a trustee of the trade group New Jersey Auto Agents Alliance and owner of the Perth Amboy-based Dyke Company.
“Some of the insurance companies are going to have to increase some of their rates,” he said. “Some of them waited a little bit too long.”
On the bright side for drivers, the state Supreme Court this summer approved an insurers’ bid to pay lower medical bills for personal injury costs, which should allow insurers to keep costs in check, Leitgeb said.
Profits across the country are down in part because the industry is in a cyclical downswing, but also because insurers’ investments are down and drivers are trying to take less expensive policies in the recession, Dyke said.
“The industry, like any other industry, is affected by the economy,” he said.
The nationwide average was a profit of 4 percent, down from 8.1 percent, according to the report.
During the years of rate declines, premiums were going down faster in New Jersey than in the rest of the country, but the state remained one of the most expensive in the nation. Experts say this is because drivers in this densely populated state have more expensive cars and need more insurance to cover more expensive assets, such as homes.
Average profit had been steadily creeping down since a wave of reforms in 2003. Profit went from 12.5 percent in 2003 to 10.1 percent in 2007, according to the report. The report computes the profit annually using data from the National Association of Insurance Commissioners, a coalition of state regulators.
Categories: Auto Insurance |
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February 3rd, 2010
It’s war on the television screen. On one side you have GEICO’s Gecko and the famously maligned Caveman. On the other side is Flo, the hyper-enthusiastic Progressive (PGR) sales clerk. It’s hard to escape these characters during sporting events or prime time as they try to win market share through a combination of amusing brand building characters and claims of lower prices.
Which company is gaining the upper hand?
GEICO is a subsidiary of Berkshire Hathaway (BRK.A) and investors can monitor the company’s progress through Berkshire’s quarterly financial statements. Progressive is a publicly traded company where one can gain greater insights into financial results through monthly financial releases.
Last year, we presented a ten year comparison between GEICO and Progressive to see if any trends could be identified regarding underwriting results or market share. (Note: Since underwriting results and investment results should be evaluated separately, we focused only on underwriting results.)
From this study, we could see that over the ten year period, GEICO generally had a slightly higher growth rate in premiums earned, a higher loss ratio, and a significantly lower expense ratio. This led to the observation that GEICO has been able to gain market share in recent years by offering lower premiums (leading to higher loss ratios) while maintaining higher underwriting profitability over the past few years due to tight controls on expenses, as reflected in the lower expense ratio.
2009 Results
GEICO
Since Berkshire Hathaway’s annual report has not been released yet, we only have GEICO’s results through the first nine months of the year based on Berkshire’s Q3 report. GEICO had $10,103 million in net premiums earned, which is up 9% from the first nine months of 2008. The loss ratio was 77.2 and the expense ratio was 18.3 which results in a combined ratio of 95.5. Pre-tax underwriting profits for the first nine months of 2009 came in at $459 million.
Progressive
Progressive recently published financial results for December which also includes figures for the full year. The company reported $14,012.8 million in net premiums earned, which is up almost 3% from 2008. The loss ratio for the year was 70.7 and the expense ratio was 20.9 for a combined ratio of 91.6. Pre-tax underwriting profits came in at $1,175.6 million for the year.
For comparative purposes, for the first nine months of the year we can examine Progressive’s results for September. The company reported $10,293.4 million in net premiums earned, a loss ratio of 70.5, an expense ratio of 21.1, and a combined ratio of 91.6 for the first nine months of 2009. Pre-tax underwriting profits for the first nine months of 2009 came in at $859.6 million.
GEICO Aims for Market Share
From looking at the data presented above, it would appear that GEICO has made a decision to take a more aggressive stance on pricing which has resulted in increasing market share but at the expense of a higher loss ratio. For the first three quarters of 2009, GEICO nearly matched Progressive in terms of premiums earned and was growing premiums at a much faster rate than Progressive.
The higher loss ratio would suggest that GEICO is competing on price. In addition, GEICO’s expense ratio for the first nine months of 2009 was 18.3 compared to 17.9 for 2008 which could indicate a more aggressive advertising strategy.
While we will not know for certain until Berkshire Hathaway publishes the 2009 annual report next month, it looks likely that GEICO may surpass Progressive in terms of net premiums earned for 2009 if the trends established during the first nine months of the year persisted into the fourth quarter.
The price of gaining this market share is a lower level of profitability compared to Progressive, at least in the short run. However, since insurance is a product that has high switching costs given the hassle involved in changing insurance companies, GEICO may be able to retain the gains in market share even if they become slightly less aggressive on pricing going forward. Generally, consumers are not going to be motivated to change auto insurance companies unless the savings is more than trivial.
Categories: Auto Insurance |
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February 3rd, 2010
Attorney General Martha Coakley finds herself on both sides of a legal dispute over the state’s competitive auto insurance system.
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As the state’s top lawyer, Coakley is defending the Patrick administration against a lawsuit that alleges some of the state’s auto insurance rules unfairly favor national companies new to the market, such as Geico and Progressive Insurance.
But as a representative of consumers on auto insurance issues, she has been critical of those same regulations.
In a scathing report her office released just before Christmas, Coakley said the state’s so-called managed competition auto insurance system has not saved drivers money. She also accused Governor Deval Patrick’s administration of “playing favorites’’ when it comes to setting insurance rules.
“Several new rules advantage certain carriers and disadvantage others,’’ Coakley said in the report, citing the same regulations she is supporting in court.
The lawsuit against the administration was filed by Arbella Mutual Insurance Co., a Quincy carrier that claims the rules put it at a disadvantage. Oral arguments have already been heard, and a decision by the state Supreme Judicial Court is expected by the end of the month.
Coakley, who is in the final week of her campaign for US Senate, was not available for comment. A spokeswoman, Amie Breton, said the attorney general is required to assume several roles, including representing state agencies in court, while also advo cating for consumers.
“Here, for example, we defended the Division of Insurance’s legal right to take certain policy actions, but that doesn’t necessarily mean that we agree with DOI’s policy choices. It just means that we recognized [the division’s] authority to make those choices,’’ Breton said in an e-mail.
Doug Bailey, a spokesman for Arbella, said the insurer welcomed Coakley’s support.
“On public policy, she appears to agree with our point of view,’’ Bailey said. “The legal issue, however, will be decided by the SJC.’’
Peter Robertson, an attorney representing many of the insurance companies that favored the 2008 move from a highly regulated system to one that allows insurers to set rates, said Coakley should not have included in her report issues that are pending in court.
He said Coakley argued in court that state officials acted reasonably in imposing the rules, but in the report accuses them of playing favorites.
“Doesn’t that imply it’s not reasonable?’’ Robertson said.
A Patrick administration spokesman declined to comment on Coakley’s legal and public policy positions.
“We respectfully disagree with the findings in the report in general,’’ said the spokesman, Jason Lefferts.
Nonnie S. Burnes, who championed the revamped auto insurance system when she was state insurance commissioner, could not be reached for comment.
Coakley and her staff have long raised questions about the administration’s nearly two-year effort to give insurers more control over the rates they charge, but the objections have been fairly muted.
Last month’s report, called “Automobile Insurance: The Road Ahead,’’ was more pointed. It said the insurance overhaul has been a disappointment for consumers, with average rates dropping 6 to 8 percent, well below the 10 to 11 percent reduction that would have occurred if the insurance commissioner had continued to set rates.
Coakley also said one-fifth of Massachusetts drivers, mostly minority and low-income residents, are paying more now than they were before deregulation.
Managed competition has attracted new companies to the state, including Geico and Progressive.
To encourage them to do business here, Burnes approved regulations allowing them to avoid having to insure high-risk drivers for two years. She also gave other insurers some leeway on what they charge high-risk drivers. Both rules are being challenged by Arbella as unfair and beyond the commissioner’s authority.
Coakley, in her report, sided with Arbella, but included a footnote indicating she was defending the commissioner’s right to impose the rules. She said she plans to issue regulations to address many of the problems she identified, but it’s unclear whether that will happen if she goes to Washington, D.C., to serve in the Senate.
Bruce Mohl is editor of CommonWealth, a public policy magazine published by MassINC and available online at www.CWunbound.org. He can be reached at bmohl@massinc.org.
Categories: Auto Insurance |
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