One allegation is used to condemn the whole industry? This is turning into “guilt by association”; companies must show that their plans are not discriminatory but without any evidence that this is true or necessary? I think the PCIAA is correct in stressing that the facts need to be assembled BEFORE the CFA can make any conclusions. But like in court, truth must be dragged into the discussion, kicking and screaming. Let’s hope cooler heads prevail. After all, rate changes are reviewed prior to approval, so if other-than-risk based factors are being used, it should be easy to find and correct.
“Allstate’s micro-segments use driver birthdates to individualize this marketplace consideration surcharge”. I think it’s pretty clear what Allstate’s doing here – they are using Zodiac signs. Everyone knows that Capricorn’s are bad drivers.
SW, any carrier that tells you they aren’t using their black box to optimize rate is telling you a big fat lie. These people are underwriting down to the zip code now to determine price. We see some who re-invent the credit score with a new model, change rate tiers upward and then top it off with a general rate increase state wide. None of the changes we have seen end up saving the customer money, only increase premiums.
They go farther that zip codes – they go down to the house # & street! We have twin risks in the same zip code with different rates. I’ve said for a long time they can manipulate their computers overnight to do what they want but nobody wants to believe me. There is so much micro information, how would anyone ever be able to tell? Just like the Government can manipulate numbers to make you believe anything they want.
Concerned, the rating system for most carriers are so complicated now, no one can understand them including their own marketing reps. “Manipulation” of the black box is the key word. I had a regional manager in my office last week admitting they had gone too far and they listened to agent panels and would try to walk back some of the manipulation and get back to underwriting risks in a more fair way. Let’s hope they have awakened and are listening to agents now.
Agent, I would like to think you are correct that companies would admit they’ve gone too far and would listen to agents. But when has this happened? Maybe a smaller regional carrier. The origin of the black box really started with the introduction of credit scoring and most agents fought this tooth & nail. Companies didn’t listen. Companies rolled out direct divisions or purchased direct companies to the dismay of agents. Maybe the Regional Manager that you met with is different, but my experience is that the personnel on the sales & marketing side have virtually no input on pricing and underwriting variables (i.e. black box items). Insurance pricing and underwriting is a dynamic process and sometimes a company’s product features will align with agent desires. When it does, the company’s marketing department will give the agent credit and a pat on the back for the agents’ input. It‘s a feel good moment that does not last.
December 22, 2014 at 6:23 pm
Agent says:
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SW, I agree that most companies don’t listen to agents that close. They say one thing to us and then do the opposite. When we told a big wig from Travelers out traveling with the marketing rep their rate increases were out of line and showed him a number of quotes done showing it, he agreed to go back and look into it. A month later, they passed more rate on. Hmm! It took them 5 years to do anything. By that time, over a third of their book had disappeared off our books. Regional carriers respond much quicker to the market and what is going on. We just do what we can and hope to have a good year on contingency and try to grow where we can.
December 22, 2014 at 9:50 pm
Ron says:
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Agent,
Insurance companies should never listen to agents when it comes to rates. They must trust that their actuaries are competent and have created the correct rates based on the company’s data, experience, loss costs and business strategy.
If they were not listening to you it is probably because your markets were not within their targeted appetite. They may not say that to your face, but it does happen. I am sure it is nothing personal, just business.
May 22, 2015 at 10:25 am
Agent says:
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Concerned, they take it even further. If you have a county line going down through part of a town on a street, one customer receives better rates than the one across the street because rating between the counties is different. How has the risk changed with 200′ separation?
Ron, tell me wise guy, what is 100% of nothing? If a company sets rates too high because some geek in a corner office does a black box model change that does not beat most carriers in the market, how much business will they write? Actuaries are not infallible by the way. They are also not out in the field seeing what we see and trying to sell 20-25% increases to loss free customers. I would like to see you sitting face to face with a customer and explaining the new model and how the increase was “so” necessary. The customer just says, well I think I will check around and see if I can do better. They usually do much better. This is why agents have to constantly re-market business to try to keep business on the books. Eventually, the market wakes up and says, what are we doing wrong? Why is our business leaving? Then, they ask agents and agents tell them once again.
The fact that you think insurance companies should set rates just for market share or to retain customers shows your ignorance on the subject.
When have I ever criticized your knowledge of running an agency? Do not criticize my knowledge of insurance pricing.
If the correct premium results in a 20-25% increase, so be it. If that results in them losing business, that is the free market at work. What you are proposing is Socialism.
I thought you were for Capitalism.
Serious questions.
1. Do you know the 3 criteria a rate must meet in order to be approved by the state?
2. have you ever filed a rate change with a state and work with the Department of Insurance?
I agree that actuaries are not infallable, but they do not make emotional decisions. The state will not let them.
Ron, I don’t disagree with anything in your comments and I admit that I don’t know the answer to Q1 and I’ve never had the pleasure of Item 2. I do know that too often an uninformed agent has told a PM – “just lower your rates a little & raise your commission and your company will grow” – and I must agree that would drive a PM crazy. But we have all seen rate corrections that are so high that it’s inexplicable to the insured. When the real reason for the rate change is to correct past mistakes or the launch of a new model. That explanation will just not fly with insureds. We all work hard to attract & retain clients and a 25% increase is typically a show stopper unless there is an obvious reason for the rate change.
While it’s your job to price the product profitably and not focus solely on “market share or to retain customers”, your company would be making a mistake if you were not held accountable for some type of growth & retention.
December 23, 2014 at 12:20 pm
Ron says:
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SWFL Agent,
Don’t get me wrong. It is not that companies do not understand where agents are coming from or totally discount their plight when there is a significant rate increase. The fact is, if rate increases are necessary, they are necessary.
Since Agent is still probably trying to google the answer, here they are.
Rates must be:
1. Not excessive
2. Adequate to pay future claims
3. Not unfairly discriminatory
As you can see, nothing about gaining market share or retaining customers.
I agree that companies must live with their decisions. I just want agents to understand that rates are not arbitrary. In addition, the more pricing factors that are used, the more accurate pricing becomes and less subsidizing occurs. Shouldn’t insureds being paying the appropriate rate for their risk?
While you are correct in your statement, “While it’s your job to price the product profitably and not focus solely on “market share or to retain customers”, your company would be making a mistake if you were not held accountable for some type of growth & retention.”, you are missing a critical word, profitable. If you are growing with or retaining risks that lose money because they are paying rates that are not adequate, why would you want them?
To me it is ironic that agents complain when capitalism and free market principles are applied to insurance.
December 23, 2014 at 12:40 pm
Agent says:
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Infallible Ron, I hate to differ with you, but you are completely off base. Carriers are doing all of the above on filing for higher rates, screwing with the credit model, re-tiering to their hearts content, messing with Replacement Cost guides which by the way encourages a moral hazard. I do agree with you that many of them have run off a lot of good business unnecessarily and then wonder where it all went. These things are plain goofy and the actuaries have to answer to management for their errors in judgment. Don’t bother to tell me I am proposing Socialism and insult me like that. I have a vested interest in writing and retaining business for my agency and I am the one who has to deal with customers on a daily basis. How would someone sitting in an ivory tower and never dealing with customers pretend to know what the correct rate is? By the way, our loss ratio with all our carriers is immaculate and we stand to make contingency with all of them so get off your high horse.
December 23, 2014 at 1:51 pm
Ron says:
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Agent,
If you hated to differ with me, then you would stop differing with me. I respect your expertise as an agent due to your experience. Why can’t you respect my expertise in insurance pricing based on my experience? The fact is that I know far more about insurance pricing than you can even imagine. I am trying to educate you on how the mechanism works as you try to educate me on the realities of the marketplace.
Please explain what you mean by stating, “Carriers are doing all of the above on filing for higher rates, screwing with the credit model, re-tiering to their hearts content, messing with Replacement Cost guides which by the way encourages a moral hazard.” Did you just use the term “moral hazard” because it sounds insurancey? Do you mean that it causes people and their agents to lie and cheat?
I understand and appreciate that you are an advocate for your clients and want your life to be as easy as possible. Heaven forbid if you should have to actually work hard to grow and retain your business.
Why do you constantly complain about having to talk to your customers? Isn’t that why you receive a commission? If it is so bad, sell your agency and get a job on the company side. I hear State Farm has moved to TX. Should be plenty of high paying jobs.
If they run off good business, then then they will lose money and one of their competitors will make more money. Do you even understand how the free market works?
You do realize that insurance, in its most basic form, is Socialism, right? Every time a carrier introduces a new rating factor, it moves insurance further from Socialism and closer to Capitalism because more insureds pay the approriate rate for their specific risk. This minimizes lower risks from subsidizing higher risks. This, in turn, lowers premiums for the best risks.
December 19, 2014 at 4:16 pm
Rickey Morrris says:
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I’ve been a good Allstate Customer for my Home and Auto for 30 years. All of a sudden this year, my home insurance doubled with no sensible explanation, (I switched an lowered it to less than the original price, for more coverage, including Flood damage) and now they have increased the price on my Auto from the $42.00 to $67 for a 2006 Hyundai with only 20,000 miles on it. No Accidents, no tickets, no violations, and very little mileage. This has to be a case of Marketplace Considerations being factored in. I will be leaving them entirely within a few days, as will a few other people who with similar records who have also been what I call assaulted by Allstate. They claim to spend $1.11 for every $1.00 they bring in, so how are they billions to the good? It’s time for Insurance reviews in detail here in Arizona.
Rickey, your Auto probably went up because you moved the Home from them and lost the companion credit. When moving, you can usually save more if you move both at the same time.
Rickey, if you have Flood Damage on your Homeowners, you have a hell of a policy. The last time I checked, Homeowners does not cover rising waters from Flood.
All of you agents out there, please tell us how you would price a product for which you do not know the costs? How would you differentiate your pricing to be more competitive if your pricing model were easy to figure out? You speak of a lack of understanding when it comes to pricing, yet you keep selling the product.
One of the reasons for each company’s “black box” is to provide it with some competitive edge in an industry with razor thin margins. If it was easy to determine a company’s pricing, they would all be the same.
You want competition? Live with the “black boxes”.
Credit works, period. It has been proven to be the number 1, most accurate predictor of future losses. If it did not work, insurers would not use it and regulators would not allow it.
Ron, your ignorance of what is going on in the market is pretty amazing. Yes, we have to live with the black boxes of carriers since there isn’t much choice, but Independent Agents with multiple markets are much better positioned than a “Captive” agent who only has one market and often loses business with no other place to turn. Common things going on are unreasonable Replacement Cost guides that are 15-20% higher than the market, Credit Score re-tooling, re-tiering homes upward and of course let’s not forget general rate increases, all to the detriment of the customer and the agent who has to deal with it.
What ignorance? I know what agents are complaining about. I speak to them every day. What I am telling you is that companies do not care what agents are complaining about. You may not want to hear that, and it may not be right, but it is true. The only time companies listen to agents is when they talk about a product offering.
Just because what is going on is making your life more difficult does not mean it is not justified.
You complain that company people do not know what it is like in the field. Wel, you have no idea what their lives are like either. I would love to see you propose a rate change to company executives based solely on what agents are saying about the market. You would be laughed out of the board room.
If the agent and customer do not klike whatr a company is doing from an underwriting and/or rating perspective, go to another company. It is called the free market.
I am beginning to think that you are the Socialist. Either that or a hypocrite. I will let you decide.
Ron, you like to say that companies are operating on a razor thin margin so they have to take rate, change their models and screw with the rating process in order to succeed. How do you explain companies acquiring other companies for billions if they are hurting for cash? Travelers recently bought a Canadian company for $1.2 Billion. Hmm! I wonder how they could muster that up. By the way, I have talked to CEO’s and they agree with me that the process and complexity have gotten out of hand and they realize something must be done. Believe me that the free market is at work and I have to re-market constantly to keep customers on the books. When enough business is lost by a carrier, they finally wake up, usually when about a third to half their volume is gone. Free market Capitalism is still at work and the companies that take the smart approach will do well and the others not so much.
I did not, :say that companies are operating on a razor thin margin so they have to take rate, change their models and screw with the rating process in order to succeed.” What I said is that companies need to charge as close to the correct rate as possible for the risk because they run on a razor thin profit margin. Running a razor thin margin does not mean that they cannot make a lot of money due to volume. However, when you do write high volume in premium, a slight error that impacts profit by less than 1% could cost millions.
You just love to use anecdotal evidence. For which companies do these CEOs work and what have they actually done? My guess is that they will agree with you to your face to keep you as an agent, but will do nothing about how they price their products.
In reality, CEOs just want to know what will create the most profit, period. They very rarely care as long as nothing unethical or illegal is being done that could harm the company’s reputation and/or bottom line. If you think otherwise, you are more ignorant than I could ever imagine.
Nearly all of those acquisitions are either financed or stock is issued. It is very rare that an acquisition is straight cash.
December 23, 2014 at 4:40 pm
Agent says:
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Ron, obviously you haven’t attended meetings between agents and company people. I have been in rooms of 150+ agents and 20 or so company people from every department. We cover all aspects of company operation, discuss what their plans are for growth and problems they have been having with their rating systems including models, filings, black boxes etc. In one meeting, before the question was asked, they admitted they went too far on increases and were re-tooling to get back in line with what the market was demanding. Believe me, it was not just about any new product offerings they were making. I like constructive meetings like that.
Actually I have. Companies will NEVER discuss their rating models or black boxes with anyone outside of their company, especially agents. They are proprietary tools that require confidentiality to be effective.
The most they may say is that they will review them.
I can also guarantee you that if they did scale back their rates, it had zero to do with agent input or market conditions. They may have used that as a catalyst to take a second look, but even rate decreases need to be approved in most states. “Getting back in line with the market” is not an acceptable justification to gain approval for lowering rates.
January 2, 2015 at 10:41 am
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Ron, if an actuary is called on the carpet by the Board and CEO to explain disappointing results and lost business by the company due to unrealistic rate increases and models, I think the actuary would be sweating blood and hoping he could keep his job.
One other thing, I still want to know how you would price a product for which you do not know the cost. Would you just ask the customer how much they think they should pay? Should the salespeople determine the price?
One thing is for sure Actuary Ron, the model currently being used by many companies is the incorrect one to determine price. When you see 20-25% rate increases on good loss free accounts, you cannot justify it no matter what factors you think it deserves. When you have a company with historical growth patterns and only passing nominal increases in rate due to inflation on Replacement Cost or nominal rate increases in Auto, they tend to retain their business. We have always been able to sell small rate adjustments, but the kinds we see now are unsellable.
Tell me something oh smart one! Suppose you had 5 Standard markets and you put a customer in for quote on the PL rater and you got a wide variance in premium from the best to the worst. I am not an actuary, but I can quickly tell which company has the worst model which produced the worst quote on the same values and limits. Which one would you try to sell, the one with the highest rate model or the most reasonable common sense model?
Do you realize that insurance rates are based on predicting future losses? If there is statistical justification to increase rates on a loss free account, and the state approves it, that is all that is needed.
Just as I would never make it as an agent, you would never make it as a product manager, actuary or company executive. There is nothing wrong with that, just the truth. Until you realize that the goal of insurance companies is not to get as much market share as possible, regardless of losses, you will never understand.
Please tell me, how many times you have had to present a rate review, whether to increase, decrease or maintain current rates, in front of an executive board including the CEO?
I have done 15 and all but 1 was approved by the board, and none were with feedback from agents. In addition, all lead to increased growth, retention and, most importantly, profits.
To answer your hypothetical, I would present all of the quotes with the pros and cons of each carrier and let the customer decide. What do you do?
The fact that you think the highest premium equals the worst model is further evidence that you have no clue about insurance pricing and rating models. There are only two factors to determine if a model is good or not, has the company met its strategic goals and profit. Everything else takes a back seat, including agent satisfaction. Sorry, but it is the truth.
December 23, 2014 at 4:49 pm
Agent says:
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Allright Ron! I agree with you 100% that you would never make it as an agent because you would be at a loss on how to explain to a typical customer the benefits of paying a lot more to have the same coverage. Sell that brand and hope it flies.
Tell me Ron, how does a company gain market share if they don’t have competitive products to offer to the public? Sure, they have to make a profit, but if their combined looks good, they should try to gain more market share instead of running business off by taking more rate. Some companies get into reserve issues and have to slow down for a while. One of ours grew 30% in 2013 and then slowed down and it was 3% growth in 2014. The problem arises that if the company doesn’t grow over a period of years, there is something internal going on like Fireman’s Fund and now they are history having been sold off.
December 23, 2014 at 4:58 pm
Ron says:
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Agent,
Now, will you admit that you would never make it as a product manager, actuary or company executive?
You asked, “how does a company gain market share if they don’t have competitive products to offer to the public?” Easy, they have no real interest in gaining market share in that particular market unless they can get the rates they believe will make them profitable.
How many times do I need to explain this to you? It really is not that complicated. Others seem to understand.
Did you even read my response? When did I say I was going to explain the benefits of paying a lot more. All I said was I would present all of the information I had and let them decide.
You never told me what you would do in your hypothetical situation. Would you just present the lowest price? Sounds lazy.
December 23, 2014 at 4:22 pm
SWFL Agent says:
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Ron,
I think most agents know your role and our role in the insurance pyramid. And we understand that pricing & regulatory issues are not our expertise. However, I’ve lost confidence in the PM’s that run some of these companies. We see rates all over the board for the same risks – all developed by what are considered to be bright people.
Yes companies can and will lose market share to restore profitability but the companies that have developed the best, most reliable models are winning the market share-profit battle. I think my aggravation lies in the fact that IA’s companies have done a poor job of dealing with price volatility over the years. Here’s my fear – if understanding and utilizing the data provides you the tools you need for pricing, then does SF, Allstate, GEICO & PGR have a competitive edge because they have more data than others? If so, that’s a concern. Happy Holidays!
Thank you for the reasonable, thoughtful response.
I agree with everything you stated.
The only thing I would clarify is that it is not necessarily the volume of data, it is the model and algortihms that are most important.
Merry Christmas!!
December 24, 2014 at 11:35 am
Agent says:
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SW, I wonder what the actuaries were telling Fireman’s Fund executives for several years running. Obviously, there was something wrong with the management including the actuaries. The result is belly up and sold off.
December 29, 2014 at 1:40 pm
FFA says:
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Ron, In my opinion, kicking a man when he is on hard times (credit tanks) only adds to the problem of the economy (less disposable income).
I have many insured who were once top credit score fall into issues. What makes them a “worse risk” one year to the next when the only thing changed is Job Situation/Credit worthiness?
I hear that concern from agents all of the time. It is not necessarily kicking a man when he is down. If the probability that he/she will file a claim increases, shouldn’t that person pay more? Remember, insurance premiums are for future coverage, not past.
The simple answer is, data indicates as insurance scores decrease, claims go up. I know that is difficult to explain to your clients, but there does not need to be a qualitative reason, only quantitative.
Of course there are exceptions, but there are also 17 – 21 year old drivers who never have an accident, yet they will pay the highest premiums, all other factors being equal.
One other, very important thing to remember, insurance scores ARE NOT credit scores. Most, if not all insurance score models take payment history as the most significant predictor of future losses, followed by bankruptcies and judgements.
FFA, these actuaries looking into their crystal ball algorithms say that when the score falls, the customer will just have accidents and file claims in the future so they must pay a higher premium. With the economy being what it is, I would venture there is a pretty significant amount of the population who have had their score deteriorate. By all means, let’s charge them more for their Auto & Home. They deserve it, right?
I know you are being somewhat sarcastic. At least I hope so. But just to put your mind at ease, the crystal ball MUST be approved by the state. If you have such a big issue with it, contact them.
In addition, should someone who files more claims pay more? Or are you for better risks subsidizing poor risks?
As I have stated many times, if insurance scores, which are significantly different than credit scores, do not work, why do nearly all insurance carriers use them and nearly all states have approved the use of them to some degree?
Serious question. Do you have a contract with any carriers that do not use insurance scoring?
I don’t fully understand why the relationship between bad payers and claims. I see it in my agency. When we need to send the reminders on a regular basis, we end up with claims on them accounts. I can see that.
What I don’t understand is why credit is factored into the Insurance Score equation. I know you work in a different side of the biz then do I. I am sure you have all the stats at your finger tips.
I just don’t like it.
December 30, 2014 at 7:52 am
Ron says:
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FFA,
You nailed it on the head when you said, “When we need to send the reminders on a regular basis, we end up with claims on them accounts.”
As I have stated, and I understand it is not the clean answer you or other agents like, insurance scores are the most highly correlated factor to ftuture losses that has been discovered and proven. Anyone can pontificate on teh excat reason why, financial hardships encourage people to use insurance claims to help generate income, people who have difficulty paying bills are more likely to file a claim for a loss that htye normally would just pay out of pocket, fraud, etc. Unfortunately, there is no right answer. The fact remains that less than 25% of insureds pay higher premiums due to insurance scoring. I have seen studies that show up to 60% pay lower premiums due to insurance scoring.
Basically, this allows for less subsidizing poor risks by better risks. Unless you are a Socialist, and I know that you are not, you should like this.
December 22, 2014 at 4:21 pm
YepYep says:
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Well said Ron. Without detailed rate segementation to tailor the rate to the individual risk, you end up with rates that are not equitable and lower risk individuals have to subsidize the high risk. I had to laugh at the use of insurance pricing buzz terms in this article because it is clear that the folks aleging the misconduct don’t have a clue what they mean!
Ron, I agree with you that free markets are at work. If a company’s rate is not competitive, then so be it. What I have a problem with, as an agent, is when a carrier such as Travelers comes in, and says, “No matter how uncompetitive we are, YOU WILL write XXX numbers of policies per month, or off with your head!” This is not a free market approach, that is pretending that you are a captive carrier approach.
I agree agent14. We have been in several meetings with Travelers. They thought their brand would sell itself no matter what they were charging. We gave them proof and they still didn’t get it for 5 years. They lowered commission on stand alone home and their auto market wasn’t competitive so we couldn’t bundle. Now, they have awakened to some degree by coming out with quantum 2.0 Auto which is better priced, but we had to take a hit on commission to get it. The home has improved a little and they do have better companion credits now so they stopped the bleeding some.
Ron, well played. When it comes to touting the free market system, the position of Travelers is Indefensible. Just my .02 cents. I hope Travelers’ new way of doing things is a complete failure.
Let’s face it, Travelers is the pits. They’ve come in swinging their big di*k around one too many time for this agent. We find we don’t need them and have said good riddance. There are plenty of good carriers out there without the red umbrella.
BTW, I assume all this “black box” talk is about personal lines as I don’t see this with commercial lines. To answer Ron’s question of how much to charge if you don’t know the cost, I loss-rate my large accounts based on their historic history to come up with a target premium. I usually get what I need doing it that way. But it has to be fairly large to do that.
My posts have been solely based on personal lines because that is my background. I am not familiar with commercial rating. However, I would imagine there are a lot of similarities between personal lines rating and small and middle market commercial just to be able to obtain enough data.
Ron, your background under Personal Lines bears little resemblance to Commercial Lines. There are few similarities. Commercial Lines has flexibility, Personal Lines, it has to fit in the same little box. We have plenty of data on our accounts in our operating system since most of our accounts have been with us for a long time. We can pull Loss Runs on any of them, see what kinds of losses they have had and how much they have paid in. Most of ours have under a 20% Loss Ratio overall and that is a real money maker for us and the company.
Good comment Libby. On Commercial Lines, all an agent has to do is compile premium paid over a period of time vs Losses over the same time and the resultant excellent Loss Ratio. A company contemplating a rate increase tends to back off their increase if they are presented with the facts. Commercial Lines is always more negotiable than Personal Lines which is that nasty black box and some actuary trying to get increases across their entire book with their so called model.
That’s true, Agent, but it’s more than just looking at the loss ratio. It’s calculating an accurate loss pick and then building in expenses to come up with a target premium. It’s taking into account that insured’s have no control over a carrier’s LAE expenses and removing them from the equation. It’s about a solid claims management and loss control and prevention plan. Then it’s getting the underwriter to agree with your numbers and methodology to get the price you need. It’s not possible to do with your slot-rated small business or these young, by-the-book underwriters just out of college. You need a national accounts underwriter, which means a large account with credible data. But that’s where I thrive and have the most fun in this incredible business of ours.
Libby, I have had a lot of luck with underwriters who are not national accounts underwriters. Small and mid market underwriters can also be persuaded in most cases. Of course, if the account has had losses and the loss ratio is not wonderful, we do have to work with the accounts to step up their loss control efforts to identify problems of the operation so they can recoup their better pricing in the future.
Its gonna be a good year. Saw a good concert on Sat Night. Wake up to find Trestman & Emery fired by the Bears. Now Agent & Libby are agreeing on something… Whats next??/ Stan Gets a job? My kids grow up?
I can just feel it. Good Things happening… 2015 Rebound year!!!
December 29, 2014 at 6:14 pm
Agent says:
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Good one FFA. Yes, Libby and I agreed on something for a change. 2015 is shaping up nicely. We have a new Congress coming in to stymie the pen and the phone and start passing meaningful legislation that will help the country.
December 23, 2014 at 4:00 pm
nuff sed says:
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@Agent or @SWFL agent-you might not like it, but Ron is right.
The use of predictive modeling is really nothing more than the use of tons of data that insurers can extract from their own records at a cheap price on their own data to improve their own results. its really nothing more than an extension of rating algorithms that you might have worked with years ago when carriers encouraged agents to rate their own insureds.
What makes it hard to understand if you are on the outside looking in is that there are now so many different risk variables that you can never point to 1, 2 or even 5 as to why a price moved up or down.
For instance, you mention a loss free insured getting a +20 some odd % increase.
Ok-for personal lines and for small commercial, prior loss experience is not always a predictor of future loss experience simply becuase there is no credibility in that particular insureds results pointing forward, but there is when you bucket 10’s of thousands of different insureds with similar credible risk bearing characteristics.
Insurance companies know for instance, how many fires they will have on their book, but they never know which ones, because fires tend not to happen over and over for one insured but will for an insured with similar risk characteristics.
Now, I wouldn’t mind seeing price optimization because ultimately it will lead to lower prices for an insured much like we as consumers benefit from lower airfares-and airlines do practice price optimization-thats why you’ll see a sale on fares from Southwest for instance-airlines are an unregulated industry where you can’t do it in insurance as our regulatory scheme is based on patterns and practices that are a century old if not older.
You might be interested in knowing that in countries like the UK, the price for auto insurance changes every day-its a market that is much less regulated and consumers benefit.
I would think that you should learn more about the technology and understand it better-its not evil, regardless of what the CFA might say.
I appreciate your comment nuff, but these newer versions of predictive modeling are flawed and the geeks that are doing it are ruining the market. They are doing this across their entire book for both HO & Auto without regard to whether it is fair to the insureds or agents. This is how they are running good business off. Please tell me if you have seen any customer receive a lower cost due to Predictive modeling. I represent 5 major standards and haven’t seen one yet. On airlines, really? Was predictive modeling used to charge bag fees? Since fuel has gone down, I haven’t seen any charging less for fares.
I could really care less what the UK charges for Auto insurance. I care about what is going on in the US. I don’t think the UK would be the country to model anything after.
Would you make the same comments about airline charges after knowing that fares are 2/3 lower-including baggage fees on an inflation adjusted basis since Pres. Reagan deregulated their airline industry? Wouldn’t your clients like to see the same thing?
Likewise, I raise the UK model as their insurance industry is by and large unregulated. There is a variety of coverages available at a wide variety of prices. Wouldn’t your clients like to have a wider variety of choice?
I would also challenge your statements that the models are flawed. How so? I would tell you that companies that use predicitive modeling are able to segment business better than those who can’t. That allows them to select better risks than their competitors which ultimately allows them to have lower rates. There is a reason why Geico or Progressive will show you competitors rates-they have figured out based on their data, that those risks whom the competition is lower than them, have a higher risk of loss than the price will support. Hence they WANT that carrier to take that risk-because they will bear those losses and then have to raise their premiums even more, making them less competitive causing the death spirial.
When I started in the business I worked for my father who was an agent and my mom who was a csr-back in the 70’s and 80’s, there were a handful of factors that could affect price of a policy whether it was personal and commercial lines. It was relatively easy for an agent or principal to explain price changes as carriers tools for accurately determining price were crude and not always reflective of risk.
Modeling takes a huge step in the right direction as it ties risk to price in a more segmented fashion.
The problem from your perspective as an agent is instead of a handful of metrics-number of citations, age, number of miles driven, and zip code, now there are literaly hundreds if not thousands of univariates which interact to create a fairly customized price.
So when the price for one of your clients changes and in your mind or the insureds, nothing has changed, then your job just got harder because you are having to try and sell that client on why they should stick with Brand X or you have to remarket them and then you have to convince them to now go with Brand Y.
I get it. Your job just got harder and I bet you’ve been doing this for a while-I know as I’ve been a lifer in insurance-going on 34 years so I get it.
But if you want to keep working in insurance until you retire, you should take some advice-quit crying about the changes you don’t understand and learn as much as you can so that you can keep your clients informed-otherwise they won’t see your value and you’ll lose.
And I’m not being mean or cold. There used to be tons of folks who worked in insurance who no longer work in the industry because they couldn’t adapt and change-think policy typists or rater/coder/entry clerks for instance.
So as long as you cling to your definition of “good business” which is rooted in thinking that is 30 years old, then you will see your business and livlihood dwindle.
nuf, I hate to disappoint you, but our agency business isn’t dwindling as you put it. The key to our success is representing a number of markets so we can remarket business to companies who haven’t gone overboard on the predictive modeling that demands so many factors to raise customers premiums. A few of our markets are on the downward path losing customers, but the common sense markets are on the upswing. I have been at this for over 30 years and have seen all the ups and downs in the market place, soft & hard.
We have seen all the tricks carriers like Progressive & GEICO uses to lure customers to them. They quote an account blind without reports and make the premium look attractive to the customer, then when the reports are run, it is higher than we offered. They use deceptive trade practices like Flo telling the customer to pick their own price. I have seen it all. By the way, we expect to earn contingency with most of our markets, Personal & Commercial due to our excellent loss ratio and growth.
Hey Agent
If you hate to disappoint me, then why, oh why do you continue to do so with each and every post.
Your business may or may not be dwindling-unless you want to share financials then its a moot point, but it is a bold statement from a random poster who may or may not be an agnet much less an agency principal and for whom you are requesting blind faith.
What is true however, is the market share for direct writers has increased over the last dozen years, taking it away from both captives and IA’s. If I recall, IA’s have about a 20% market share of PL here in the US.
I’m not going to go any further without wishing you a Merry Christmas btw, so I’ll include that here.
I would like to know from you, which carriers you are referring to who are “common sense markets” who “haven’t gone overboard”. Then based on that,lets compare their results with the markets who are actively using modeling for PL and Small Commercial-and another btw, I think that modeling doesn’t work with high net worth PL and Commercial business over a threshold of roughly $50k-for both of those buckets, there is more heterogeneity in exposures-modeling works with fairly large groups of homogenous risks.
So anyway, how do you feel about doubling down on Christmas Eve there dear agent and coughing up some real facts to back up your words as opposed to what you’ve been saying so far?
Hey nuf, how about answering a compelling question for me instead of droning on about how IA’s and captives are losing business. Do you think these direct writers have built in algorithms to quote customers blind without running any score reports?
Another thing I have seen is penalizing seniors age 60-70 on score even though many seniors have paid off homes, no debt whatsoever. Suddenly, they deserve higher rates on the predictive modeling even if they haven’t had a claim for 10 or more years. They tend to go up on tier rating just because of age. Sounds like discrimination to me.
I know you do not like it when I address your questions to others, but I believe I am more qualified to respond than another agent.
Direct writers, like most captive and independent agency carriers, offer quotes and will bind based on the insured’s and agent’s word. Please name one carrier who runs reports prior to binding. This is common indutry practice due to the high costs of running MVRs and CLUE rports.
Regarding the penalization of seniors through credit. Do you realize that insurance scores are not the same as creit scores? They do not take income, debt, or credit inquiries into consideration. Most are based on payment history, default judgements and bankruptcies.
Finally, insurance does discriminate. Yes, you are willfully selling a product that discriminates. Don’t believe me, try changing the age and or gender of an insured for a quote and see what happens.
Ron, you are talking all around the subject without saying what I am asking. Let me put it another way so you will get it. How do you use your algorithms to price a product to a senior whose income has fallen some due to retirement and living on retirement income, Social Security etc? The senior has no debt, pays his bills up front with a perfect record and still gets a rate increase even though there are no claims. This is a big fallacy in score rating.
By the way, how does your system account for the millennial crowd of age 25-35? Did you know that many of this generation think it is ok to talk and text and drive? That may be almost as bad as DUI driving since it is so distracting. I see it all the time when I am out driving and they are so addicted to that phone, they have no idea of anything going on around them. Please explain your algorithms on that issue.
I have no idea how to answer your question to your satisfaction. These are not my algorithms. I had no input so I cannot comment intelligently on them.
There is no way for me to know why these perfect seniors are getting a rate increase. My only guess is that the carriers who are increasing their rates have filed for a rate increase for that age class. If that is the case, talk to your marketing rep, then the state to find out why they approved the rate increase.
Can you prove that it is their insurance score that is causing the rate increase? If not, stop making baseless accusations.
Every time you post something in regards to insurance pricing, you show more ignorance on the subject. You want everything to be clean and easy. Well, it is not.
I agree 100% with you regarding the dangers of texting and driving. Do you think it is only the millenial crowd that texts while driving? Do you think everyone who drives drunk is caught and has a DUI/DWI on their MVR?
We account for texting and driving exactly the same way we account for DUIs. If they get convicted and it is discovered on an MVR, it gets evaluated. How that conviction is weighted is determined by each carrier separately. Some may weigh it more heavily than others. It is called the free market.
Ron, if it isn’t that complicated, why did you devote 6 paragraphs to it. I thought you were one of those geeks that presented algorithms to the executives of the company and only had one turned down over the years. By the way, applying for a state wide increase with the state is a whole lot different than the predictive modeling going on within the company in those dastardly black boxes. That is something the state knows nothing about and as you say, it is proprietary information that is closely held by the company.
December 30, 2014 at 7:37 am
Ron says:
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Agent,
First, I did not dedicate 6 paragraphs to it.
Second, if you think needing only 6 paragraphs to explain a topic makes something complicated, you must have a 3rd grade education.
Finally, until you actually work with and undersatnd predictive modeling, please refrain from making comments. I know it is complicated to you and you do not like to discuss insurance and how it is priced with your insurance clients. You sound much more like a lay person than an insurance professional.
Trust me, the state knows about their predictive models, what data is used, and the algorithms used. Thety may not be able to disclose that information to the public, but they know.
You still have not answered my questions about insurance scores:
1. Should someone who files more claims pay more? Or are you for better risks subsidizing poor risks?
2. If insurance scores, which are significantly different than credit scores, do not work, why do nearly all insurance carriers use them and nearly all states have approved the use of them to some degree?
3.Do you have a contract with any carriers that do not use insurance scoring?
December 29, 2014 at 5:02 pm
FFA says:
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Ron, Do you have demographics on the texting & drive issue? Age groups? Population Density? Speed at impact?
Ron, you sure like to pontificate and drone on about subjects you don’t understand. How can a “Broker”, who is probably wholesale hope to know what is going on in the world of “Predictive Modeling”, Black Boxes, arbitrary rate filings score retooling, re-tiering, Replacement Cost manipulation etc?
Regarding your questions: 1. Yes, I do think people that file claims should pay more. The problem is that people that do not file claims are also paying more because of “Predictive Modeling” scenarios. 2. I have not been a big fan of Insurance/Credit Scores determining price of the insurance product since there are holes in it like the Senior population whose score declines some due to lower income after retirement and these people have very few claims and pay their bills and don’t use much credit. They get penalized and the younger set up to their eyeballs in debt, using credit cards etc often have better scores. 3. Yes, all my carriers use score, some weight it more than others. Did you know that the Hartford AARP program is typically much lower than other standard markets in Auto for retired persons because they use a different Predictive Modeling algorithm and it is a very lucrative book of business for them.
Ron, I know of a smaller regional carrier based out of Wis that don’t do credit scoring. That’s their main draw. Their cash cow is the bar scene & adult entertainment venues, but their personal lines rates are generally better then the main players. They do attract the lower insurance scores, but they do it profitably at a better price. Claims is spot on the industry norm.
Good for them. If they are truly successful rating without insurance scoring, by growing profitably, then others will eventually follow suit. That is how the industry works.
Can you provide thwe name of the carrier? I would be very interested to see their written premiums, growth and loss ratios over at least 5 years.
FFA, I have one called National Lloyds which has been around for eons and they don’t do credit scores either and have been very successful in their niche. They do mostly smaller homes, a lot of rental dwelling business. We write a fair number of Hispanic business with them and those people don’t have any score at all. They don’t believe in bank accounts either and pay their premiums in cash. They hardly ever file a claim so the business is lucrative.
Please dispute the facts I have presented to prove that I do not understand what I am talking about.
As is par for the course for you, you missed the part where I stated I have past experience in product management and pricing. In addition, I keep up on the information. So I do have expertise in the area of predicitive models. I can also state with complete confidence that there are no such things as arbitrary rate filings score retooling. I am not even sure what that is. All i know is that “arbitrary” is NEVER acceptable in a rate filing.
You stated, “Yes, I do think people that file claims should pay more.” Therefore, since insurance scores have been PROVEN to be the most highly correltaed factor to future losses, you should be in favor of their use.
In addition you stated, “The problem is that people that do not file claims are also paying more because of ‘Predictive Modeling’ scenarios.” Unless you know the algorithm and data going into the predicitive model, you cannot make that statement with any level of accuracy. Have you ever had a client who filed a claim for the first time? They never had previous claims. How do you price a product for which you do not know the total cost?.
If you knew anything about insurance scoring you would know that income is not factored in. How would insurers obtain this information? If you have a client whose rate has increased solely due to re-tiering based on a change in their insurance score, file a complaint with the state. Most, and likely all, states only allow insurance scoring to be used at new business. If this is not true in TX, please let me know and provide your source. Instead of complaining, why don’t you start acting as an advocate for your clients.
There are holes in EVERY rating/underwriting factor. Not every 17 year old male is a poorer driver than every 50 year old woman. Not everybody who causes an accident will cause another. Not every person that drinks and drives or texts while driving will cause an accident. Nothing is perfect.
Since all of your carriers use insurance scoring, what does that tell you? It should tell you that IT WORKS. If it did not, you would have at least one who doesn’t and they, based on your statements, would have all of the good risks.
Good for AARP. If that is their target market, then they are using predicitive modeling correctly. Believe it or not, many carriers are shying away from seniors based on poor claims experience. That is just the free market at work. Stop complaining you Socialist!
You are the type of person who claims to work hard, but complains every time you need to work hard. Maybe you start selling vacuum cleaners door-to-door. At least you won’t have to deal with predicitve models.
You are right about one thing Ron. The system is not perfect and is basically imperfect with the information used to develop the price on any given customer. When a company wakes up and finds they are losing business because of flawed predictive modeling, they charge an actuary to start running numbers again and start tweaking it to a more fair system. It took 5 years for Travelers to awaken from their slumber and realize what they were doing was wrong for the market. I wonder how many actuaries they went through before they realized their errors.
I see I have you frustrated now since you are resorting to name calling which is a common trait of left wingers. You don’t recognize any problems the retail market is going through, it is all about the score and the algorithms and by all means, let’s not use any common sense in the insurance industry. You would not have lasted long in the real world Ron.
I never get frustrated. When did I resort to name calling? If you against the free market (predicitive modeling, insurance scoring, etc.), then you are a Socialist.
If you want every company to use the same, simple rating model so you don’t have to work hard explaining it to your customers and you don’t have to remarket to get the best rate for you customers, you are lazy. If you had any true base of understanding insurance scores and algorithms you would know that is common sense. How much more common sense can you have than, those you are predicited to cost the company the most money will pay the most in premium.
You have yet to tell me how you would go about pricing an insurance product so it is not overly excessive, adequate to pay claims, and not unfairly discriminatory. I did not even mebntion perfectly fair for every single insured and profitable for the company.
I may not be aware of all the problems in teh retail world, but you have no clue about insurance pricing.
I have already made it in the real world.
December 30, 2014 at 4:17 pm
Agent says:
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Ron, I do know enough about insurance pricing to know it is out of whack and out of control. If it were done correctly, there would be more common sense to it instead of just crunching numbers and incorrectly applying unjustified rates. Some of our carriers have admitted they went too far with the modeling and are seeking to back off some so they will remain viable in the marketplace. I don’t think I am anywhere close to being a Socialist in insisting that companies do the right thing for my customers. You, on the other hand think an agent questioning the companies modeling is wrong. By the way, if you have made it in the real world, how come you still don’t pay Federal Income Tax and I continue to support you with mine?
December 30, 2014 at 4:41 pm
Ron says:
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Agent,
You still have not answered my question. How you would go about pricing an insurance product so it is not overly excessive, adequate to pay claims, and not unfairly discriminatory. I would love to hear your “common sense” approach to pricing.
What makes you a Socialist is your desire to remove a free-market based solution to help companies become competitive and target whatever market they desire. You may not see it that way, but removing predicitive modeling and insurance scoring would do exactly that.
If all you know about insurance opricving is that it is out of whack and out of control, you know NOTHING about how insurance pricing is established. You rant like a lay person. Please try to act like an insurance professional. Maybe you should work for a consumer watchdog organization. They do not know anything about insurance either.
If the only criteria in your mind for making it in the real world is to pay Federal Income Tax, which I have in the past, you have a twisted world view. I am married with 3 children, own my own home, send my children to a private Catholic school, saved money toward retirement, the only debt I have is my mortgage, and I have done all of this on a single income with no help from the government or you. If that is not making it in your real world, then fine. I would not want to live in your world anyway.
December 30, 2014 at 12:35 pm
FFA says:
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If income is not factored in, why do we need SS#’s.
Social Security numbers are used to find credit reports. The data from those, payment history, judgements, bankruptcies, etc., are then inputted into a conmpany’s insurance score model. Credit reports tdo not include income and insurance companies cannot obtain tax filings without permission.
December 30, 2014 at 12:59 pm
Agent says:
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Hi FFA, I hope you had a good Christmas as I did. We look forward to a much better 2015.
I saw a great political cartoon this morning. Picture Obama standing at a podium.
He said: I have a plan to help the unemployed during these tough economic times. If you like your unemployment benefits, you can keep them, PERIOD!
December 30, 2014 at 1:09 pm
Agent says:
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FFA, did you see the latest AP article titled Fewer Americans have a sense of Duty? Interesting that they conclude that the sense of duty is lowest with the young. Adults less than 30 were much less likely to vote, volunteer, keep informed or even speak English. Only 37% think it is important to keep up with issues, down from 56% in 1984. They have been dumbed down by the educational system and could care less what is going on in the world. Many have been brainwashed by liberal professors in school and just have an ideology drummed into their head. Does that sound like some we have seen on this forum?
December 30, 2014 at 1:11 pm
FFA says:
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Thanks Agent. I hope all was well on your end. My fav present was getting my mom out of the Nursing Home and to the family X Mass Dinner.. She is fading and don’t think she will be around for next X Mass. She has surprised me with her health in the past, so….
I started gong back to church and my 10 yr old gr son been going with me. Amazing the comfort I have been finding..
My favorite present was on Sat Night. Me & the wife got to see the BoDeans again. You should be familiar with them as they come from your neck of the woods.
Ron, as usual, you have it all backward. Socialists, like the one we have in office currently are the ones who like to mandate, order, control the marketplace and in the case of actuaries, impose unrealistic algorithms to raise premiums with their company’s products which drives business away from them. Then, they act shocked that their formulas did not work and have to go back to the drawing board to re-tool. If a company does not listen to the market and agents, they are asking for big trouble. Ask anyone from Travelers how it worked out for them in the past 5 years. They showed a lot of arrogance like you thinking they could impose rate increases ad nauseum and the others would just follow like lemmings. Didn’t work out so well.
December 31, 2014 at 11:30 am
Ron says:
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Agent,
Is the government mandating the use of predicitive models, insurance scoring, re-tiering, replacement cost manipulation, or anyhting else for which you are complaining? If not, then your are the Socialist who wants these free-market practices to stop.
Should the government step in and stop these practices? If yes, you are the Socialist. If no, then how do you stop them?
You still have not answered my question. How you would go about pricing an insurance product so it is not overly excessive, adequate to pay claims, and not unfairly discriminatory. I would love to hear your “common sense” approach to pricing.
December 31, 2014 at 11:32 am
Agent says:
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Ron, you complain that I don’t answer your questions and if you bothered to read the prior posts, I did and even numbered them. Who has a lack of reading comprehension. Also, you have admitted in the past that you were part of the 47% who did not pay Federal Income Tax. Now, you are touting your success in the real world. Which is it really?
You answered some of my questions, but not how you would go about pricing insurance. I know you will never answer because YOU HAVE NO CLUE, but it is fun to pester you about it.
As I stated in previous posts, I am CURRENTLY in the 43% that does not pay Federal income tax. Before I had a home and children I WAS paying Federal income tax. Therfore, based on your twisted definition of making it in the real world, I was making it, but not any more. Even though I am in a much better family and financial position. No thanks to you or the government.
January 2, 2015 at 3:52 pm
Agent says:
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Believe it or not, most carriers shying away from senior business are shooting themselves in the foot with their flawed modeling schemes. Hartford is laughing all the way to the bank. Oh brilliant one, recognize it or not, the population of this country continues to gray and companies that get their house in order and stop penalizing the senior crowd will do well and the others not so much. This is a huge market and it will be bigger in the next 20 years.
Why do you care who wants to write seniors and who doesn’t? Shouldn’t each carrier be allowed to determine their own target market, even if it is to their own peril? I thought you were for the free market.
If that is the “golden egg” all other carriers will adjust their models and begin to follow suit. nxt to the NFL, insurance is the ultimate copy-cat industry.
January 5, 2015 at 6:01 pm
Agent says:
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Ron, I want my carriers to treat the Senior market right and also be able to compete with the Hartford/AARP market and not lose any business to them. Believe me that my markets have all heard from me on this subject. I can’t believe you said – why do you care who wants to write Seniors and who doesn’t. Are you crazy or just stupid?
Why do you want everyone else to cater to you in order to make your life easier? Who do you think you are to try to dictate what market an insurance company should target. Would it be nice to have more markets in order to create more competition? Of course. But that is not the reality right now.
I have made very lucid, fact-based statements in order to educate you on why companies make decisions and how models and different rating/underwriting tools are utilized, and all you can do is insult me. Grow up.
One other thing, why do you feel the need to keep giving your own posts thums up? No one else is looking at our posts any more. Do you think it makes you look better?
January 2, 2015 at 5:38 pm
Agent says:
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FFA, I saw a good article on Prop/Casualty 360 which listed 10 reasons for accidents. Texting while driving was above DUI in causing accidents. 44 states now have Texting Laws and fines are heavy and possible loss of license in some. Every single state should have these laws on the books. The cell crowd is out of control and are much like Alchoholics thinking they can handle it.
You are an actuary and you are in favor of less safety by penalizing texting drivers? Be careful on the way home Ron, texting and driving is a very dangerous thing and you might actually run over an innocent driver or pedestrian.
What I care about is freedom and liberty from an oppressive government. Yes, sometimes that means bad things happen because not all people are responsible. However, I will take that over more laws and bigger government any day.
Besides, aren’t you one of the people that says criminals do not follow laws when some people push for more gun control laws? What is the difference? Do you think people will stop texting and driving because there is a law against it? Do people not speed, run red lights, drive recklessly, etc.? There are plenty of laws against that those. You are so naive.
May 22, 2015 at 9:31 am
Agent says:
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Ron, if what you care about is freedom and liberty from oppressive government, why did you vote for less freedom and a more oppressive government? How can anyone be that stupid?
December 30, 2014 at 5:21 pm
Agent says:
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Good for you FFA. I am glad you had a great family dinner with your mom. We treasure our parents and every moment we can spend with them. I lost both of mine some years ago. My mother had a bad stroke and was basically comatose for the last 6 months of her life in a care facility. That is no life at all and when she passed on, it was a blessing. Glad you are back in church. We find a lot of comfort with our church as well. No matter what the world throws at us, God is in control and it will be all right in the end. What do those atheists have to look forward to?
Wake up Ron and smell the coffee. You are the one who has no clue about the real world. There is a big change coming in this country and you had better get on board or you will be left behind. Progressive politics were soundly rejected in the mid terms. The Blue States are in trouble and it would be good if you recognized it.
How to get out of bed every day? Why don’t you just move to another country if it is about to get as bad as you say?
Please tell me what is the big change, what the exact result will be, and when it will happen. I want to know when I can either say, “You were right” or “You were wrong” In addition, how exactly do I “get on board”?
So your blood pressure shoots up to a new high every time you read my post, right? I don’t fit your little algorithm box and it frustrates you, doesn’t it? Ron, you can’t see the forest for the trees. I don’t expect you ever to get on board because you are committed to the Progressive cause and according to you, they are doing the right thing for America. You also misinterpreted my statement about change that will be coming. Your reading skills are lacking to say the least. The change I was talking about is good change. The country turned red overnight, both houses of government changed out, Obama is a lame duck. That is a good thing. Perhaps it is you that should consider moving if you don’t like Republican governance. Do you want to know the exact date? Let’s start with 01-06-2015, the date the new Congress will be sworn in. It will take some time, but 2015 promises to be exciting.
You have no idea the enjoyment I get from your ignorance. I love how you tap dance whenever I challenge you, because cannot answer most of my questions directly.
You think you have some kind of power over the insurance companies when all they do is use you as a conduit to the customers. In other words, you are just a small, easily replaceable cog in the insurance machine.
I will admit that I did misinterpret your post. Now I know how you feel when you misinterpret nearly every one of my posts. At least I am man enough to admit when I was wrong.
Please list all of the good things that will happen to only those who are “on board”. I want to know if any of your predictions come true and how we can measure the good change we are about to experience. Also, I want to know how I can get on board. I voted for mostly Republicans last November. Does that get me on board?
If you would not move during Democratic governance, I am not going anywhere now.
January 5, 2015 at 4:58 pm
Agent says:
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I also take great joy in seeing you make a fool out of yourself Ron. There is not one company who would be in business without someone selling their products. Your arrogance is amazing. To not listen to the market or agents and get input is just like an actuary who has no clue.
You will never be on board as long as you like Progressive governance. We have seen enough and made better choices in the last election. We have about 745 days left in Obama’s term and it can’t come soon enough.
I never said companies do not listen to agents. All I said is that companies do not make decisions based on what agents say. They may take information from agents in order to take additional looks at their strategy (pricing, underwriting, models, etc) to see if it makes sense to change. But, at the end of the day, if what the agents want does not result in projections to profitable business, the company will not change. Get it?
I already conceded that companies need agents. However, agents need companies far more. If you want proof, see GEICO. Direct writers can make money without agents, but agents cannot make money without companies.
January 2, 2015 at 2:55 pm
Agent says:
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Ron, following are some interesting facts provided by Prop/Casualty 360 on what the companies do to price Homeowners coverage. Put these into your algorithm pipe and smoke them.
1. Pets – Does the prospect have a vicious breed dog?
2. Credit Score – Big factor on price
3. Location – Where is the property? Is it in a higher risk area?
4. Trampolines – Trampolines are a no no for a lot of markets. The ones that take them require all kinds of extra padding and nets.
5. Swimming Pools – Can be a hazard, particularly if you have kids around and there are parties etc.
6. Fire Protection – What class of fire protection is there? Hydrants within 500 ft, distance from fire department, volunteer or full department?
7. Poor maintenance – Peeling paint, shingles missing from roof, trash in yard.
8. Weather preparation. Will roof and structure stand up to higher winds? House on slab or Pier & Beam?
9. Claim frequency – Clue reports are invaluable for reported claims. Even if nothing paid due to deductible, frequent claims are an issue.
10. Neighborhood Crime – Break Ins in some areas are a problem.
I am not sure how the algorithms account for all these issues.
Really Ron? If agents were not out in the real world finding and writing business, you would not even have a job. How long would you keep your job if business was not sent in to write.
You just cannot leave it alone Ron. Three posts for every one I make, every one of them an insult. I would like to see you market direct Ron. Your close ratio would be almost nil since you don’t have people skills. That is why you would never make it on the street and your employer would say, sorry Ron, we are in the insurance sales business and you haven’t produced anything. You can’t talk down to people and get their name on the dotted line.
You have posted 44 messages and I have posted 40. Please tell me how that equates to 3-1? Your prro math skills are almost as bad as your reading comprehension.
I have alreeady conceded that I would not make it as an insurance producer/salesperson. I know too much about insurance and enjoy educating people. I have learned that salespeople just throw out word tracks to get the sale and that is what the clients want.
In addition, I enjopy what I do, make good money, and work standard hours so i can be with my family.
You would never make it on the comapny side because you have very limited knowkledge of the insurance mechanism, underwriting and pricing.
We all have a role and it works becasue people like you sell what people like me provide. If we switched roles, we would both likely fail.
January 7, 2015 at 11:21 am
Agent says:
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Tell me Ron, have you ever made a presentation or sat in with a sales pro on a presentation to a client? I kind of doubt it, but if you did and the sales pro just threw out word tracks to get the sale, they weren’t very professional. I go over my proposals thoroughly and listen to the prospect and answer their questions about coverage, offer alternatives, extension endorsements etc. It seems to have worked well for me for many years. There is a good reason why you are not in front of the public. You just don’t have the people skills. It shows with every post you make and every insult you make with me.
January 7, 2015 at 12:25 pm
Ron says:
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Agent,
I have sat in front of clients, given presentations and sold policies. However, it just was not my cup of tea.
I applaud you for doing your job the correct way, but you are more of the exception than the rule, from my experience.
You still have not answered my question, “Why do you feel the need to continuously like your posts and dislike mine? Nobody else is reading our conversations. Are you really that insecure?”
Serious question. Why do you feel the need to continuously like your posts and dislike mine? Nobody else is reading our conversations. Are you really that insecure?
So Ron, in your experience as you say, I am the exception to the rule for agents. Did you criticize the agent you sat in with after he glossed over the details of coverage? I am sure you made a friend for life after that. If you sold a policy after giving a presentation, I would have liked to be a fly on the wall for that meeting since you do not have a sales personality. Obviously, it wasn’t your cup of tea as you put it.
I have been following the back and forth commentary between you and Agent. Thank you for the information you have provided, I am on the agency side and some information you provided I knew already and some was new to me. You know Agent will be a troll every time he gets the chance, I wouldn’t waste my time on him.
Really this is what insurance journal should be about, professionals communicating and learning from each other…but Agent will never take what you say at value and he is such an arrogant person that no matter what you tell him, he has done it, done it better or was in a meeting about it. I love to read his stuff and sit back and chuckle at it. He really provides me with loads of entertainment. Have a great day and Happy New Year to all!
By the way fake Ron, you taking Ron’s word at face value doesn’t say much about your IQ. I have verified that companies using the new models, black boxes, rescoring, tiering upward was flawed and many are walking them back because they went too far.
Are you even capable of accepting criticism without resorting to insults? Just because someone appreciates the way I present my case and not yours, does not mean they have a low IQ.
You said, “I have verified that companies using the new models, black boxes, rescoring, tiering upward was flawed and many are walking them back because they went too far.”
I GUARANTEE you that if that is true, it is not becasue of your input. In addition, it does not sound like they are abandoning those methods, only revamping them. Isn’t that what successful businesses do?
I gues Agent thinks I am posting as Ron, when he really does need reading comprehension as MANY people have pointed out over the years to that silly goose.
Trust me, nothing that Agent says to me or has ever said on these blogs gets to me emotionally or personally…again, I love to laugh and he makes me do that almost daily. If it were someone who’s opinion I actually value on this site (i.e. Rosenblatt) I may take offense to being accused of having a low IQ…but not from Agent.
And to put this out there, I agree and disagree with both sides, Rosenblatt and FFA are some of my favorites to read and I appreicate that both can do it with some class. Agent is a complete joke to me and will remain that way.
There is not truth to this article. Most of these are to get you to click on a link and they sell your info to telemarketing companies that sell leads to insurance agents. Anytime you read something about .. ” your insurance company does not want you to know” it is not true. There is another one out there that we see all the time that your insurance company does not want you to know that there are discounts that save your money if you don’t drive far or have low mileage. Most of the newer policies out there do not even offer any mileage discounts it is just a flat rate. The product you are currently on does allow us to offer discounts fro how far your drive, but since 2009 we do not include mileage as a rating factor in any of our newer products. We have the truck as work and the car as pleasure.
The reason insurance rates are going up are due to claims and lawsuits. I have seem 2 situations were clients have bumped someone in a parking lot and only $500 of damage on the cars and they party says they were injured, gets an attorney and sues fro $25,000 of medical. Also, there is a lot of fraud out there too. We have see people turn in Towing/ Road side assistance claims that total more that the premium of their policy. We cannot cancel the policy until the end of the 6 months so we have to keep paying until we can get them off the books. Those are just a few examples of thing we see. Insurance was supposed to be to help when there was a catastrophic situation, but many turn in claims for $700 and they have a $500 ded. Used to people would pay for small claims like that. Recently, Nationwide cancelled a client of mine- they called to inquire on the rates to see what we could do and when you move to a new product you adhere to the new rules. So the husband had 3 accidents and the daughter had 1 and now they are going from $233 a month to $503. If he would have stayed on the old product 1 of his and his daughter’s would have been forgiven and the fender bender forgiveness would have kicked in so he would not have been cancelled.
All that being said… Over time the insurance companies will come out with new products to try to gain market share by attracting new clients. They usually go into the market at a lower price then they start to raise the prices on that product. Nationwide has had 4 product on Auto, 3 have come out since 2009. That product is the highest priced product we have on the books so we do try to roll those clients to newer less expensive products if they qualify and if it is actually less expensive. That is not always the case.
You are on the original product that Nationwide has had since the beginning of time. I personally am still on that product too. The benefits you have on this product are the preferred customer/Long term policy holder status. Motor Vehicle reports are only ordered once every 3-5 years. where the other products run the Motor vehicle report once a year. It includes Accident Forgiveness -which gives each person in the household 1 accident every 5 years with no rate increase that is built into the policy. All the new products you have to pay for that feature. You have Fender Bender Forgiveness- so if you have a minor accident that the damage is less than $1250 we will not raise your rates or count that against you. You have Auto Insurance Guarantee -as long as you maintain a valid driver’s license and your account is in good standing you will be offered coverage with Nationwide. Pet Insurance- If a customer’s dog or cat is injured in a accident that is covered under a Nationwide Collision Nationwide will pay up to $500 for vet bills related to the injuries from the accident. Car Key Replacement- I you carry Comprehensive coverage , Nationwide will pay up to $400 to replace the customer’s key if lost or stolen/ or electronic car entry devise. You may not need or be interested in these, but all of these are included in your current policy at no additional cost and they are not available in out new product.
Now I did check out most recent product for you and it would save you some money, but you will lose all the above features so if you would like to do that we can save you $304.80 per 6 months. We are more that happy to write the new policy for you, just know that is takes an average of a 5% rate increase every 6 months. So that you will be looking for that increase and they we did not disclose that to you.
I am glad that you reached out to us to check on these items. I hope that all of this information has been helpfully. Just let me know what you would like us to do. I will be out of the office starting this afternoon until Tuesday after lunch.
Have a great Holiday weekend. I look forward to hearing back form you.
One allegation is used to condemn the whole industry? This is turning into “guilt by association”; companies must show that their plans are not discriminatory but without any evidence that this is true or necessary? I think the PCIAA is correct in stressing that the facts need to be assembled BEFORE the CFA can make any conclusions. But like in court, truth must be dragged into the discussion, kicking and screaming. Let’s hope cooler heads prevail. After all, rate changes are reviewed prior to approval, so if other-than-risk based factors are being used, it should be easy to find and correct.
“Allstate’s micro-segments use driver birthdates to individualize this marketplace consideration surcharge”. I think it’s pretty clear what Allstate’s doing here – they are using Zodiac signs. Everyone knows that Capricorn’s are bad drivers.
SW, any carrier that tells you they aren’t using their black box to optimize rate is telling you a big fat lie. These people are underwriting down to the zip code now to determine price. We see some who re-invent the credit score with a new model, change rate tiers upward and then top it off with a general rate increase state wide. None of the changes we have seen end up saving the customer money, only increase premiums.
They go farther that zip codes – they go down to the house # & street! We have twin risks in the same zip code with different rates. I’ve said for a long time they can manipulate their computers overnight to do what they want but nobody wants to believe me. There is so much micro information, how would anyone ever be able to tell? Just like the Government can manipulate numbers to make you believe anything they want.
Concerned, the rating system for most carriers are so complicated now, no one can understand them including their own marketing reps. “Manipulation” of the black box is the key word. I had a regional manager in my office last week admitting they had gone too far and they listened to agent panels and would try to walk back some of the manipulation and get back to underwriting risks in a more fair way. Let’s hope they have awakened and are listening to agents now.
Agent, I would like to think you are correct that companies would admit they’ve gone too far and would listen to agents. But when has this happened? Maybe a smaller regional carrier. The origin of the black box really started with the introduction of credit scoring and most agents fought this tooth & nail. Companies didn’t listen. Companies rolled out direct divisions or purchased direct companies to the dismay of agents. Maybe the Regional Manager that you met with is different, but my experience is that the personnel on the sales & marketing side have virtually no input on pricing and underwriting variables (i.e. black box items). Insurance pricing and underwriting is a dynamic process and sometimes a company’s product features will align with agent desires. When it does, the company’s marketing department will give the agent credit and a pat on the back for the agents’ input. It‘s a feel good moment that does not last.
SW, I agree that most companies don’t listen to agents that close. They say one thing to us and then do the opposite. When we told a big wig from Travelers out traveling with the marketing rep their rate increases were out of line and showed him a number of quotes done showing it, he agreed to go back and look into it. A month later, they passed more rate on. Hmm! It took them 5 years to do anything. By that time, over a third of their book had disappeared off our books. Regional carriers respond much quicker to the market and what is going on. We just do what we can and hope to have a good year on contingency and try to grow where we can.
Agent,
Insurance companies should never listen to agents when it comes to rates. They must trust that their actuaries are competent and have created the correct rates based on the company’s data, experience, loss costs and business strategy.
If they were not listening to you it is probably because your markets were not within their targeted appetite. They may not say that to your face, but it does happen. I am sure it is nothing personal, just business.
Concerned, they take it even further. If you have a county line going down through part of a town on a street, one customer receives better rates than the one across the street because rating between the counties is different. How has the risk changed with 200′ separation?
The Beatles told them to do it.
Ron, tell me wise guy, what is 100% of nothing? If a company sets rates too high because some geek in a corner office does a black box model change that does not beat most carriers in the market, how much business will they write? Actuaries are not infallible by the way. They are also not out in the field seeing what we see and trying to sell 20-25% increases to loss free customers. I would like to see you sitting face to face with a customer and explaining the new model and how the increase was “so” necessary. The customer just says, well I think I will check around and see if I can do better. They usually do much better. This is why agents have to constantly re-market business to try to keep business on the books. Eventually, the market wakes up and says, what are we doing wrong? Why is our business leaving? Then, they ask agents and agents tell them once again.
Agent,
The fact that you think insurance companies should set rates just for market share or to retain customers shows your ignorance on the subject.
When have I ever criticized your knowledge of running an agency? Do not criticize my knowledge of insurance pricing.
If the correct premium results in a 20-25% increase, so be it. If that results in them losing business, that is the free market at work. What you are proposing is Socialism.
I thought you were for Capitalism.
Serious questions.
1. Do you know the 3 criteria a rate must meet in order to be approved by the state?
2. have you ever filed a rate change with a state and work with the Department of Insurance?
I agree that actuaries are not infallable, but they do not make emotional decisions. The state will not let them.
Ron, I don’t disagree with anything in your comments and I admit that I don’t know the answer to Q1 and I’ve never had the pleasure of Item 2. I do know that too often an uninformed agent has told a PM – “just lower your rates a little & raise your commission and your company will grow” – and I must agree that would drive a PM crazy. But we have all seen rate corrections that are so high that it’s inexplicable to the insured. When the real reason for the rate change is to correct past mistakes or the launch of a new model. That explanation will just not fly with insureds. We all work hard to attract & retain clients and a 25% increase is typically a show stopper unless there is an obvious reason for the rate change.
While it’s your job to price the product profitably and not focus solely on “market share or to retain customers”, your company would be making a mistake if you were not held accountable for some type of growth & retention.
SWFL Agent,
Don’t get me wrong. It is not that companies do not understand where agents are coming from or totally discount their plight when there is a significant rate increase. The fact is, if rate increases are necessary, they are necessary.
Since Agent is still probably trying to google the answer, here they are.
Rates must be:
1. Not excessive
2. Adequate to pay future claims
3. Not unfairly discriminatory
As you can see, nothing about gaining market share or retaining customers.
I agree that companies must live with their decisions. I just want agents to understand that rates are not arbitrary. In addition, the more pricing factors that are used, the more accurate pricing becomes and less subsidizing occurs. Shouldn’t insureds being paying the appropriate rate for their risk?
While you are correct in your statement, “While it’s your job to price the product profitably and not focus solely on “market share or to retain customers”, your company would be making a mistake if you were not held accountable for some type of growth & retention.”, you are missing a critical word, profitable. If you are growing with or retaining risks that lose money because they are paying rates that are not adequate, why would you want them?
To me it is ironic that agents complain when capitalism and free market principles are applied to insurance.
Infallible Ron, I hate to differ with you, but you are completely off base. Carriers are doing all of the above on filing for higher rates, screwing with the credit model, re-tiering to their hearts content, messing with Replacement Cost guides which by the way encourages a moral hazard. I do agree with you that many of them have run off a lot of good business unnecessarily and then wonder where it all went. These things are plain goofy and the actuaries have to answer to management for their errors in judgment. Don’t bother to tell me I am proposing Socialism and insult me like that. I have a vested interest in writing and retaining business for my agency and I am the one who has to deal with customers on a daily basis. How would someone sitting in an ivory tower and never dealing with customers pretend to know what the correct rate is? By the way, our loss ratio with all our carriers is immaculate and we stand to make contingency with all of them so get off your high horse.
Agent,
If you hated to differ with me, then you would stop differing with me. I respect your expertise as an agent due to your experience. Why can’t you respect my expertise in insurance pricing based on my experience? The fact is that I know far more about insurance pricing than you can even imagine. I am trying to educate you on how the mechanism works as you try to educate me on the realities of the marketplace.
Please explain what you mean by stating, “Carriers are doing all of the above on filing for higher rates, screwing with the credit model, re-tiering to their hearts content, messing with Replacement Cost guides which by the way encourages a moral hazard.” Did you just use the term “moral hazard” because it sounds insurancey? Do you mean that it causes people and their agents to lie and cheat?
I understand and appreciate that you are an advocate for your clients and want your life to be as easy as possible. Heaven forbid if you should have to actually work hard to grow and retain your business.
Why do you constantly complain about having to talk to your customers? Isn’t that why you receive a commission? If it is so bad, sell your agency and get a job on the company side. I hear State Farm has moved to TX. Should be plenty of high paying jobs.
If they run off good business, then then they will lose money and one of their competitors will make more money. Do you even understand how the free market works?
You do realize that insurance, in its most basic form, is Socialism, right? Every time a carrier introduces a new rating factor, it moves insurance further from Socialism and closer to Capitalism because more insureds pay the approriate rate for their specific risk. This minimizes lower risks from subsidizing higher risks. This, in turn, lowers premiums for the best risks.
I’ve been a good Allstate Customer for my Home and Auto for 30 years. All of a sudden this year, my home insurance doubled with no sensible explanation, (I switched an lowered it to less than the original price, for more coverage, including Flood damage) and now they have increased the price on my Auto from the $42.00 to $67 for a 2006 Hyundai with only 20,000 miles on it. No Accidents, no tickets, no violations, and very little mileage. This has to be a case of Marketplace Considerations being factored in. I will be leaving them entirely within a few days, as will a few other people who with similar records who have also been what I call assaulted by Allstate. They claim to spend $1.11 for every $1.00 they bring in, so how are they billions to the good? It’s time for Insurance reviews in detail here in Arizona.
Rickey, your Auto probably went up because you moved the Home from them and lost the companion credit. When moving, you can usually save more if you move both at the same time.
Rickey, if you have Flood Damage on your Homeowners, you have a hell of a policy. The last time I checked, Homeowners does not cover rising waters from Flood.
All of you agents out there, please tell us how you would price a product for which you do not know the costs? How would you differentiate your pricing to be more competitive if your pricing model were easy to figure out? You speak of a lack of understanding when it comes to pricing, yet you keep selling the product.
One of the reasons for each company’s “black box” is to provide it with some competitive edge in an industry with razor thin margins. If it was easy to determine a company’s pricing, they would all be the same.
You want competition? Live with the “black boxes”.
Credit works, period. It has been proven to be the number 1, most accurate predictor of future losses. If it did not work, insurers would not use it and regulators would not allow it.
Ron, your ignorance of what is going on in the market is pretty amazing. Yes, we have to live with the black boxes of carriers since there isn’t much choice, but Independent Agents with multiple markets are much better positioned than a “Captive” agent who only has one market and often loses business with no other place to turn. Common things going on are unreasonable Replacement Cost guides that are 15-20% higher than the market, Credit Score re-tooling, re-tiering homes upward and of course let’s not forget general rate increases, all to the detriment of the customer and the agent who has to deal with it.
Agent,
What ignorance? I know what agents are complaining about. I speak to them every day. What I am telling you is that companies do not care what agents are complaining about. You may not want to hear that, and it may not be right, but it is true. The only time companies listen to agents is when they talk about a product offering.
Just because what is going on is making your life more difficult does not mean it is not justified.
You complain that company people do not know what it is like in the field. Wel, you have no idea what their lives are like either. I would love to see you propose a rate change to company executives based solely on what agents are saying about the market. You would be laughed out of the board room.
If the agent and customer do not klike whatr a company is doing from an underwriting and/or rating perspective, go to another company. It is called the free market.
I am beginning to think that you are the Socialist. Either that or a hypocrite. I will let you decide.
Ron, you like to say that companies are operating on a razor thin margin so they have to take rate, change their models and screw with the rating process in order to succeed. How do you explain companies acquiring other companies for billions if they are hurting for cash? Travelers recently bought a Canadian company for $1.2 Billion. Hmm! I wonder how they could muster that up. By the way, I have talked to CEO’s and they agree with me that the process and complexity have gotten out of hand and they realize something must be done. Believe me that the free market is at work and I have to re-market constantly to keep customers on the books. When enough business is lost by a carrier, they finally wake up, usually when about a third to half their volume is gone. Free market Capitalism is still at work and the companies that take the smart approach will do well and the others not so much.
Agent,
I did not, :say that companies are operating on a razor thin margin so they have to take rate, change their models and screw with the rating process in order to succeed.” What I said is that companies need to charge as close to the correct rate as possible for the risk because they run on a razor thin profit margin. Running a razor thin margin does not mean that they cannot make a lot of money due to volume. However, when you do write high volume in premium, a slight error that impacts profit by less than 1% could cost millions.
You just love to use anecdotal evidence. For which companies do these CEOs work and what have they actually done? My guess is that they will agree with you to your face to keep you as an agent, but will do nothing about how they price their products.
In reality, CEOs just want to know what will create the most profit, period. They very rarely care as long as nothing unethical or illegal is being done that could harm the company’s reputation and/or bottom line. If you think otherwise, you are more ignorant than I could ever imagine.
Nearly all of those acquisitions are either financed or stock is issued. It is very rare that an acquisition is straight cash.
Ron, obviously you haven’t attended meetings between agents and company people. I have been in rooms of 150+ agents and 20 or so company people from every department. We cover all aspects of company operation, discuss what their plans are for growth and problems they have been having with their rating systems including models, filings, black boxes etc. In one meeting, before the question was asked, they admitted they went too far on increases and were re-tooling to get back in line with what the market was demanding. Believe me, it was not just about any new product offerings they were making. I like constructive meetings like that.
Agent,
Actually I have. Companies will NEVER discuss their rating models or black boxes with anyone outside of their company, especially agents. They are proprietary tools that require confidentiality to be effective.
The most they may say is that they will review them.
I can also guarantee you that if they did scale back their rates, it had zero to do with agent input or market conditions. They may have used that as a catalyst to take a second look, but even rate decreases need to be approved in most states. “Getting back in line with the market” is not an acceptable justification to gain approval for lowering rates.
Ron, if an actuary is called on the carpet by the Board and CEO to explain disappointing results and lost business by the company due to unrealistic rate increases and models, I think the actuary would be sweating blood and hoping he could keep his job.
Agent,
One other thing, I still want to know how you would price a product for which you do not know the cost. Would you just ask the customer how much they think they should pay? Should the salespeople determine the price?
One thing is for sure Actuary Ron, the model currently being used by many companies is the incorrect one to determine price. When you see 20-25% rate increases on good loss free accounts, you cannot justify it no matter what factors you think it deserves. When you have a company with historical growth patterns and only passing nominal increases in rate due to inflation on Replacement Cost or nominal rate increases in Auto, they tend to retain their business. We have always been able to sell small rate adjustments, but the kinds we see now are unsellable.
Tell me something oh smart one! Suppose you had 5 Standard markets and you put a customer in for quote on the PL rater and you got a wide variance in premium from the best to the worst. I am not an actuary, but I can quickly tell which company has the worst model which produced the worst quote on the same values and limits. Which one would you try to sell, the one with the highest rate model or the most reasonable common sense model?
Agent,
Do you realize that insurance rates are based on predicting future losses? If there is statistical justification to increase rates on a loss free account, and the state approves it, that is all that is needed.
Just as I would never make it as an agent, you would never make it as a product manager, actuary or company executive. There is nothing wrong with that, just the truth. Until you realize that the goal of insurance companies is not to get as much market share as possible, regardless of losses, you will never understand.
Please tell me, how many times you have had to present a rate review, whether to increase, decrease or maintain current rates, in front of an executive board including the CEO?
I have done 15 and all but 1 was approved by the board, and none were with feedback from agents. In addition, all lead to increased growth, retention and, most importantly, profits.
To answer your hypothetical, I would present all of the quotes with the pros and cons of each carrier and let the customer decide. What do you do?
The fact that you think the highest premium equals the worst model is further evidence that you have no clue about insurance pricing and rating models. There are only two factors to determine if a model is good or not, has the company met its strategic goals and profit. Everything else takes a back seat, including agent satisfaction. Sorry, but it is the truth.
Allright Ron! I agree with you 100% that you would never make it as an agent because you would be at a loss on how to explain to a typical customer the benefits of paying a lot more to have the same coverage. Sell that brand and hope it flies.
Tell me Ron, how does a company gain market share if they don’t have competitive products to offer to the public? Sure, they have to make a profit, but if their combined looks good, they should try to gain more market share instead of running business off by taking more rate. Some companies get into reserve issues and have to slow down for a while. One of ours grew 30% in 2013 and then slowed down and it was 3% growth in 2014. The problem arises that if the company doesn’t grow over a period of years, there is something internal going on like Fireman’s Fund and now they are history having been sold off.
Agent,
Now, will you admit that you would never make it as a product manager, actuary or company executive?
You asked, “how does a company gain market share if they don’t have competitive products to offer to the public?” Easy, they have no real interest in gaining market share in that particular market unless they can get the rates they believe will make them profitable.
How many times do I need to explain this to you? It really is not that complicated. Others seem to understand.
Did you even read my response? When did I say I was going to explain the benefits of paying a lot more. All I said was I would present all of the information I had and let them decide.
You never told me what you would do in your hypothetical situation. Would you just present the lowest price? Sounds lazy.
Ron,
I think most agents know your role and our role in the insurance pyramid. And we understand that pricing & regulatory issues are not our expertise. However, I’ve lost confidence in the PM’s that run some of these companies. We see rates all over the board for the same risks – all developed by what are considered to be bright people.
Yes companies can and will lose market share to restore profitability but the companies that have developed the best, most reliable models are winning the market share-profit battle. I think my aggravation lies in the fact that IA’s companies have done a poor job of dealing with price volatility over the years. Here’s my fear – if understanding and utilizing the data provides you the tools you need for pricing, then does SF, Allstate, GEICO & PGR have a competitive edge because they have more data than others? If so, that’s a concern. Happy Holidays!
SWFL Agent,
Thank you for the reasonable, thoughtful response.
I agree with everything you stated.
The only thing I would clarify is that it is not necessarily the volume of data, it is the model and algortihms that are most important.
Merry Christmas!!
SW, I wonder what the actuaries were telling Fireman’s Fund executives for several years running. Obviously, there was something wrong with the management including the actuaries. The result is belly up and sold off.
Ron, In my opinion, kicking a man when he is on hard times (credit tanks) only adds to the problem of the economy (less disposable income).
I have many insured who were once top credit score fall into issues. What makes them a “worse risk” one year to the next when the only thing changed is Job Situation/Credit worthiness?
FFA,
I hear that concern from agents all of the time. It is not necessarily kicking a man when he is down. If the probability that he/she will file a claim increases, shouldn’t that person pay more? Remember, insurance premiums are for future coverage, not past.
The simple answer is, data indicates as insurance scores decrease, claims go up. I know that is difficult to explain to your clients, but there does not need to be a qualitative reason, only quantitative.
Of course there are exceptions, but there are also 17 – 21 year old drivers who never have an accident, yet they will pay the highest premiums, all other factors being equal.
One other, very important thing to remember, insurance scores ARE NOT credit scores. Most, if not all insurance score models take payment history as the most significant predictor of future losses, followed by bankruptcies and judgements.
FFA, these actuaries looking into their crystal ball algorithms say that when the score falls, the customer will just have accidents and file claims in the future so they must pay a higher premium. With the economy being what it is, I would venture there is a pretty significant amount of the population who have had their score deteriorate. By all means, let’s charge them more for their Auto & Home. They deserve it, right?
Agent,
I know you are being somewhat sarcastic. At least I hope so. But just to put your mind at ease, the crystal ball MUST be approved by the state. If you have such a big issue with it, contact them.
In addition, should someone who files more claims pay more? Or are you for better risks subsidizing poor risks?
As I have stated many times, if insurance scores, which are significantly different than credit scores, do not work, why do nearly all insurance carriers use them and nearly all states have approved the use of them to some degree?
Serious question. Do you have a contract with any carriers that do not use insurance scoring?
I don’t fully understand why the relationship between bad payers and claims. I see it in my agency. When we need to send the reminders on a regular basis, we end up with claims on them accounts. I can see that.
What I don’t understand is why credit is factored into the Insurance Score equation. I know you work in a different side of the biz then do I. I am sure you have all the stats at your finger tips.
I just don’t like it.
FFA,
You nailed it on the head when you said, “When we need to send the reminders on a regular basis, we end up with claims on them accounts.”
As I have stated, and I understand it is not the clean answer you or other agents like, insurance scores are the most highly correlated factor to ftuture losses that has been discovered and proven. Anyone can pontificate on teh excat reason why, financial hardships encourage people to use insurance claims to help generate income, people who have difficulty paying bills are more likely to file a claim for a loss that htye normally would just pay out of pocket, fraud, etc. Unfortunately, there is no right answer. The fact remains that less than 25% of insureds pay higher premiums due to insurance scoring. I have seen studies that show up to 60% pay lower premiums due to insurance scoring.
Basically, this allows for less subsidizing poor risks by better risks. Unless you are a Socialist, and I know that you are not, you should like this.
Well said Ron. Without detailed rate segementation to tailor the rate to the individual risk, you end up with rates that are not equitable and lower risk individuals have to subsidize the high risk. I had to laugh at the use of insurance pricing buzz terms in this article because it is clear that the folks aleging the misconduct don’t have a clue what they mean!
YEP, Isn’t this the OBama Way?
Ron, I agree with you that free markets are at work. If a company’s rate is not competitive, then so be it. What I have a problem with, as an agent, is when a carrier such as Travelers comes in, and says, “No matter how uncompetitive we are, YOU WILL write XXX numbers of policies per month, or off with your head!” This is not a free market approach, that is pretending that you are a captive carrier approach.
I agree agent14. We have been in several meetings with Travelers. They thought their brand would sell itself no matter what they were charging. We gave them proof and they still didn’t get it for 5 years. They lowered commission on stand alone home and their auto market wasn’t competitive so we couldn’t bundle. Now, they have awakened to some degree by coming out with quantum 2.0 Auto which is better priced, but we had to take a hit on commission to get it. The home has improved a little and they do have better companion credits now so they stopped the bleeding some.
agent14,
There is no way I can or will defend Travelers or any other carrier who would take that approach. That is a whole different issue.
Ron, well played. When it comes to touting the free market system, the position of Travelers is Indefensible. Just my .02 cents. I hope Travelers’ new way of doing things is a complete failure.
Let’s face it, Travelers is the pits. They’ve come in swinging their big di*k around one too many time for this agent. We find we don’t need them and have said good riddance. There are plenty of good carriers out there without the red umbrella.
BTW, I assume all this “black box” talk is about personal lines as I don’t see this with commercial lines. To answer Ron’s question of how much to charge if you don’t know the cost, I loss-rate my large accounts based on their historic history to come up with a target premium. I usually get what I need doing it that way. But it has to be fairly large to do that.
Libby,
My posts have been solely based on personal lines because that is my background. I am not familiar with commercial rating. However, I would imagine there are a lot of similarities between personal lines rating and small and middle market commercial just to be able to obtain enough data.
Ron, your background under Personal Lines bears little resemblance to Commercial Lines. There are few similarities. Commercial Lines has flexibility, Personal Lines, it has to fit in the same little box. We have plenty of data on our accounts in our operating system since most of our accounts have been with us for a long time. We can pull Loss Runs on any of them, see what kinds of losses they have had and how much they have paid in. Most of ours have under a 20% Loss Ratio overall and that is a real money maker for us and the company.
Good comment Libby. On Commercial Lines, all an agent has to do is compile premium paid over a period of time vs Losses over the same time and the resultant excellent Loss Ratio. A company contemplating a rate increase tends to back off their increase if they are presented with the facts. Commercial Lines is always more negotiable than Personal Lines which is that nasty black box and some actuary trying to get increases across their entire book with their so called model.
That’s true, Agent, but it’s more than just looking at the loss ratio. It’s calculating an accurate loss pick and then building in expenses to come up with a target premium. It’s taking into account that insured’s have no control over a carrier’s LAE expenses and removing them from the equation. It’s about a solid claims management and loss control and prevention plan. Then it’s getting the underwriter to agree with your numbers and methodology to get the price you need. It’s not possible to do with your slot-rated small business or these young, by-the-book underwriters just out of college. You need a national accounts underwriter, which means a large account with credible data. But that’s where I thrive and have the most fun in this incredible business of ours.
Libby, I have had a lot of luck with underwriters who are not national accounts underwriters. Small and mid market underwriters can also be persuaded in most cases. Of course, if the account has had losses and the loss ratio is not wonderful, we do have to work with the accounts to step up their loss control efforts to identify problems of the operation so they can recoup their better pricing in the future.
A Blue Moon Tonight…
Its gonna be a good year. Saw a good concert on Sat Night. Wake up to find Trestman & Emery fired by the Bears. Now Agent & Libby are agreeing on something… Whats next??/ Stan Gets a job? My kids grow up?
I can just feel it. Good Things happening… 2015 Rebound year!!!
Good one FFA. Yes, Libby and I agreed on something for a change. 2015 is shaping up nicely. We have a new Congress coming in to stymie the pen and the phone and start passing meaningful legislation that will help the country.
@Agent or @SWFL agent-you might not like it, but Ron is right.
The use of predictive modeling is really nothing more than the use of tons of data that insurers can extract from their own records at a cheap price on their own data to improve their own results. its really nothing more than an extension of rating algorithms that you might have worked with years ago when carriers encouraged agents to rate their own insureds.
What makes it hard to understand if you are on the outside looking in is that there are now so many different risk variables that you can never point to 1, 2 or even 5 as to why a price moved up or down.
For instance, you mention a loss free insured getting a +20 some odd % increase.
Ok-for personal lines and for small commercial, prior loss experience is not always a predictor of future loss experience simply becuase there is no credibility in that particular insureds results pointing forward, but there is when you bucket 10’s of thousands of different insureds with similar credible risk bearing characteristics.
Insurance companies know for instance, how many fires they will have on their book, but they never know which ones, because fires tend not to happen over and over for one insured but will for an insured with similar risk characteristics.
Now, I wouldn’t mind seeing price optimization because ultimately it will lead to lower prices for an insured much like we as consumers benefit from lower airfares-and airlines do practice price optimization-thats why you’ll see a sale on fares from Southwest for instance-airlines are an unregulated industry where you can’t do it in insurance as our regulatory scheme is based on patterns and practices that are a century old if not older.
You might be interested in knowing that in countries like the UK, the price for auto insurance changes every day-its a market that is much less regulated and consumers benefit.
I would think that you should learn more about the technology and understand it better-its not evil, regardless of what the CFA might say.
I appreciate your comment nuff, but these newer versions of predictive modeling are flawed and the geeks that are doing it are ruining the market. They are doing this across their entire book for both HO & Auto without regard to whether it is fair to the insureds or agents. This is how they are running good business off. Please tell me if you have seen any customer receive a lower cost due to Predictive modeling. I represent 5 major standards and haven’t seen one yet. On airlines, really? Was predictive modeling used to charge bag fees? Since fuel has gone down, I haven’t seen any charging less for fares.
I could really care less what the UK charges for Auto insurance. I care about what is going on in the US. I don’t think the UK would be the country to model anything after.
@Agent
Interesting comments.
Would you make the same comments about airline charges after knowing that fares are 2/3 lower-including baggage fees on an inflation adjusted basis since Pres. Reagan deregulated their airline industry? Wouldn’t your clients like to see the same thing?
Likewise, I raise the UK model as their insurance industry is by and large unregulated. There is a variety of coverages available at a wide variety of prices. Wouldn’t your clients like to have a wider variety of choice?
I would also challenge your statements that the models are flawed. How so? I would tell you that companies that use predicitive modeling are able to segment business better than those who can’t. That allows them to select better risks than their competitors which ultimately allows them to have lower rates. There is a reason why Geico or Progressive will show you competitors rates-they have figured out based on their data, that those risks whom the competition is lower than them, have a higher risk of loss than the price will support. Hence they WANT that carrier to take that risk-because they will bear those losses and then have to raise their premiums even more, making them less competitive causing the death spirial.
When I started in the business I worked for my father who was an agent and my mom who was a csr-back in the 70’s and 80’s, there were a handful of factors that could affect price of a policy whether it was personal and commercial lines. It was relatively easy for an agent or principal to explain price changes as carriers tools for accurately determining price were crude and not always reflective of risk.
Modeling takes a huge step in the right direction as it ties risk to price in a more segmented fashion.
The problem from your perspective as an agent is instead of a handful of metrics-number of citations, age, number of miles driven, and zip code, now there are literaly hundreds if not thousands of univariates which interact to create a fairly customized price.
So when the price for one of your clients changes and in your mind or the insureds, nothing has changed, then your job just got harder because you are having to try and sell that client on why they should stick with Brand X or you have to remarket them and then you have to convince them to now go with Brand Y.
I get it. Your job just got harder and I bet you’ve been doing this for a while-I know as I’ve been a lifer in insurance-going on 34 years so I get it.
But if you want to keep working in insurance until you retire, you should take some advice-quit crying about the changes you don’t understand and learn as much as you can so that you can keep your clients informed-otherwise they won’t see your value and you’ll lose.
And I’m not being mean or cold. There used to be tons of folks who worked in insurance who no longer work in the industry because they couldn’t adapt and change-think policy typists or rater/coder/entry clerks for instance.
So as long as you cling to your definition of “good business” which is rooted in thinking that is 30 years old, then you will see your business and livlihood dwindle.
nuf, I hate to disappoint you, but our agency business isn’t dwindling as you put it. The key to our success is representing a number of markets so we can remarket business to companies who haven’t gone overboard on the predictive modeling that demands so many factors to raise customers premiums. A few of our markets are on the downward path losing customers, but the common sense markets are on the upswing. I have been at this for over 30 years and have seen all the ups and downs in the market place, soft & hard.
We have seen all the tricks carriers like Progressive & GEICO uses to lure customers to them. They quote an account blind without reports and make the premium look attractive to the customer, then when the reports are run, it is higher than we offered. They use deceptive trade practices like Flo telling the customer to pick their own price. I have seen it all. By the way, we expect to earn contingency with most of our markets, Personal & Commercial due to our excellent loss ratio and growth.
Hey Agent
If you hate to disappoint me, then why, oh why do you continue to do so with each and every post.
Your business may or may not be dwindling-unless you want to share financials then its a moot point, but it is a bold statement from a random poster who may or may not be an agnet much less an agency principal and for whom you are requesting blind faith.
What is true however, is the market share for direct writers has increased over the last dozen years, taking it away from both captives and IA’s. If I recall, IA’s have about a 20% market share of PL here in the US.
I’m not going to go any further without wishing you a Merry Christmas btw, so I’ll include that here.
I would like to know from you, which carriers you are referring to who are “common sense markets” who “haven’t gone overboard”. Then based on that,lets compare their results with the markets who are actively using modeling for PL and Small Commercial-and another btw, I think that modeling doesn’t work with high net worth PL and Commercial business over a threshold of roughly $50k-for both of those buckets, there is more heterogeneity in exposures-modeling works with fairly large groups of homogenous risks.
So anyway, how do you feel about doubling down on Christmas Eve there dear agent and coughing up some real facts to back up your words as opposed to what you’ve been saying so far?
Hey nuf, how about answering a compelling question for me instead of droning on about how IA’s and captives are losing business. Do you think these direct writers have built in algorithms to quote customers blind without running any score reports?
Another thing I have seen is penalizing seniors age 60-70 on score even though many seniors have paid off homes, no debt whatsoever. Suddenly, they deserve higher rates on the predictive modeling even if they haven’t had a claim for 10 or more years. They tend to go up on tier rating just because of age. Sounds like discrimination to me.
Agent,
I know you do not like it when I address your questions to others, but I believe I am more qualified to respond than another agent.
Direct writers, like most captive and independent agency carriers, offer quotes and will bind based on the insured’s and agent’s word. Please name one carrier who runs reports prior to binding. This is common indutry practice due to the high costs of running MVRs and CLUE rports.
Regarding the penalization of seniors through credit. Do you realize that insurance scores are not the same as creit scores? They do not take income, debt, or credit inquiries into consideration. Most are based on payment history, default judgements and bankruptcies.
Finally, insurance does discriminate. Yes, you are willfully selling a product that discriminates. Don’t believe me, try changing the age and or gender of an insured for a quote and see what happens.
Ron, you are talking all around the subject without saying what I am asking. Let me put it another way so you will get it. How do you use your algorithms to price a product to a senior whose income has fallen some due to retirement and living on retirement income, Social Security etc? The senior has no debt, pays his bills up front with a perfect record and still gets a rate increase even though there are no claims. This is a big fallacy in score rating.
By the way, how does your system account for the millennial crowd of age 25-35? Did you know that many of this generation think it is ok to talk and text and drive? That may be almost as bad as DUI driving since it is so distracting. I see it all the time when I am out driving and they are so addicted to that phone, they have no idea of anything going on around them. Please explain your algorithms on that issue.
Agent,
I have no idea how to answer your question to your satisfaction. These are not my algorithms. I had no input so I cannot comment intelligently on them.
There is no way for me to know why these perfect seniors are getting a rate increase. My only guess is that the carriers who are increasing their rates have filed for a rate increase for that age class. If that is the case, talk to your marketing rep, then the state to find out why they approved the rate increase.
Can you prove that it is their insurance score that is causing the rate increase? If not, stop making baseless accusations.
Every time you post something in regards to insurance pricing, you show more ignorance on the subject. You want everything to be clean and easy. Well, it is not.
I agree 100% with you regarding the dangers of texting and driving. Do you think it is only the millenial crowd that texts while driving? Do you think everyone who drives drunk is caught and has a DUI/DWI on their MVR?
We account for texting and driving exactly the same way we account for DUIs. If they get convicted and it is discovered on an MVR, it gets evaluated. How that conviction is weighted is determined by each carrier separately. Some may weigh it more heavily than others. It is called the free market.
It’s really not that complicated.
Ron, if it isn’t that complicated, why did you devote 6 paragraphs to it. I thought you were one of those geeks that presented algorithms to the executives of the company and only had one turned down over the years. By the way, applying for a state wide increase with the state is a whole lot different than the predictive modeling going on within the company in those dastardly black boxes. That is something the state knows nothing about and as you say, it is proprietary information that is closely held by the company.
Agent,
First, I did not dedicate 6 paragraphs to it.
Second, if you think needing only 6 paragraphs to explain a topic makes something complicated, you must have a 3rd grade education.
Finally, until you actually work with and undersatnd predictive modeling, please refrain from making comments. I know it is complicated to you and you do not like to discuss insurance and how it is priced with your insurance clients. You sound much more like a lay person than an insurance professional.
Trust me, the state knows about their predictive models, what data is used, and the algorithms used. Thety may not be able to disclose that information to the public, but they know.
You still have not answered my questions about insurance scores:
1. Should someone who files more claims pay more? Or are you for better risks subsidizing poor risks?
2. If insurance scores, which are significantly different than credit scores, do not work, why do nearly all insurance carriers use them and nearly all states have approved the use of them to some degree?
3.Do you have a contract with any carriers that do not use insurance scoring?
Ron, Do you have demographics on the texting & drive issue? Age groups? Population Density? Speed at impact?
FFA,
I do not have access to that information. My past experience is in product management and pricing, but I am currently a broker.
Ron, you sure like to pontificate and drone on about subjects you don’t understand. How can a “Broker”, who is probably wholesale hope to know what is going on in the world of “Predictive Modeling”, Black Boxes, arbitrary rate filings score retooling, re-tiering, Replacement Cost manipulation etc?
Regarding your questions: 1. Yes, I do think people that file claims should pay more. The problem is that people that do not file claims are also paying more because of “Predictive Modeling” scenarios. 2. I have not been a big fan of Insurance/Credit Scores determining price of the insurance product since there are holes in it like the Senior population whose score declines some due to lower income after retirement and these people have very few claims and pay their bills and don’t use much credit. They get penalized and the younger set up to their eyeballs in debt, using credit cards etc often have better scores. 3. Yes, all my carriers use score, some weight it more than others. Did you know that the Hartford AARP program is typically much lower than other standard markets in Auto for retired persons because they use a different Predictive Modeling algorithm and it is a very lucrative book of business for them.
Ron, I know of a smaller regional carrier based out of Wis that don’t do credit scoring. That’s their main draw. Their cash cow is the bar scene & adult entertainment venues, but their personal lines rates are generally better then the main players. They do attract the lower insurance scores, but they do it profitably at a better price. Claims is spot on the industry norm.
FFA,
Good for them. If they are truly successful rating without insurance scoring, by growing profitably, then others will eventually follow suit. That is how the industry works.
Can you provide thwe name of the carrier? I would be very interested to see their written premiums, growth and loss ratios over at least 5 years.
Badger Mutual. Small tight regional.
FFA, I have one called National Lloyds which has been around for eons and they don’t do credit scores either and have been very successful in their niche. They do mostly smaller homes, a lot of rental dwelling business. We write a fair number of Hispanic business with them and those people don’t have any score at all. They don’t believe in bank accounts either and pay their premiums in cash. They hardly ever file a claim so the business is lucrative.
Agent,
Please dispute the facts I have presented to prove that I do not understand what I am talking about.
As is par for the course for you, you missed the part where I stated I have past experience in product management and pricing. In addition, I keep up on the information. So I do have expertise in the area of predicitive models. I can also state with complete confidence that there are no such things as arbitrary rate filings score retooling. I am not even sure what that is. All i know is that “arbitrary” is NEVER acceptable in a rate filing.
You stated, “Yes, I do think people that file claims should pay more.” Therefore, since insurance scores have been PROVEN to be the most highly correltaed factor to future losses, you should be in favor of their use.
In addition you stated, “The problem is that people that do not file claims are also paying more because of ‘Predictive Modeling’ scenarios.” Unless you know the algorithm and data going into the predicitive model, you cannot make that statement with any level of accuracy. Have you ever had a client who filed a claim for the first time? They never had previous claims. How do you price a product for which you do not know the total cost?.
If you knew anything about insurance scoring you would know that income is not factored in. How would insurers obtain this information? If you have a client whose rate has increased solely due to re-tiering based on a change in their insurance score, file a complaint with the state. Most, and likely all, states only allow insurance scoring to be used at new business. If this is not true in TX, please let me know and provide your source. Instead of complaining, why don’t you start acting as an advocate for your clients.
There are holes in EVERY rating/underwriting factor. Not every 17 year old male is a poorer driver than every 50 year old woman. Not everybody who causes an accident will cause another. Not every person that drinks and drives or texts while driving will cause an accident. Nothing is perfect.
Since all of your carriers use insurance scoring, what does that tell you? It should tell you that IT WORKS. If it did not, you would have at least one who doesn’t and they, based on your statements, would have all of the good risks.
Good for AARP. If that is their target market, then they are using predicitive modeling correctly. Believe it or not, many carriers are shying away from seniors based on poor claims experience. That is just the free market at work. Stop complaining you Socialist!
You are the type of person who claims to work hard, but complains every time you need to work hard. Maybe you start selling vacuum cleaners door-to-door. At least you won’t have to deal with predicitve models.
You are right about one thing Ron. The system is not perfect and is basically imperfect with the information used to develop the price on any given customer. When a company wakes up and finds they are losing business because of flawed predictive modeling, they charge an actuary to start running numbers again and start tweaking it to a more fair system. It took 5 years for Travelers to awaken from their slumber and realize what they were doing was wrong for the market. I wonder how many actuaries they went through before they realized their errors.
I see I have you frustrated now since you are resorting to name calling which is a common trait of left wingers. You don’t recognize any problems the retail market is going through, it is all about the score and the algorithms and by all means, let’s not use any common sense in the insurance industry. You would not have lasted long in the real world Ron.
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Ron, I do know enough about insurance pricing to know it is out of whack and out of control. If it were done correctly, there would be more common sense to it instead of just crunching numbers and incorrectly applying unjustified rates. Some of our carriers have admitted they went too far with the modeling and are seeking to back off some so they will remain viable in the marketplace. I don’t think I am anywhere close to being a Socialist in insisting that companies do the right thing for my customers. You, on the other hand think an agent questioning the companies modeling is wrong. By the way, if you have made it in the real world, how come you still don’t pay Federal Income Tax and I continue to support you with mine?
Agent,
You still have not answered my question. How you would go about pricing an insurance product so it is not overly excessive, adequate to pay claims, and not unfairly discriminatory. I would love to hear your “common sense” approach to pricing.
What makes you a Socialist is your desire to remove a free-market based solution to help companies become competitive and target whatever market they desire. You may not see it that way, but removing predicitive modeling and insurance scoring would do exactly that.
If all you know about insurance opricving is that it is out of whack and out of control, you know NOTHING about how insurance pricing is established. You rant like a lay person. Please try to act like an insurance professional. Maybe you should work for a consumer watchdog organization. They do not know anything about insurance either.
If the only criteria in your mind for making it in the real world is to pay Federal Income Tax, which I have in the past, you have a twisted world view. I am married with 3 children, own my own home, send my children to a private Catholic school, saved money toward retirement, the only debt I have is my mortgage, and I have done all of this on a single income with no help from the government or you. If that is not making it in your real world, then fine. I would not want to live in your world anyway.
If income is not factored in, why do we need SS#’s.
FFA,
Social Security numbers are used to find credit reports. The data from those, payment history, judgements, bankruptcies, etc., are then inputted into a conmpany’s insurance score model. Credit reports tdo not include income and insurance companies cannot obtain tax filings without permission.
Hi FFA, I hope you had a good Christmas as I did. We look forward to a much better 2015.
I saw a great political cartoon this morning. Picture Obama standing at a podium.
He said: I have a plan to help the unemployed during these tough economic times. If you like your unemployment benefits, you can keep them, PERIOD!
FFA, did you see the latest AP article titled Fewer Americans have a sense of Duty? Interesting that they conclude that the sense of duty is lowest with the young. Adults less than 30 were much less likely to vote, volunteer, keep informed or even speak English. Only 37% think it is important to keep up with issues, down from 56% in 1984. They have been dumbed down by the educational system and could care less what is going on in the world. Many have been brainwashed by liberal professors in school and just have an ideology drummed into their head. Does that sound like some we have seen on this forum?
Thanks Agent. I hope all was well on your end. My fav present was getting my mom out of the Nursing Home and to the family X Mass Dinner.. She is fading and don’t think she will be around for next X Mass. She has surprised me with her health in the past, so….
I started gong back to church and my 10 yr old gr son been going with me. Amazing the comfort I have been finding..
My favorite present was on Sat Night. Me & the wife got to see the BoDeans again. You should be familiar with them as they come from your neck of the woods.
This one sums it all up:
https://myspace.com/bodeans/music/song/hand-in-hand-31052241-31502335
Ron, as usual, you have it all backward. Socialists, like the one we have in office currently are the ones who like to mandate, order, control the marketplace and in the case of actuaries, impose unrealistic algorithms to raise premiums with their company’s products which drives business away from them. Then, they act shocked that their formulas did not work and have to go back to the drawing board to re-tool. If a company does not listen to the market and agents, they are asking for big trouble. Ask anyone from Travelers how it worked out for them in the past 5 years. They showed a lot of arrogance like you thinking they could impose rate increases ad nauseum and the others would just follow like lemmings. Didn’t work out so well.
Agent,
Is the government mandating the use of predicitive models, insurance scoring, re-tiering, replacement cost manipulation, or anyhting else for which you are complaining? If not, then your are the Socialist who wants these free-market practices to stop.
Should the government step in and stop these practices? If yes, you are the Socialist. If no, then how do you stop them?
You still have not answered my question. How you would go about pricing an insurance product so it is not overly excessive, adequate to pay claims, and not unfairly discriminatory. I would love to hear your “common sense” approach to pricing.
Ron, you complain that I don’t answer your questions and if you bothered to read the prior posts, I did and even numbered them. Who has a lack of reading comprehension. Also, you have admitted in the past that you were part of the 47% who did not pay Federal Income Tax. Now, you are touting your success in the real world. Which is it really?
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Believe it or not, most carriers shying away from senior business are shooting themselves in the foot with their flawed modeling schemes. Hartford is laughing all the way to the bank. Oh brilliant one, recognize it or not, the population of this country continues to gray and companies that get their house in order and stop penalizing the senior crowd will do well and the others not so much. This is a huge market and it will be bigger in the next 20 years.
Agent,
Why do you care who wants to write seniors and who doesn’t? Shouldn’t each carrier be allowed to determine their own target market, even if it is to their own peril? I thought you were for the free market.
If that is the “golden egg” all other carriers will adjust their models and begin to follow suit. nxt to the NFL, insurance is the ultimate copy-cat industry.
Ron, I want my carriers to treat the Senior market right and also be able to compete with the Hartford/AARP market and not lose any business to them. Believe me that my markets have all heard from me on this subject. I can’t believe you said – why do you care who wants to write Seniors and who doesn’t. Are you crazy or just stupid?
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FFA, I saw a good article on Prop/Casualty 360 which listed 10 reasons for accidents. Texting while driving was above DUI in causing accidents. 44 states now have Texting Laws and fines are heavy and possible loss of license in some. Every single state should have these laws on the books. The cell crowd is out of control and are much like Alchoholics thinking they can handle it.
Agent,
Why can’t you stop pushing for more laws? I want less government, not more.
You are an actuary and you are in favor of less safety by penalizing texting drivers? Be careful on the way home Ron, texting and driving is a very dangerous thing and you might actually run over an innocent driver or pedestrian.
Agent,
When did I ever say I ma or ever was an actuary?
What I care about is freedom and liberty from an oppressive government. Yes, sometimes that means bad things happen because not all people are responsible. However, I will take that over more laws and bigger government any day.
Besides, aren’t you one of the people that says criminals do not follow laws when some people push for more gun control laws? What is the difference? Do you think people will stop texting and driving because there is a law against it? Do people not speed, run red lights, drive recklessly, etc.? There are plenty of laws against that those. You are so naive.
Ron, if what you care about is freedom and liberty from oppressive government, why did you vote for less freedom and a more oppressive government? How can anyone be that stupid?
Good for you FFA. I am glad you had a great family dinner with your mom. We treasure our parents and every moment we can spend with them. I lost both of mine some years ago. My mother had a bad stroke and was basically comatose for the last 6 months of her life in a care facility. That is no life at all and when she passed on, it was a blessing. Glad you are back in church. We find a lot of comfort with our church as well. No matter what the world throws at us, God is in control and it will be all right in the end. What do those atheists have to look forward to?
Wake up Ron and smell the coffee. You are the one who has no clue about the real world. There is a big change coming in this country and you had better get on board or you will be left behind. Progressive politics were soundly rejected in the mid terms. The Blue States are in trouble and it would be good if you recognized it.
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So your blood pressure shoots up to a new high every time you read my post, right? I don’t fit your little algorithm box and it frustrates you, doesn’t it? Ron, you can’t see the forest for the trees. I don’t expect you ever to get on board because you are committed to the Progressive cause and according to you, they are doing the right thing for America. You also misinterpreted my statement about change that will be coming. Your reading skills are lacking to say the least. The change I was talking about is good change. The country turned red overnight, both houses of government changed out, Obama is a lame duck. That is a good thing. Perhaps it is you that should consider moving if you don’t like Republican governance. Do you want to know the exact date? Let’s start with 01-06-2015, the date the new Congress will be sworn in. It will take some time, but 2015 promises to be exciting.
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I also take great joy in seeing you make a fool out of yourself Ron. There is not one company who would be in business without someone selling their products. Your arrogance is amazing. To not listen to the market or agents and get input is just like an actuary who has no clue.
You will never be on board as long as you like Progressive governance. We have seen enough and made better choices in the last election. We have about 745 days left in Obama’s term and it can’t come soon enough.
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Ron, following are some interesting facts provided by Prop/Casualty 360 on what the companies do to price Homeowners coverage. Put these into your algorithm pipe and smoke them.
1. Pets – Does the prospect have a vicious breed dog?
2. Credit Score – Big factor on price
3. Location – Where is the property? Is it in a higher risk area?
4. Trampolines – Trampolines are a no no for a lot of markets. The ones that take them require all kinds of extra padding and nets.
5. Swimming Pools – Can be a hazard, particularly if you have kids around and there are parties etc.
6. Fire Protection – What class of fire protection is there? Hydrants within 500 ft, distance from fire department, volunteer or full department?
7. Poor maintenance – Peeling paint, shingles missing from roof, trash in yard.
8. Weather preparation. Will roof and structure stand up to higher winds? House on slab or Pier & Beam?
9. Claim frequency – Clue reports are invaluable for reported claims. Even if nothing paid due to deductible, frequent claims are an issue.
10. Neighborhood Crime – Break Ins in some areas are a problem.
I am not sure how the algorithms account for all these issues.
Agent,
Why are you telling me what I already know?
I thought I would pass some useful info on to you since you know so little about the insurance marketplace.
Agent,
Thank you for wasting both of our time.
You are truly a uselss, condescending, pompous ass!!!!
Really Ron? If agents were not out in the real world finding and writing business, you would not even have a job. How long would you keep your job if business was not sent in to write.
Agent,
I never said companies did not need agents. My exacct words were, “I already conceded that companies need agents.” Did you miss that part?
Now, will you be a man and apologize for misinterpreting my post as I did?
I could market directly to clients to provide insurance. As I said previously, GEICO is doing quite well with very few agents.
How would you have a job as an insurance agent if there were no insurance companies? Maybe you could work in the oil fields.
Agent,
The following from your list are rating factors, but may also be underwriting factors:
Credit score, location, fire protection, and claim frequency.
The following are underwriting factors only:
Pets, trampolines, swimming pools, poor maintenance, and weather preparation.
Do you know the difference between a rating and an underwriting factor? Hint: underwriting factors do not impact the price.
You just cannot leave it alone Ron. Three posts for every one I make, every one of them an insult. I would like to see you market direct Ron. Your close ratio would be almost nil since you don’t have people skills. That is why you would never make it on the street and your employer would say, sorry Ron, we are in the insurance sales business and you haven’t produced anything. You can’t talk down to people and get their name on the dotted line.
Agent,
You have posted 44 messages and I have posted 40. Please tell me how that equates to 3-1? Your prro math skills are almost as bad as your reading comprehension.
I have alreeady conceded that I would not make it as an insurance producer/salesperson. I know too much about insurance and enjoy educating people. I have learned that salespeople just throw out word tracks to get the sale and that is what the clients want.
In addition, I enjopy what I do, make good money, and work standard hours so i can be with my family.
You would never make it on the comapny side because you have very limited knowkledge of the insurance mechanism, underwriting and pricing.
We all have a role and it works becasue people like you sell what people like me provide. If we switched roles, we would both likely fail.
Tell me Ron, have you ever made a presentation or sat in with a sales pro on a presentation to a client? I kind of doubt it, but if you did and the sales pro just threw out word tracks to get the sale, they weren’t very professional. I go over my proposals thoroughly and listen to the prospect and answer their questions about coverage, offer alternatives, extension endorsements etc. It seems to have worked well for me for many years. There is a good reason why you are not in front of the public. You just don’t have the people skills. It shows with every post you make and every insult you make with me.
Agent,
I have sat in front of clients, given presentations and sold policies. However, it just was not my cup of tea.
I applaud you for doing your job the correct way, but you are more of the exception than the rule, from my experience.
You still have not answered my question, “Why do you feel the need to continuously like your posts and dislike mine? Nobody else is reading our conversations. Are you really that insecure?”
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So Ron, in your experience as you say, I am the exception to the rule for agents. Did you criticize the agent you sat in with after he glossed over the details of coverage? I am sure you made a friend for life after that. If you sold a policy after giving a presentation, I would have liked to be a fly on the wall for that meeting since you do not have a sales personality. Obviously, it wasn’t your cup of tea as you put it.
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Apparently someone is or fake Ron wouldn’t have posted his diatribe.
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By the way fake Ron, you taking Ron’s word at face value doesn’t say much about your IQ. I have verified that companies using the new models, black boxes, rescoring, tiering upward was flawed and many are walking them back because they went too far.
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I sent the article to nationwide (http://www.npr.org/2015/05/08/403598235/being-a-loyal-auto-insurance-customer-can-cost-you)
They sent me this back:
There is not truth to this article. Most of these are to get you to click on a link and they sell your info to telemarketing companies that sell leads to insurance agents. Anytime you read something about .. ” your insurance company does not want you to know” it is not true. There is another one out there that we see all the time that your insurance company does not want you to know that there are discounts that save your money if you don’t drive far or have low mileage. Most of the newer policies out there do not even offer any mileage discounts it is just a flat rate. The product you are currently on does allow us to offer discounts fro how far your drive, but since 2009 we do not include mileage as a rating factor in any of our newer products. We have the truck as work and the car as pleasure.
The reason insurance rates are going up are due to claims and lawsuits. I have seem 2 situations were clients have bumped someone in a parking lot and only $500 of damage on the cars and they party says they were injured, gets an attorney and sues fro $25,000 of medical. Also, there is a lot of fraud out there too. We have see people turn in Towing/ Road side assistance claims that total more that the premium of their policy. We cannot cancel the policy until the end of the 6 months so we have to keep paying until we can get them off the books. Those are just a few examples of thing we see. Insurance was supposed to be to help when there was a catastrophic situation, but many turn in claims for $700 and they have a $500 ded. Used to people would pay for small claims like that. Recently, Nationwide cancelled a client of mine- they called to inquire on the rates to see what we could do and when you move to a new product you adhere to the new rules. So the husband had 3 accidents and the daughter had 1 and now they are going from $233 a month to $503. If he would have stayed on the old product 1 of his and his daughter’s would have been forgiven and the fender bender forgiveness would have kicked in so he would not have been cancelled.
All that being said… Over time the insurance companies will come out with new products to try to gain market share by attracting new clients. They usually go into the market at a lower price then they start to raise the prices on that product. Nationwide has had 4 product on Auto, 3 have come out since 2009. That product is the highest priced product we have on the books so we do try to roll those clients to newer less expensive products if they qualify and if it is actually less expensive. That is not always the case.
You are on the original product that Nationwide has had since the beginning of time. I personally am still on that product too. The benefits you have on this product are the preferred customer/Long term policy holder status. Motor Vehicle reports are only ordered once every 3-5 years. where the other products run the Motor vehicle report once a year. It includes Accident Forgiveness -which gives each person in the household 1 accident every 5 years with no rate increase that is built into the policy. All the new products you have to pay for that feature. You have Fender Bender Forgiveness- so if you have a minor accident that the damage is less than $1250 we will not raise your rates or count that against you. You have Auto Insurance Guarantee -as long as you maintain a valid driver’s license and your account is in good standing you will be offered coverage with Nationwide. Pet Insurance- If a customer’s dog or cat is injured in a accident that is covered under a Nationwide Collision Nationwide will pay up to $500 for vet bills related to the injuries from the accident. Car Key Replacement- I you carry Comprehensive coverage , Nationwide will pay up to $400 to replace the customer’s key if lost or stolen/ or electronic car entry devise. You may not need or be interested in these, but all of these are included in your current policy at no additional cost and they are not available in out new product.
Now I did check out most recent product for you and it would save you some money, but you will lose all the above features so if you would like to do that we can save you $304.80 per 6 months. We are more that happy to write the new policy for you, just know that is takes an average of a 5% rate increase every 6 months. So that you will be looking for that increase and they we did not disclose that to you.
I am glad that you reached out to us to check on these items. I hope that all of this information has been helpfully. Just let me know what you would like us to do. I will be out of the office starting this afternoon until Tuesday after lunch.
Have a great Holiday weekend. I look forward to hearing back form you.
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I am paying $150.00 a month.
Pretty good post gz. Nationwide is not on your side.