An Insurance Policy That Monitors Your Driving – Are You Willing To Trade Your Privacy For Discounts?

No one likes an annoying back seat driver.  But could you stomach one that stayed quiet and just used observations of your driving habits to determine your auto insurance rates?  Well that time may be coming soon.   Insurance companies are beginning to build momentum in the field of using telemetrics as the primary actuarial data source for auto insurance rates.  Telemetrics, the science of measuring data created by your driving habits has the goal in mind of a more accurate auto insurance rate for each driver.

Insurance industry executives and underwriters have long wished for a better way to predict which clients will cause losses on their insurance policies.  In the world of auto insurance, the tools that insurance companies have had at their disposal in the past have been relatively crude.  Decisions about your driving ability and safety are currently based on information such as the kind of car you drive, your age and number of years driving, your past traffic violations and past auto insurance claims.  For instance, get a few speeding tickets and even though you’ve not filed a claim, in N.C., your auto insurance rates will skyrocket.  And yet I’ve seen quite a few clients with a high number of speeding tickets who never had an accident or filed an insurance claim.  Or take the example of teen drivers.  Not every new driver has accidents, but the insurance company simply has no way of knowing which child carries the greatest risk so they just have to charge huge inexperienced operator rates to all new drivers..  But what if the insurance company could watch young driver every time they head out in the car?  Would they then be able to make better decisions about which young driver is most likely to cause an accident and thus charge each a fairer rate?

Enter telemetrics, the newest underwriting science in auto insurance rates.  While this science has been around for a few years already, very few insurance companies have studied or adopted it.  That may be about to change.  State Farm Insurance, one of the largest auto insurers in the country is testing the use of telemetrics in several states and has indicated that they plan to roll this out to all states soon.  This strategy, should it succeed for State Farm, is bound to push this trend amongst all auto insurers much more quickly.  So what is telemetrics exactly?  Well, telemetrics is the gathering of data about your driving habits via small telemetric devices which plug into the car’s diagnostic ports.  This data is then sent to the insurance company and analyzed to determine if your driving habits indicate that you deserve  a discount refund on your rates for safer driving.  Right now these programs are focused on offering cash back discounts for good driving behaviors but are not designed to generate additional rate increases for the drivers who don’t make the grade.   That approach is almost certain to change should this form of auto rating, often referred to as usage rating become more common.    For now, this new technology is still in a testing phase and insurance companies would be hard pressed to get people to sign up to be monitored if they risked higher rates for doing so.

So what data are insurance companies collecting with telemetric programs?  Generally speaking they claim to monitor your speed, the number of miles your drive, the times of day that you drive, as well as your acceleration and deceleration habits and how hard you take turns.  What they currently claim not to monitor is seat belt usage, the exact vehicle location the car’s speed relative to the posted speed limit at that location. 

Telemetrics as a car insurance rating and underwriting tool is not without its critics.  The fears and complaints deal primarily with privacy issues in this data collection process.    Collecting this much data on U.S. drivers certainly puts insurance companies in a powerful position.  While they don’t currently plan to collect detailed data about where you have traveled, as telemetrics become more commonplace it can be assumed that more and more data will be collected.  This does create a slippery slope scenario where once you have given over your privacy to insurance companies, over time the data they collect on you could become more detailed and broader.  And once the data is compiled and collected, it could fall into the hands of law enforcement or even your separated spouse’s divorce lawyer or some other civil liability suit attorney.  And what about hackers gaining unauthorized access to insurance company data and using this information to harm you in some way?  And one other aspect of the slippery slope theory says that as more and more people accept the loss of privacy in order to try for more discounts, those who wish to maintain their privacy may have to pay higher insurance rates just to do so.  Would this be fair? 

Clinard Insurance Group is an independent insurance agency, located in Winston Salem, NC.  We insure thousands of families and businesses all across North Carolina, South Carolina, Tennessee and Georgia.  If you would like help with your auto insurance,  home insurance, life insurance or business insurance needs, please feel free to call us, toll free, at 877-687-7557.

If You Buy Flood Insurance, Your Next Bill Might Be A Shocker!

In the United States, flood insurance is very much a subsidized product.  You see, flood insurance, by its very nature, runs against the basic rules of the insurance industry.  With flood insurance, only people in flood zones will buy it.  Homeowners insurance and auto insurance are different.  Any house could burn, so every home owner will buy insurance and spread the risk around.  But flood insurance is very different as the risk of loss only applies to those in known flood zones thus removing the ability of insurance to spread the risk.  So, in order to make a market for flood insurance, the federal government created the National Flood Insurance Program (NFIP) and either over time or perhaps even from the beginning and by design, they allowed the rates to be set far below what is needed to pay the losses generated in the program.

These subsidies made the NFIP a real target in these days of federal budget cutting.  And since the NFIP has to be reauthorized from time to time, it’s reauthorization now became contingent on these subsidies going away.  Enter the Biggert-Waters Flood Insurance Reformation Act of 2012, which reauthorizing the NFIP through September 30, 2017, but also included a mandate to eliminate the subsidized premiums.  The result of this legislation is that  many who buy flood insurance can now expect to pay quite a bit more for flood insurance.

This unwinding of subsidies means that rate increases will happen for consumers in one of two ways.  They will either see 25% rate increases each year for an undetermined number of years into the future, or they will see immediately higher rates as their policy is forced into a post-firm conversion to post-firm rates.  Either way, if you buy flood insurance then, you will likely be facing much higher rates for all renewals and changes that take place after October 1, 2013.

Earlier I mentioned pre-FIRM and post-FIRM rating programs and this needs a brief explanation.  These terms simply describe the rating table from which the rates for flood insurance are taken.  Pre-FIRM buildings are those built before January 1, 1975 or built before their community adopted its first Flood Insurance Rate Map (FIRM).  And while there are some exceptions to the rule, if your home is a pre-FIRM home, located in flood zones A, V, or D, then you should expect 25% rate increases on your flood insurance policy each year for the foreseeable future.  I assume that these rate increases will stop once your rates have gradually increased to match post-FIRM rates.  If your building or home is a pre-FIRM building and located in flood zones A, V, or D and the building was not insured on a NFIP policy prior to July 6, 2012, or was purchased by a new owner after July, 6, 2012 or have experienced a lapse in flood coverage on or after October 4, 2012, then that building will be immediately reclassified into the higher cost post-FIRM rating.  If this happens then your policy will take on all of the rate increase needed to remove all subsidies immediately.

If you have a home or building that will need to be moved from pre-FIRM to post-FIRM categorization,  then you will do a few things to make sure that you maintain your eligibility for flood insurance.  This means that you must submit a new elevation certificate on your property along with current photos of the front and back of your building. 

As the federal government eliminates flood insurance subsidies, some homeowners will find themselves facing higher premiums and perhaps even additional paperwork and eligibility issues.   If you buy flood insurance now, then you can expect to receive some notifications of the rate changes, along with instructions on what you must do to remain eligible to continue to purchase flood insurance.  Please read all of this information carefully, and pay attention to deadlines to make sure that you can continue to buy this insurance for your flood risk building.  If you need any help with your flood insurance or have questions about this program, please feel free to call us, toll free, at 877-687-7557.

Clinard Insurance Group is an independent insurance agency located in Winston Salem, NC.  We insure thousands of families and businesses all across NC, GA, TN, and SC.  We can help you with your auto insurance, home insurance, life insurance and business insurance with specialized niche programs for artisan contractors, landscapers insurance, restaurant insurance, used car dealers insurance, painters insurance and auto repair shop insurance.  If we can help you in any way, please call us, toll free at 877-687-7557.