The problem that I’ve always had with them is that they will be used eventually to raise people’s premiums. It’s the problem I had with them when I used to be a regulator and it’s the same problem I have with them as a consumer. There’s nothing in the policy that prevents them from using it to raise people’s premiums…it’s solely their “word.”
Of course it will be used to raise premiums. At this point the UBI is mostly gathering information. Once the information can be added to rate making, then the companies will charge based on a person’s driving habits. Why is that a problem?
I would think driving habits are more relevant to risk than college degrees and credit scores.
KY, do you think the info gathering process should include distracted driving from cell use? If companies only knew what drivers were doing these days, they would non-renew half of their policyholders.
With all these hacks I want info to be in the fewest places as possible. How would the insurance company know? Do I need give them an alibi? And what if I was just on hold with Comcast muzak for an hour. How could I possibly get Comcast to help me prove that to insurance company??
David,
I disagree. The same thing was said about Predictive Modeling. However, what I have found is that better data makes insurance companies identify both the attractive and unattractive clients. As a result, sure they are more hard on the unattractive clients. That said, the better data makes insured become more competitive on the favorable clients.
In other words, if you are good… the telematics will provide proof of that. Insurance companies will fight to retain their good clients, and will let their poor clients go, or pay more to stay.
Producer, do you remember the story a while back that Progressive was having trouble with their Snapshot program and was having to raise rates due to driving habits they didn’t like? Millenials and others who bought into the supposed Snapshot savings for having the device were sorely disappointed that their premiums went up.
Allstate has taken some heat for their predictive modeling and charging more to long term loss free customers and judging how much more they can raise rates without running the customer off. They give better rates to new applicants than the long term good customers. That is the worst strategy possible.
Agent gave an example of exactly the problem I have with it. The insurance company is going to arbitrarily determine what they believe is “bad” driving…including stopping too quickly, driving too fast for their like, et al, regardless of whether an accident occurs or not. To me, that’s a dangerous route to go down regarding pricing and often can lead to more discriminatory pricing.
You also bring up the issue of predictive modeling. I feel the same way in regards to that, because oftentimes, in my discussions with insurance companies, they often don’t even know what data is included in their model, as it’s often developed by a third party who just sells it to the company and retains rights over it. How was I supposed to tell our state residents that they can be sure that they weren’t being discriminated against, when the company they bought their policy from can’t even tell them that, because they have no idea what their policy’s price is based on? One company, for example, attempted to provide us a pricing basis that included the color of the bathroom walls and the type of carpet included in the living room…what does that have to do with pricing a H/O policy?
I respectfully disagree Producer#1. Companies are not fighting to retain better customers. Allstate has Price Optimization which increases rates on their good clients. They are raising rates on them and giving better rates to new applicants. Many companies are doing what they call “Maintenance Rates” which is increasing premiums to accounts that don’t deserve them.
My experience with UBI from an agent’s perspective that sells it, and also from my own perspective as a consumer that has tried it personally, is what most people do not realize is the insurance company’s definition of a good driver is not the same definition of a what a consumer thinks a good driver is. If a driver drives in any traffic, and is good at braking to avoid hitting the car in front of them, that is a penalty. If you tap your brakes and your speed is reduced by 7.5 mph to 15 mph in a one second amount of time, you will be penalized. Also, if you drive between the hours of 12:00 am and 4:00 am you will be penalized. I do think that the UBI monitoring of a car’s annual miles driven is helpful, as most consumers do not accurately disclose how many miles they drive per year. Insurance companies will bait the consumer to try the UBI with a “discount” for the first policy term, but they can get surcharged upon renewal. So this UBI is not really what most millennials think it is. There is always a “gotcha”.
agent14, I agree with you. I tried Snapshot and wasn’t too surprised when I only received a 1% discount for my driving. I like the concept of usage based insurance but “gotcha” indeed.
Price Optimization is just a scheme invented by actuaries to maximize the price on Auto Insurance. Back in the day, the price was determined by tickets, accidents, vehicle usage, age of driver, gender and type of vehicle. I think they did a better job of underwriting back then than all the fancy models of credit score and putting devices in cars. Now, throw in the number of drivers texting while driving and you have a mess trying to figure it out.
The problem that I’ve always had with them is that they will be used eventually to raise people’s premiums. It’s the problem I had with them when I used to be a regulator and it’s the same problem I have with them as a consumer. There’s nothing in the policy that prevents them from using it to raise people’s premiums…it’s solely their “word.”
Of course it will be used to raise premiums. At this point the UBI is mostly gathering information. Once the information can be added to rate making, then the companies will charge based on a person’s driving habits. Why is that a problem?
I would think driving habits are more relevant to risk than college degrees and credit scores.
KY, do you think the info gathering process should include distracted driving from cell use? If companies only knew what drivers were doing these days, they would non-renew half of their policyholders.
With all these hacks I want info to be in the fewest places as possible. How would the insurance company know? Do I need give them an alibi? And what if I was just on hold with Comcast muzak for an hour. How could I possibly get Comcast to help me prove that to insurance company??
David,
I disagree. The same thing was said about Predictive Modeling. However, what I have found is that better data makes insurance companies identify both the attractive and unattractive clients. As a result, sure they are more hard on the unattractive clients. That said, the better data makes insured become more competitive on the favorable clients.
In other words, if you are good… the telematics will provide proof of that. Insurance companies will fight to retain their good clients, and will let their poor clients go, or pay more to stay.
Producer, do you remember the story a while back that Progressive was having trouble with their Snapshot program and was having to raise rates due to driving habits they didn’t like? Millenials and others who bought into the supposed Snapshot savings for having the device were sorely disappointed that their premiums went up.
Allstate has taken some heat for their predictive modeling and charging more to long term loss free customers and judging how much more they can raise rates without running the customer off. They give better rates to new applicants than the long term good customers. That is the worst strategy possible.
Agent gave an example of exactly the problem I have with it. The insurance company is going to arbitrarily determine what they believe is “bad” driving…including stopping too quickly, driving too fast for their like, et al, regardless of whether an accident occurs or not. To me, that’s a dangerous route to go down regarding pricing and often can lead to more discriminatory pricing.
You also bring up the issue of predictive modeling. I feel the same way in regards to that, because oftentimes, in my discussions with insurance companies, they often don’t even know what data is included in their model, as it’s often developed by a third party who just sells it to the company and retains rights over it. How was I supposed to tell our state residents that they can be sure that they weren’t being discriminated against, when the company they bought their policy from can’t even tell them that, because they have no idea what their policy’s price is based on? One company, for example, attempted to provide us a pricing basis that included the color of the bathroom walls and the type of carpet included in the living room…what does that have to do with pricing a H/O policy?
I respectfully disagree Producer#1. Companies are not fighting to retain better customers. Allstate has Price Optimization which increases rates on their good clients. They are raising rates on them and giving better rates to new applicants. Many companies are doing what they call “Maintenance Rates” which is increasing premiums to accounts that don’t deserve them.
My experience with UBI from an agent’s perspective that sells it, and also from my own perspective as a consumer that has tried it personally, is what most people do not realize is the insurance company’s definition of a good driver is not the same definition of a what a consumer thinks a good driver is. If a driver drives in any traffic, and is good at braking to avoid hitting the car in front of them, that is a penalty. If you tap your brakes and your speed is reduced by 7.5 mph to 15 mph in a one second amount of time, you will be penalized. Also, if you drive between the hours of 12:00 am and 4:00 am you will be penalized. I do think that the UBI monitoring of a car’s annual miles driven is helpful, as most consumers do not accurately disclose how many miles they drive per year. Insurance companies will bait the consumer to try the UBI with a “discount” for the first policy term, but they can get surcharged upon renewal. So this UBI is not really what most millennials think it is. There is always a “gotcha”.
agent14, I agree with you. I tried Snapshot and wasn’t too surprised when I only received a 1% discount for my driving. I like the concept of usage based insurance but “gotcha” indeed.
Price Optimization is just a scheme invented by actuaries to maximize the price on Auto Insurance. Back in the day, the price was determined by tickets, accidents, vehicle usage, age of driver, gender and type of vehicle. I think they did a better job of underwriting back then than all the fancy models of credit score and putting devices in cars. Now, throw in the number of drivers texting while driving and you have a mess trying to figure it out.