Big Brother (insurance company)

of everyone asking insurance companies to stay out of our lives (that is, ask no questions about us) is that they would have to charge all of us the same rate and us older citizens (like me) would have to pay extra to cover the wrecks caused by teenage drives.

That does not sound smart to me.

As i said in another thread
The law of unintended consequences is an adage or idiomatic warning that an intervention in a complex system always creates unanticipated and often undesirable outcomes

I am a big privacy advocate and I am torn on this issue. There are documented correlations between car color and accidents/ticketing rates/etc. They are assessing a risk based on those statistics.

They use third grade psychology tests for the studies. Pure crapola.

Try looking at the vehicles people drive. A red mini-van... Oooo, an inherent speeder, and risk taker!

The insurance companies wanted to charge more for say, a red vehicle, because their "statistics" showed that red vehicles were in more accidents. Of course, they failed to take into account (or at least to mention) that there were more red vehicles on the road than other colors. I seem to recall that when the number of red vehicles was taken into account and the accident data properly weighted to compensate, there was a negligible difference in the accident rate. Funny that. They used that "data" to charge higher rates for a while... as long as they were able to get away with it.

Based on the amount of high-speed driving I did in my younger days, I should have been paying much higher insurance premiums according to their "complex system"... disproportionately higher than what I was costing them - which was nothing due to the lack of accidents. Oh wait... I can't say that because I made a claim when someone broke into my car.

So... the "system" doesn't always work but I guess it's the best they have to go on. A really long-term picture of accident history would be a better predictor of future accident potential but would be more of an invasion of privacy.

I think they have some Equifax-type database where they actually do keep that data anyway, but I don't know how far they can legally go back.

As for the question about the radar-detector, I always shortened "none of your business" to the first two letters of that phrase for brevity... "no".

- Phil

I have Geico and I don't think I've seen the color or radar detector question on their online application. I also don't think red is anywhere near the most popular color. I think is it white, followed by gray/silver, then all kinds of blue. By the way, statistics are available showing that white is the safest because lighter colors are the most visible, particularly at night.

Phil, I am not sure where you got the information you used in making your statements, but they are not correct. Pleas look at this link which I think diminz was referencing:
http://www.cars.com/go/advice/Story.jsp?section=top&subject=...

I worked for an insurance company for many years and can tell you that the risk factors used for setting car insurance rates do not include color even though color does have consequences.

For example, when I recently added a new car to my insurance, I was not asked for the color. Note however that there does seem to be a correlation between car color and accidents but it is not what you are assuming. See this link
http://www.mynrmacommunity.com/motoring/2007/09/24/crash-ris...

Having more red cars and skewing the numbers would mean there are more red-car-drivers to pay the higher rate. If that's what they were doing.

Very interesting article. This worries me because I tend to like dark colors - dark greens, blues, reds, and charcoal grey. And yes, I really like a black car although I tend to stay away from them because the paint finish is typically harder to keep up.

I typically drove with my headlights on during the day, especially if I was driving fast... long before we had daytime running lights.

It was quite some time ago that I heard about this. Perhaps I was misinformed or perhaps red was more popular back then. I am pretty sure that MAIF - the MD Automobile Insurance Fund - which provides insurance for high-risk or substandard drivers did charge more for red and black vehicles at one time. I think this was just a case of abuse "because we can", since the typically young driver with lots of citations and/or accidents that they underwrite has few alternatives for insuring their new sports car.

I would imagine that, just like shortened yellow-light times, the abusers of these policies have had their behavior corrected by lawsuits.

- Phil

All right I drive a silver car and it is a small one BUT I believe (i.e. my opinion totally unbacked by stats!) that colour DOES matter.

To wit: in Canada a white car is virtually invisible in the wintertime as is brown in the summer on the back roads where dust clouds are common. Green and blue are likewise hard to see at dusk and black is virtually invisible at night unless it is coming towards you (I know lights matter but I'm not going down THAT rabbit hole!)

I can see bright colours a lot easier than dark ones.

Therefore, my conclusion is that bright colours provide a better safety factor as they are seen sooner and more easily.

This should cause the insurance companies pause to consider - if indeed colour is one of many factors in determining rates!

I still drive silver 'cuz I like it!

INMHO

You were not misinformed. I owned a red car back then. In fact as I recall, during that period of time is also when the Maryland State Police changed their vehicle colors to yellow from brown & black because the knee-jerk of the day was safe vehicle colors. Took many years to change them back to a color that allowed them to hide better in their speed traps. It was publicly acknowledged that the more obvious color had decreased revenue.

Insurance used to be the only form of sanctioned gambling allowed until lotto became popular, but unlike lotto the insurance companies are allowed to skew the monetary outcome. Yeah.. I trust companies like AIG and the other non-profit insurers implicitly and would never question their obvious benevolence and dedication to the public.

And I didn't realize that Florida was a safer driving area than College towns. But you learn something new every day.

I agree that insurance is a form of sanctioned gambling. When you buy life insurance you are making a sort of bet that you will die sooner and the insurance company is betting you will live at least to the averages. If you buy an annuity, you are gambling that you will live a long time and the insurance company is betting you will only line to an average age.

Insurance companies are very tightly regulated by the NAIC (National Association of Insurance Commissioners) so there are not many abuses relative to rate setting. That is not to say that there are not abuses in the payment of claims although a letter to the NAIC office in your state will ensure a prompt review.

As I recall, the insurance operations of AIG were never questioned in the financial meltdown. What was at issue was the derivative investments made by AIG, the holding company above the insurance company. I think many people improperly associated the two separate entities.

Insurance companies have very strict rules as to the investment of their assets. The more risky the instrument they might wish to invest in, the more "capital" they must hold to ensure that policyholders are protected. While the debate on financial regulation was taking place I wrote to my senators asking that they consider requiring banks be under regulation of investment classes similar to that under which insurance companies are operating.

Sometime our memories are colored by what other people say.

Wonder if it would be possible for you to find some article that would support the claim that MD at one time used color of vehicle as a risk factor?

Or the the color of police cars had decreased revenue?

It's sad to know that the state puts revenue ahead of public safety when it comes to emergency vehicle colors. Police vehicles travel at some of the highest speeds on average of any of the vehicles on the road, and they aren't always running their lights.

So when I'm killed or seriously injured because I or someone else nearby didn't see the speeding camouflaged patrol car, I can take comfort in knowing that the unsafe colors helped to snag at least 1 driver that was doing 71 in a 65 zone, creating a menace to public safety.

Unbelievable.

The reason I asked the question a couple of posts above is to determine if we "know" or if we just "think".

Remember "WMDs"!

I totally agree, although I suspect that they just might have managed to do a good job hiding those WMDs. Still, I think we should have known for sure.

I imagine it's true though, Maryland State Police cars are now a nice shade of camouflage green/black, blending in quite well with the median during most of the season.

I know. You can search the newspaper and MAIF archives if you like though.

But as an aside, if I were to make a statement that were contrary to your position, would you accept that my statement was factual?

your are funny, you bring up WMD's but if a state agency simply state that accidents decreased 10% you buy into it, I look at it this way if they don't back it up data not information but straight data, it means zip , zero.

I am very happy to have this statement from you. It means that you will not support the many false statements and selective quoting that goes on. You will wait for "data not information but straight data". This will certainly help to keep these forums focused on the facts.

nice deflection

will it work?

Try looking at the vehicles people drive. A red mini-van... Oooo, an inherent speeder, and risk taker!
[/quote]

LOL

I stay away from GEICO and Progressive.

Progressive billed me for the first and the last months' premiums when I signed up. Then when I decided not to renew, they billed me for the last month's premium again.

was considered fast. If you had a red vehicle, it stood out to the police who would check your speed more often then others, thus more tickets. The other factor that ins. companies use to determine ins rates that drives me nuts is your credit score. My driving recorded which I'm proud to say is 100% clean is what should be used. My credit score, which is good, has no factor in my driving.

I have a 5-star rated insurance company. I've had the insurance through them for over 10yrs.

About a year or two ago I received a letter from them saying that they were going to run a credit check and based on the information, my rates could possibly go up based on the information they received.

My credit rating has nothing to do with my driving record or the vehicle/s that I drive. I had not had a ticket in over 20yrs nor an accident that I was at fault. All of my premiums have been paid on time and in full since day one.

Because they couldn't find a reason to raise my rates, I believe they came up with this as a way to "justify" a rate increase. (Note: the letter did not say that my rates "may go down" based on the credit report information. I have an very good credit rating by the way.

It bothered me that the insurance company was going to run a credit report on me. My credit rating is none of their business, I'm not applying for loan from them and as previously mentioned, my premiums have been paid on time and in full 100%.

I contacted my agent and wrote a letter to the company in response to the letter I received and told them that I do not give them my permission to run a credit check (a company has to have your permission to run a credit check even when you're applying for loan...which is a given for a loan). When credit checks are run, it affects your credit score (so I've been told). Anyways, I informed my insurance company that if they did run a credit check and that my rates went up even $1 as a result, they would lose my business immediately, which included all of my vehicle insurances, my home insurance and boat, etc..

I never heard back from them regarding this nor have I seen my premiums go up. (About once every other year my premium will go up about $5 - $10 and their reason is the inflated costs of repairs....which I think is BS too, because of the decreasing value of my vehicles each year.

They will try and find a way to increase your premiums. Just be diligent and stand your ground.

I often jump in when someone makes statements that are not fully informed or at odds with the facts.

But first

pkdmslf, what is a five star insurance company? If you had said something like Triple A Plus, I would have understood. Five star sounds like a rating that is given to mutual funds and the like.

Had you allowed permission to obtain your credit score, you might have gotten a lower premium because of your very good credit rating.

here is a link to an article that explains the relationship between credit scores and auto/home premiums.

http://www.bankrate.com/brm/news/insurance/credit-scores1.as...

Note that the article indicates that “Two-thirds of policyholders have lower premiums because of their good credit record."

In the following article, there is discussion about the difference between the "credit score" we usually think of and the "credit score" used by insurance companies.

http://hubpages.com/hub/How-your-credit-rating-influences-yo...

The following article details some state to state differences

http://www.articlesbase.com/credit-articles/credit-scores-ca...

Other links
http://www.pciaa.net/legtrack/web/naiipublications.nsf/30813...

Anyone can design a study to come to the conclusion they desire simply by manipulation and when the group conducting the study is funded by insurance companies is it really any surprise what the results are going to be? Allowing some data in and some out is a form of manipulation. Rest assured insurance companies are not using this information to justify LOWERING YOUR RATES. It is used to JUSTIFY RAISING YOUR RATES.
The best thing to do is shop around. I was with a larger company for 8 years, no accidents, no tickets and my rates were climbing every year with the usual bla bla bla from my agent. I shopped around and cut my rates by over 50% on my auto alone. I also saved money on my home and umbrella.
This is not a knock against insurance agents but they are really comissioned salespeople with few exceptions. They get a % of your policy premium. The more you pay the more they get paid and again, if they're tied to only one company you may be getting the short end of the stick. Just shop around to verify you're getting a good rate.

Just like a lot of other businesses, like cable/satellite TV and Internet, I think insurance companies give a low introductory rate to get you and then gradually increase your rate, using excuses like the cost of repairs when you haven't had any accidents. I regularly switch back and forth between GEICO and 21st Century (used to be AIG before that name became unpopular) when one raises my rates. Then the next one raises my rates a year later (no accidents or tickets) and I go back to the other which has lowered its quote from the previous year. It's all about how much money they can get out of you.

Geico wouldn't insure me when I bought a car a few years ago. This would have been my 1st "personnel" car in 33 years. I have driven a company vehicle for that long. Their reason for refusal...."you have no history". Even though I have a license and gave them the company insurance info.

I have to assume that you did not follow the links and read the articles. Otherwise, you would not have made such statements about "garbage in = garbage out" unless you are so hardened against insurance companies that no fact would sway you.

Within the links I provided you will find:

"A study by the Casualty Actuarial Society shows that people with prior driving violations or accidents and good credit have much better loss ratios than people with clean driving records and bad credit. And a study by the University of Texas says there is a "significant relationship" between credit scores and filed insurance claims."

"According to the Property Casualty Insurers Association of America (PCI) insurance scores are an accurate insurance rating tool. In a July 20, 2007 release they confirm their opinion by stating, "In fact, insurance scores were found to be a better predictor of claims than driving records." "

Being an actuary, I would also provide you with a link to the website of the CAS
http://www.casact.org/

This is an international organization composed of professionals whose studies are well respected because of the careful rigor with which they are conducted.

I hope you will carefully re-consider your statements in this case.

When we let drug companies put drugs on the market without independant testing we end up with problems. Anytime you allow a group that stands to gain significant revenue by proving or disproving a point do the testing itself isn't that like allowing the fox to guard the hen house?
Without culling all the data and how they got and used the data how could anyone say the tests or results are valid? What independant group or peer group with no ties to the insurance industry looked over the studies used and agree with the findings to verify that they are scientifically solid and are factually based?
Credit scores may have a valid place in the total picture of determining rates but why is it insurance companies (for the most part) are very secretive about exactly what they use and the formula they use to determine your score?
I've tried calling my former insurance company and couldn't get a straight answer from my agent or the head office. All you get is the runaround.
If a score is going to be used the company should state what your score is and exactly what information was used, exactly where they got it shouldn't they? An honest company would.
Just like a credit score shouldn't you be able to dispute it? Hard to dispute when they won't tell you what information let alone what formula or model they use to come up with the number.
When an insurance company lays it all out and is open I'll change my mind. Until then credit scoring is just a tool to justify an increase in your rates and you have no way to dispute the findings.
If insurance companies are going to use a credit based report then they should be required to provide at every renewal a copy of the report which gives the customer a complete breakdown of how every item in their report was or was not used.
If the studies are factually based maybe the same people who did the studies will offer 10 million dollars to anyone or any group that can prove them wrong. Then I'd believe them because people will come out of the woodwork to do just that.
Obviously not all insurers believe in them because not all use them. This as much proves there are skeptics within insurance companies themselves.

Well said, and all the right questions for the methodology!

Thumbs up, Frside007.

The point was.....

Top rated insurance company trying to find a reason to raise a person's insurance premium based on their credit rating.

Invasion of privacy.

None of their business.

Has nothing to do with what car I drive or my driving/accident record.

And to boot, un-necessary collection of data.

Under their rules, God help the person that has been laid off in this economy, or worse yet, has had to file for protection from creditors for the same.

Their rates would go sky-high, despite never missing a payment. That's just wrong.

did they?

I've never had an insurance company ask for my credit information. Does it depend on if you are still making payments on the vehicle?

Flo weeps.

All kidding aside, nothing these insurance companies do surprises me. I've been lucky to have the same agent for many years, but everyone I know has one horror story or another.

I had ING insurance drop the coverage on my Lotus with two weeks notice a couple of years ago. They asked if the car was a kit car! Yes it was the original kit car but why would that make a difference.

They asked if I had built it! When I purchased it in 1976 it was a basket case so I guess yes I built it.

They dropped it because in their words there were now lots of cars built by their owners that were less than quality builds. I can believe that there are (Home Built Cars) but I have a new frame on my car and it is an original Lotus Super 7. I offered documentation to that effect but they wouldn't move their opinion. In the end I had to move for a time to another company that offers insurance on Hot Rods, at a higher rate.

Insurance companies hold all the cards and when you sometimes don't fit into their demographics they kick you out.

I am now with a company that knows that I have an original Lotus and that it is a quality build with supporting documentation.

The insurance companies are mindless but the agents make the difference.

Bob

Insurance is like gambling.

You pay your money because you think you might get in an accident.

The insurance companies take your money thinking you won't get into an accident.

When you do get in an accident, usually, your rates go up and the insurance companies get more of your money.

Just like insurance companies rate an applicant based on past accidents - which moves them into a higher risk category - the same would and should apply for each new accident.

There is a database kept by the casualty insurers that stores the records of accidents so that other companies would have a record of the new accident. The question one might ask is whether or not the premium after the increase in rates is more or less than what another insurance company would now charge.

Not exactly like gambling for the insurance companies. The insurance companies know they are going to have losses. They just want to have as much money in premiums left over after paying losses to make a substantial profit. So, in a particular rate category, they want the policyholders to be of low enough risk to make that happen. For higher risk policyholders, they'll have a higher rate to make a profit. You would prefer not to be in one of those higher risk categories however they compute it. So you chose an insurance company which doesn't rate you as high of a risk as another company does because of different computation factors.

I probably just said the obvious, but maybe not so obvious is that it is not exactly like gambling for you either. You get insurance because your state mandates it, or because your lienholder mandates it. Even if you could afford to self-insure (cover the entire loss or lawsuit) like Bill Gates could, you'd probably still buy car insurance even if you never expected to have an accident.

I think it is obvious why they ask to run your credit report.

People with poor credit are more likely to take risks and do not care about the consequences. Credit histories go back several years and can show trends in the decisions that people make.

I don't agree with them using this as a tool to "find" your rate at all. I think it is wise to shop for insurance every year.

I agree with your assessment about "Credit histories go back several years and can show trends in the decisions that people make." There is a high correlation between this and the "risk" the insurance company assumes by insuring a low credit rick person.

Shopping for rates is appropriate.

But - why do you object to this being used as a tool to find your rate?

The following article might give one insight into how and why a corporate entity penetrates into your life: http://abcnews.go.com/Business/visa-predicts-divorce/story?i...

So, the idea is that past behavior is the best indicator of future behavior. Is it possible to go one step further and actually give someone a nudge (financial, for instance) to force that person at the tipping edge into a particular set of decisions? In other words, when does the tool become merely predictive and cross over into a tool of control?

Not very likely? The corporate world wouldn't do that would it?

I do think that the corporate world would like to push us toward certain actions - that is why they spend so much money on advertising. That is why Google has "targeted" ads based on your search terms. This does not seem to be nefarious.

Although I though for a minute that you might be saying that Credit Card companies were pushing people toward divorce, I do not believe that is what you meant by asking about a tool of control. Credit card companies do not want that because they have a higher potential of loos when a divorce happens.

Here is one interesting thing about technology to me. There are plenty of people who quickly realize that new technology can be used for their evil purposes. I am talking about con-men, drug cartels terrorists and the like. It is likely we have been the target of cyber-attacks by rogue elements including some governments. When we extol progress, we need to think about how progress provides equal opportunity for evil.

For the same reason I don't think I should have to give my SSN to verify my identity with various places I do business with. Or why I do not give my phone number to a store when I make a purchase. Or I refuse to let someone make photo copies of my drivers license when I rent a piece of equipment. I don't think it is any of there business. I have the ability to protect my own identity. It is my personal information to be used to determine how much house I can buy, what rate I get for my next car/RV loan etc.. Insurance companies simply do not need this information. They may want it, it is not necessary.

What do they need? Driving and accident history, that is all. Coincedently accident history is only subjected to you for how long? Three to five years I think. Credit history reports go back to the beginning of your time as a borrower.

I have not seen any transparancies with the Insurance industry as to what factors the credit history helps to determine your rates. If there was a formula that they would make available or risk groups that clearly showed what makes up your rates that would help them (at least for myself). Honestly if they freely gave out the information that they are using to determine your rates it would help. But they do not.

Also your credit report lists a whole lot more information than anyone else needs to know.

Not being any of their business does not mean that your credit score does not correlate with your risk.

If credit scores were not a good risk factor, then it would seem that an insurance company would be foolish to use it. If it did not correlate, then that company using it would be at a disadvantage to those who did not. Why would it do that?

Well, some believe the guiding principle of the corporate world is their overriding concern for the bottom line over such values as sustainability. You might have heard it referred to, in publicly traded companies, as maximizing shareholder value. With this in mind, it’s not too difficult to find examples from the corporate world where private profit is placed above public welfare, for example, pushing pharmaceutical drugs through the pipeline of development and testing to more quickly bring the medications into the market before properly vetting the safety of the drugs.

But, you’re right; in a sense the worst case scenario is more indicative of a Hollywood movie than real life. For all I know, this just might be more illustrative of the failure of government regulation rather than solely the greed (~nefarious intent) of the corporate entity. However, my general sentiment is informed by the recent financial crisis and its ongoing permutation. Consider the consequences when the legal restraints were removed after the dismantling of the Glass-Steagall Act. One prominent result was the formation of institutions “too big to fail”. This together with the stepping in of government to eliminate the moral hazard by socializing the losses through taxpayer guarantees has led partially to a loss in trust with the corporate world. Today, there is a lot of justified mistrust concerning institutions and it seems the reevaluation of relationships must be a keystone of restoring public trust.

But more specifically, it is always not so much the small con-men or petty criminals I worry about as much as the large-scale duping (a la Enron) occurring with the presumed blessing of government that appears to present a greater danger to our continued welfare.

Bravo!