Yes, rates went up 2% – 3.5%. Of course, all of the claims drivers such as medical costs, auto repair costs, home repair and rebuidling costs, etc all increased by more than 3% making it harder to make money writing these lines. Something to remember when talking to your clients.
Do you even know the difference between a rate increase and score rating, re-tiering and Replacement Cost guides?
I am still waiting for you to answer my question from a separate article:
How you would go about pricing an insurance product so it is not overly excessive, adequate to pay claims, and not unfairly discriminatory? Don’t forget to cover administrrative costs, agency commissions and a profit contingency. In addition, make sure each insured pays the proper premium for the risk that they present to the carrier.
Part of the problem is that consumers don’t understand that the primary factors that drive insurance costs – medical, legal, and home & auto repairs – are increasing at a faster rate than other areas. They see big screen TV’s and other consumer products going down in price but insurance can’t be “built” or mass produced in China like other products. No real economies of scale with insurance except for data collection and evaluation. I’m tiring of answering the question – “when are my rates going to go down?”.
Well, gasoline has gone down due to the war with OPEC and Saudia Arabia keeping production up and increased activity for oil and gas in this country. Too bad it doesn’t work with insurance because of inflation etc.
Wasn’t $5 per gallon gas one of the predictions of the right if President Obama was elected in 2008 then re-elected in 2012? I believe they also predicted 10% unemployment, negative GDP growth, increased spending, higher taxes for everyone, stock market to get even worse, and a Socialist country. There has been a slight increase in the top marginal tax rate beginning with the first dollar made over $400,000, but that is the only prediction that is almost close to coming to fruition, but still way off.
December 31, 2014 at 2:00 pm
Agent says:
Like or Dislike:
0
0
Yes Ron, I know all of that and I did answer your questions in the other article. You just didn’t read it. You are one arrogant guy thinking agents are dumb about insurance and all you care about are your flawed algorithms that produce rate increases. By the way, my carriers make money on our business or we wouldn’t be getting contingency from them for growth, favorable loss ratio for all lines.
If you know that, why did you state, “Those actuaries were working overtime on their Predictive Modeling, score rating, re-tiering and Replacement Cost guides to produce these increases.”? The article is about rate increases, not price increases for individual risks. Yes, there is a significant difference.
I did read and comprehended all of you posts. Please copy and paste your answer to 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? Don’t forget to cover administrrative costs, agency commissions and a profit contingency. In addition, make sure each insured pays the proper premium for the risk that they present to the carrier.” I may have missed it.
In my experience, MOST, not necessarily all agents know far less about insurance than they realize. They are great salespeople, but do not understand pricing, underwriitng, predictive models, insurance scoring, etc. You have proven this to be true.
Algorithms do not produce rate increases, period. The fact that you think that further supports your ignorance on the subject matter.
Good for your carriers. And, as you stated before, they all use insurance scoring. I would venture to guess that they all also use predicitve modeling, tiering and all of the other rating tools you like to complain about. They must be working.
He didn’t answer you, Ron. You know that. He lies.
January 5, 2015 at 10:14 am
Libby says:
Like or Dislike:
0
0
“In my experience, MOST, not necessarily all agents know far less about insurance than they realize. They are great salespeople, but do not understand pricing, underwriitng, predictive models, insurance scoring, etc.”
I will agree with this statement as respects personal lines agents. Not good commercial lines agents. We have to know these things in order to compete in the market. As I stated before, I loss rate my large accounts and build in an expense ratio to come up with a fair premium to present to the underwriter. I use 35% on most lines and sometimes 50% on WC (depending on claim activity.)
January 5, 2015 at 10:42 am
Agent says:
Like or Dislike:
0
0
It has been my experience Modeling Ron that company people really don’t know much about insurance, don’t have much common sense and are flabbergasted when predictive modeling plans don’t work out so well. Then, they ask agents where they went wrong. Travelers is the prime example.
One of our markets was consistently losing business to our other markets when we had to move business or lose it. We had a substantial amount of Auto business that, due to predictive modeling had big rate increases. They came out with another Auto market that was better, but it was reserved only for new business. The existing client base in the other market was not eligible to be moved even though it was profitable. The net result is that they lost both the Home & Auto business of a substantial client base and their retention sucks. Common sense dictates that you try to retain your customers while writing new business. Tell me that is a good strategy in the marketplace.
January 5, 2015 at 1:06 pm
Ron says:
Like or Dislike:
0
0
Agent,
How could you possibly say, “It has been my experience Modeling Ron that company people really don’t know much about insurance..”? If they do not know about insurance, how are they making enough money to pay your commission and profit sharing/contigencies?
I am still waiting for an answer, you may copy paste your supposed answer from the other article if you wish, to my original question, “How you would go about pricing an insurance product so it is not overly excessive, adequate to pay claims, and not unfairly discriminatory? Don’t forget to cover administrrative costs, agency commissions and a profit contingency. In addition, make sure each insured pays the proper premium for the risk that they present to the carrier”.
If you have no answer, just say so.
Please provide evidence to your statement, “…company people…are flabbergasted when predictive modeling plans don’t work out so well.” Can you provide an example of a company whose predictive model did not work out from a profitability standpoint, not growth/retention. What was their combined ratio before and after instituting a predictive model. I do not want any anecdotal evidence, I want data.
You said, “Common sense dictates that you try to retain your customers while writing new business.” Not in the insurance business. You only want to retain and write business that is profitable. The fact that you do not get that is further evidence of your ignorance of the insurance mechanism.
January 5, 2015 at 1:09 pm
Ron says:
Like or Dislike:
0
0
Libby,
As I have stated several times in the past, my experience is in personal lines. I would expect agents who specialize in writing commercial lines have more knowledge about insurance since they deal with a more sophisticated clientele.
January 5, 2015 at 2:09 pm
Libby says:
Like or Dislike:
0
0
Thank you. Just clarifying. Don’t like to be lumped in with agents like Agent.
December 30, 2014 at 3:57 pm
KNOWALL says:
Like or Dislike:
0
0
capitalism needs the insurance industry but at times it does appear to be a racket
Actually Knowall, Insurance is a noble profession and agents are licensed and have to do CE to keep their licenses. People like to scream about their rates going up, but it sure comes in handy when there is an accident or loss. When you compare insurance professionals to attorney’s (particularly the ambulance chasers), we look pretty good by comparison.
“…but at times it does appear to be a racket” Those are probably the times when you’ve been paying for something for years and have never used it. All it takes is one loss (car accident w/ significant injuries = huge medical expenses or a demolished home = expensive to rebuild) for the “racket” to actually be a live-saver.
Hey Rosenblatt, have you ever heard of first accident forgiveness instituted by several carriers and no extra premium charge for that accident? I know that is a foreign concept to you and Ron. Ron probably goes crazy with his models and says, but wait, I want to increase rates 25% because of that one accident.
You know so little about me it is ridiculuos. I would NEVER advocate for an increase in premium due to a single accident, unless there were extenuating circumstances that indicate the risk going forward is higher, such as the driver was the undiclosed 17 year old child.
December 31, 2014 at 11:14 am
Yogi Polar Berra says:
Like or Dislike:
0
0
Insurance’s main purpose is to reduce the financial risk of doing something, like owning a home, driving a car, going into business.
Without insurance, we all could only take small risks and probably couldn’t drive cars, own expensive homes, sail large boats, or produce products or services to be provided or sold to customers.
It allows people and businesses to free up their savings or capital for other purchases or products.
Insurance is the ‘oil that lubricates the world economy’.
Good one Yogi. It is a contract which promises to pay if an accident or claim results. Being an intangible, it is not like buying a tangible good like a TV, car etc. Most people do not like to gamble on their assets being taken from them.
Those actuaries were working overtime on their Predictive Modeling, score rating, re-tiering and Replacement Cost guides to produce these increases.
Yes, rates went up 2% – 3.5%. Of course, all of the claims drivers such as medical costs, auto repair costs, home repair and rebuidling costs, etc all increased by more than 3% making it harder to make money writing these lines. Something to remember when talking to your clients.
Agent,
Do you even know the difference between a rate increase and score rating, re-tiering and Replacement Cost guides?
I am still waiting for you to answer my question from a separate article:
How you would go about pricing an insurance product so it is not overly excessive, adequate to pay claims, and not unfairly discriminatory? Don’t forget to cover administrrative costs, agency commissions and a profit contingency. In addition, make sure each insured pays the proper premium for the risk that they present to the carrier.
Part of the problem is that consumers don’t understand that the primary factors that drive insurance costs – medical, legal, and home & auto repairs – are increasing at a faster rate than other areas. They see big screen TV’s and other consumer products going down in price but insurance can’t be “built” or mass produced in China like other products. No real economies of scale with insurance except for data collection and evaluation. I’m tiring of answering the question – “when are my rates going to go down?”.
Simple answer: “Never!” When does anything ever go down???
Well, gasoline has gone down due to the war with OPEC and Saudia Arabia keeping production up and increased activity for oil and gas in this country. Too bad it doesn’t work with insurance because of inflation etc.
Agent,
Wasn’t $5 per gallon gas one of the predictions of the right if President Obama was elected in 2008 then re-elected in 2012? I believe they also predicted 10% unemployment, negative GDP growth, increased spending, higher taxes for everyone, stock market to get even worse, and a Socialist country. There has been a slight increase in the top marginal tax rate beginning with the first dollar made over $400,000, but that is the only prediction that is almost close to coming to fruition, but still way off.
Yes Ron, I know all of that and I did answer your questions in the other article. You just didn’t read it. You are one arrogant guy thinking agents are dumb about insurance and all you care about are your flawed algorithms that produce rate increases. By the way, my carriers make money on our business or we wouldn’t be getting contingency from them for growth, favorable loss ratio for all lines.
Agent,
If you know that, why did you state, “Those actuaries were working overtime on their Predictive Modeling, score rating, re-tiering and Replacement Cost guides to produce these increases.”? The article is about rate increases, not price increases for individual risks. Yes, there is a significant difference.
I did read and comprehended all of you posts. Please copy and paste your answer to 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? Don’t forget to cover administrrative costs, agency commissions and a profit contingency. In addition, make sure each insured pays the proper premium for the risk that they present to the carrier.” I may have missed it.
In my experience, MOST, not necessarily all agents know far less about insurance than they realize. They are great salespeople, but do not understand pricing, underwriitng, predictive models, insurance scoring, etc. You have proven this to be true.
Algorithms do not produce rate increases, period. The fact that you think that further supports your ignorance on the subject matter.
Good for your carriers. And, as you stated before, they all use insurance scoring. I would venture to guess that they all also use predicitve modeling, tiering and all of the other rating tools you like to complain about. They must be working.
He didn’t answer you, Ron. You know that. He lies.
“In my experience, MOST, not necessarily all agents know far less about insurance than they realize. They are great salespeople, but do not understand pricing, underwriitng, predictive models, insurance scoring, etc.”
I will agree with this statement as respects personal lines agents. Not good commercial lines agents. We have to know these things in order to compete in the market. As I stated before, I loss rate my large accounts and build in an expense ratio to come up with a fair premium to present to the underwriter. I use 35% on most lines and sometimes 50% on WC (depending on claim activity.)
It has been my experience Modeling Ron that company people really don’t know much about insurance, don’t have much common sense and are flabbergasted when predictive modeling plans don’t work out so well. Then, they ask agents where they went wrong. Travelers is the prime example.
One of our markets was consistently losing business to our other markets when we had to move business or lose it. We had a substantial amount of Auto business that, due to predictive modeling had big rate increases. They came out with another Auto market that was better, but it was reserved only for new business. The existing client base in the other market was not eligible to be moved even though it was profitable. The net result is that they lost both the Home & Auto business of a substantial client base and their retention sucks. Common sense dictates that you try to retain your customers while writing new business. Tell me that is a good strategy in the marketplace.
Agent,
How could you possibly say, “It has been my experience Modeling Ron that company people really don’t know much about insurance..”? If they do not know about insurance, how are they making enough money to pay your commission and profit sharing/contigencies?
I am still waiting for an answer, you may copy paste your supposed answer from the other article if you wish, to my original question, “How you would go about pricing an insurance product so it is not overly excessive, adequate to pay claims, and not unfairly discriminatory? Don’t forget to cover administrrative costs, agency commissions and a profit contingency. In addition, make sure each insured pays the proper premium for the risk that they present to the carrier”.
If you have no answer, just say so.
Please provide evidence to your statement, “…company people…are flabbergasted when predictive modeling plans don’t work out so well.” Can you provide an example of a company whose predictive model did not work out from a profitability standpoint, not growth/retention. What was their combined ratio before and after instituting a predictive model. I do not want any anecdotal evidence, I want data.
You said, “Common sense dictates that you try to retain your customers while writing new business.” Not in the insurance business. You only want to retain and write business that is profitable. The fact that you do not get that is further evidence of your ignorance of the insurance mechanism.
Libby,
As I have stated several times in the past, my experience is in personal lines. I would expect agents who specialize in writing commercial lines have more knowledge about insurance since they deal with a more sophisticated clientele.
Thank you. Just clarifying. Don’t like to be lumped in with agents like Agent.
capitalism needs the insurance industry but at times it does appear to be a racket
Actually Knowall, Insurance is a noble profession and agents are licensed and have to do CE to keep their licenses. People like to scream about their rates going up, but it sure comes in handy when there is an accident or loss. When you compare insurance professionals to attorney’s (particularly the ambulance chasers), we look pretty good by comparison.
“…but at times it does appear to be a racket” Those are probably the times when you’ve been paying for something for years and have never used it. All it takes is one loss (car accident w/ significant injuries = huge medical expenses or a demolished home = expensive to rebuild) for the “racket” to actually be a live-saver.
Hey Rosenblatt, have you ever heard of first accident forgiveness instituted by several carriers and no extra premium charge for that accident? I know that is a foreign concept to you and Ron. Ron probably goes crazy with his models and says, but wait, I want to increase rates 25% because of that one accident.
Agent,
You know so little about me it is ridiculuos. I would NEVER advocate for an increase in premium due to a single accident, unless there were extenuating circumstances that indicate the risk going forward is higher, such as the driver was the undiclosed 17 year old child.
Insurance’s main purpose is to reduce the financial risk of doing something, like owning a home, driving a car, going into business.
Without insurance, we all could only take small risks and probably couldn’t drive cars, own expensive homes, sail large boats, or produce products or services to be provided or sold to customers.
It allows people and businesses to free up their savings or capital for other purchases or products.
Insurance is the ‘oil that lubricates the world economy’.
Good one Yogi. It is a contract which promises to pay if an accident or claim results. Being an intangible, it is not like buying a tangible good like a TV, car etc. Most people do not like to gamble on their assets being taken from them.