NC Homeowners Insurance Rate Making – Is The Fox Running The Hen House?

The NC homeowners insurance market is in real turmoil.  Rate making for homeowners insurance rates, traditionally the bailiwick of regulators, is being undermined a long forgotten loophole.  This is creating a huge change in the way that insurance companies in NC are pricing their home insurance product.  If the regulators in this state don’t take some action soon, then this creeping process will undermine the rate making process completely and leave us with a sorry hybrid rate making system that means some homeowners will be paying far more than their share for their home insurance and it could create a large population of uninsured homes with the homeowners unaware of their lack of protection.

Homeowners insurance rates in North Carolina have long been regulated by the NC Rate Bureau and the NC Insurance Department.  This process has required insurance companies to file the rates for their products and then wait for them to be approved.  For many years now, the Rate Bureau has established the maximum rate levels that insurance companies could charge for home insurance.  This maximum rate level is called bureau rates.   During the time that home insurance was attractive to insurance companies, the rates that insurance companies filed were at deep discounts to the bureau rate, in some cases as much as 60% below bureau rates.  But in the past two years we have seen a sea change in the appetite for home insurance business from insurance companies operating in North Carolina.  Over the last decade, while they were bidding  down the rates in a competitive feeding frenzy for market share,  the climate seemed to change around them.  The heavy losses of 2011 in our state were a big wake up call.  And when a few large companies take action, it doesn’t take long for all the smaller companies to run scared and follow their lead. So, most home insurance companies in NC have switched their approach from one of seeking more new home insurance business to trying to find ways to get rid of the policies that they have.

A big part of the journey to restore profitability to NC homeowners insurance has led the insurance companies to try to find ways to charge higher rates on home insurance policies.  This strategy pretty quickly ran them up against bureau rates.    But there is a way around the Rate Bureau’s established maximum rate.  The law states that if the insurance company receives a signed form from the homeowner that gives them permission to charge rates higher than the Rate Bureau maximums, then rates can go as high as the insurance company wants to take them.  The form that homeowners can sign to give their insurance company the right to charge them rates above the NC Rate Bureau rates is called the consent to rate letter.

The consent to rate loophole was originally designed to give the insurance companies a way to charge a more appropriate rate to the rare situations where a homeowner has some inherent risk that makes them unattractive to insurance companies.  It is meant as a way to help homeowners with higher risk to be able to obtain some insurance, even if it is expensive.   It was meant to be used only rarely, to solve the one of a kind problems.    

The real problem now is that with our current rate structure in NC, the rates are just too low in the eyes of the insurance companies doing business here.  And the only choices that the insurance companies have are to either cancel policies or have their clients sign consent to rate letters.  They need higher rates for home insurance in our state to continue to write home insurance in our state.  But using the consent to rate letter to attain this goal is a bit like trying to open the battery cover on your cell phone using only a hammer.  In the process you destroy the phone.  The consent to rate letter is a clunky, unwieldy tool to increase rates.  With the current overuse of this technique, the consent to rate letter has just become a way to do an end run around the rate making regulatory power that the Rate Bureau is supposed to control.

So how does this work for the homeowner?  Well, if you are one of the unlucky ones selected by your insurance company to sign a consent to rate letter, then you will receive one with your homeowners insurance renewal bill.  If you sign this form, then you will be agreeing to a huge increase on your premium, one substantially higher than the maximum rates supposed to be allowed by the Rate Bureau.  On the other hand, if you don’t sign and return the consent to rate letter, then your home insurance policy will be cancelled by your insurance company.  So it is sort of an all or nothing approach, and even a bit random.  Some homeowners will escape completely; perhaps because they have never filed a claim or because their auto insurance policy is making enough money for the same insurance company to make up the difference.  Others will pay far more than our current regulatory system of rate making anticipates that they should pay.  This subdividing of the insurance marketplace for homeowners insurance will, over time, put great stress on the system.  In addition, there is the very real risk that many homeowners will not fully understand the consent to rate letter and may fail to return it.  They then will not receive a renewal bill and may only discover their lack of home insurance after a large loss has occurred.  And large, uninsured losses are not good for our economy or our society.

The real solution would probably be to have the Rate Bureau increase homeowner’s insurance rates, particularly the maximum rate, much more quickly than we have seen.  Their slow movement in this direction can be understood when you frame their choices in the light of an election year.  Now that the elections are behind us, I would like to see the Rate Bureau address this issue and take back control of the rate making process, or perhaps just scrap it completely and let insurance companies charge the prices that they want without requiring a consent to rate letter from the customer.  It is clear to me that the hybrid system that we are stuck in right now is not good for consumers or insurance companies.

If you find a consent to rate letter from your insurance company with your next renewal, I would advise that you not blindly sign and return it.  There may be other options available to you.  Here’s what you should do. First call your agent and find out exactly why you were on the list to receive a consent to rate letter.  Then ask if your agent has any other options for you that might allow you to buy your home insurance policy at a rate below bureau rates.  If you are still not satisfied, give us a call at 877-687-7557 and we will help you find a solution that works best for you.

At Clinard Insurance Group, located in Winston Salem, NC, we insure thousands of families all across North Carolina.  We will be happy to take your questions on your home or auto insurance and help you better understand just what your options are for the future with these policies.   We can help you with your auto insurance, your home insurance, your life insurance and even your business insurance.  Give us a call; you will be glad that you did.

How Much Money Can You Pull Out Of Your Retirement Account Each Year?

When it comes to retirement savings, most of the buzz that we hear is oriented around how to save the money and how to invest it to generate the largest possible nest egg.  But that part of the process is child’s play compared with trying to figure out how much you can withdraw each year to make that money last for the rest of your life. There are a few ways to guarantee that you will never outlive your retirement money but many of those reduce your monthly payout so low as to make them unattractive to all but the longest livers out there.  But for many people, a new product that combines indexing and life insurance can solve this puzzle and give them significantly more money to live on each month when they retire.  But you have to put this kind of program in action years before you retire in order for it to work for you.   

One way to describe the withdrawal problem, in uniquely southern terms, is to say that you don’t want to run out of gravy before you run out of biscuit and vice versa.  It is a simple concept that we all understand right away, yet the solution is very complicated.  What is the largest amount of money that can you take out of your nest egg each year and not run the risk of running out of money before you die?  Experts have worked on this problem for many years and the the answer itself is an elusive moving target.

Financial analysts have studied this problem trying to come up with a percentage of the total of your retirement funds that you can withdraw each year.  Of course the answer to this question depends on what kind of investment returns your nest egg can collect during the years of your retirement.  And the percentage of withdrawal that they recommend is of course influenced by the recent past investment returns.  These days, most experts will put the range of withdrawal rates at somewhere between 2% and 4%.  So, let’s crunch those numbers just a bit to give you an idea of what that looks like.  Assume that you have been very diligent over your lifetime and have managed to accumulate $1 million in your retirement account.  A 4% withdrawal each year would give you $40,000 per year.  Assuming your retirement funds are not Roth IRA funds, then it is likely that you will have to pay income taxes on that money.  Suddenly, that $1 million doesn’t seem like so much money.    Now imagine if there was a way to safely increase that withdrawal rate to 7%?  Now you would have $70,000 each year to live on.  That extra 3% could make a huge difference in your retirement lifestyle. 

To further complicate this decision though, consider that you just can’t choose a withdrawal number and stick with it with no future adjustments.  Prior to the 2008 market meltdown advisors were telling people that a 7% per year withdrawal was safe.  That is because they were relying on past history of stock market returns to make their calculations.  But this process is like driving a car by looking only in the rear view mirror.  There are many retirees out there who followed the 7% advice from their financial advisors who are now going to have to cut back their lifestyle dramatically after the market meltdown of 2008.   So you will need to constantly adjust your expectations and if you get it wrong early in your retirement, then you will have almost no way of making up the losses.

In the opening paragraph, I mentioned that there are ways to create income streams that you cannot outlive.  Annuities are tools that can do this very well.  The problem with straight annuities is that some are so expensive that they may not generate the monthly income that you need from your nest egg.  However, there is another, rather new solution.  One life insurance company is now offering a cash value life insurance policy that uses indexing to generate guaranteed lifetime withdrawal rates of 7% or more as long as you live.  And if you die early, unlike with straight annuities, the life insurance and cash value amounts return to your estate so that your investment is not lost.  Now these policies are not for everyone, for instance you need to be healthy enough to qualify for the life insurance policy in the first place.  Also, you need to act ahead of your actual retirement and get this in place a few years before you retire.  But once you have set this up and put this in place, you now have a bucket where you can transfer your retirement nest egg, or a portion of it, when you retire.  This will allow you to utilize this investment tool to allow you a much greater withdrawal rate for any funds that you drop into the policy.

At Clinard Insurance Group, located in Winston Salem, NC, we insure thousands of families all across North Carolina.  We can help you with your auto insurance, your home insurance as well as your life insurance or your business insurance.  Please call us toll free, at 877-687-7557 if you would like our help with any of your insurance needs.

Insurance Fraud Investigators Using Social Media To Catch The Crooks

There are many different kinds of insurance fraud scams, from the creative and complicated to the simple and childlike.  Insurance fraud in the United States costs insurers about $30 billion per year; more than 10% of all losses paid out by insurance companies.  I’ve mentioned this number to people in the past who have responded with a comment that the insurance companies can afford it so what is the big deal.  But they are forgetting that all costs are passed to the consumer eventually so these crooks are really stealing from them.  Just imagine, if we could get rid of insurance fraud completely, you could expect to pay 10% less for every kind of insurance policy that you buy from auto insurance and home insurance to business insurance and life insurance and health insurance.  How much would that 10% add up to in your case?

Before social media exploded into an integral part of so many peoples’ lives, solving insurance fraud claims had been a slow and difficult process.  But sites, like Twitter, Facebook, Linked In and others are providing a wealth of information and clues to investigators.  Here are a  few of these real world examples that show how these social media sites are helping investigators catch and stop some of the insurance fraud taking place today.

This first example is a case of fraud that didn’t include an insurance company, but it does prove how powerful these tools can be.  A woman worked in the payables department of a big corporation that had awarded a maintenance contract to a firm which was secretly run by her husband.    The maintenance firm was billing for services that were not actually performed and the wife was paying them on behalf of the corporation.  You can imagine that this kind of fraud is tough to detect and even harder to prove.    But the investigator cross referenced information from all of the social media sites with traditional sources such as the white pages and eventually found an address associated with the maintenance firm that matched an address of one of the couple’s grown children.    This allowed the investigator to connect the two and eventually to put an end to their fraud.

The one area of insurance that has perhaps benefited the most from these new tools is workers compensation insurance.  In one case, an injured worker, who was out of work on disability, posted photos of himself on top of a mountain in Aspen ready to ski down.  Another disabled worker left social media tracks that led to him playing basketball in an adult basketball league.   In this case,  the insurance company saves a lot of investigation money because instead of having to follow him around 24/7, the investigator needs only to attend the basketball game to witness him playing.   Or consider the case of a worker who was out on disability for a back injury who posted photos of himself at a karate class, thereby ending his disability workers compensation claim.

Social media is also quite good at revealing relationships between the different players in a scam.    A doctor and an attorney who were involved in a fraudulent insurance scheme together turned out to be connected on Linked In and it was later found that they were tweeting to each other to set up meetings to work out their next moves.  In another case, an investigator of a slip and fall claim, using social media sleuthing, discovered that two other people living in the same apartment with the victim were also victims of previous slip and fall claims.  In the end it was proven that only the first of these claims was legitimate and that the other two were fabricated.

Even Craigslist is a useful tool for the fraud investigator.  One fraudster filed an auto insurance claim for a stolen car.  A few months later he listed that same car for sale on Craigslist.    In another example, an individual filed a claim for his car that had been burned and investigators later found several earlier ads on Craigslist where this person had tried unsuccessfully to sell the car.  I guess he decided it would be easier to burn it and collect the insurance money.

All of these sleuthing techniques will help keep your insurance costs lower over the long term.   But if you don’t want to wait for these techniques to trickle down as savings to you, but would rather lower your insurance costs today, then you should call Clinard Insurance Group, toll free, at 877-687-7557 and let us help you find the policy that suits your needs at a rates that will bring a smile to your face.

Could Hurricane Sandy Cause Your Home Insurance Rates To Rise?

Hurricane Sandy  was a huge and vicious storm that dealt the northeastern US such a severe blow that the clean-up will probably continue for many more weeks and perhaps even months.  Luckily for those of us in North Carolina, Sandy dealt us mostly a glancing blow and for the most part we didn’t suffer huge property losses here.   Despite this though, hurricane Sandy will almost certainly contribute to higher future home insurance rates for you and your neighbors.

   

Property insurance rates for your homeowners insurance policy are promulgated from data gathered from many different sources from your credit score to the construction type of your home to the fire protection in your town.  Weather related past loss experience is also a huge player in this number crunching process.  And as far as weather related losses such as hurricanes go, there are really three ways that you can be affected negatively by these storms.  We can look at each of these three loss impact separately.

The first impact type is really very  simple and direct.  It’s pretty obvious that when your home or property suffers a direct loss from a storm and you have to file a claim that the insurance company is going to review your policy more closely before determining your rate at renewal.  Most insurance companies will allow you to file some number of weather related claims before they take the more drastic step of non-renewing your policy.  Many years ago, some companies might even allow as many as three weather related losses on one homeowners policy if they were all small.  Things have changed quite a bit in the past two years and some insurance companies now won’t tolerate even one weather related loss without at least requiring that you increase your deductible.  Many might just not renew your policy after one weather related loss.

A second, less obvious storm impact on your home insurance rates happens when a storm hits your local area.  Even though your home may be spared the damage, you may still face future rate increases due to this storm.  When insurance companies pay out for a lot of storm losses in one area, you can bet that they start to train their attention on that area and begin to work to get more rate increases there.  So, even when you have dodged the bullet of storm losses, you may not dodge the rate increase bullet caused by that local storm.

The third storm impact for rate increases comes from the fundamental mechanism of how insurance spreads losses around.  Consider that when you purchase home insurance you are substituting a smaller known loss (your premiums) for a larger unknown one (storm damages to your home).  The insurance companies do the same thing with their risks by purchasing reinsurance coverage for their book of policies.  Reinsurance is insurance protection that insurance companies purchase from reinsurance companies on all or some portion of their policies.  For example, an insurance company might sign a reinsurance contract with a reinsurer that says that if they suffer losses from any one storm that exceed $100 million then the reinsurer will pay for all claims over that amount.  Knowing this, you can quickly see that when large storms hit the US and cause extensive damage, the reinsurers have to pay out on their contracts with the insurance companies.  After this has happened, the future costs of reinsurance will be higher as the reinsurers attempt to cover past losses and also make sure that they are profitable going forward into the future.  These higher reinsurance costs are then passed on down to the homeowners insurance consumer.

So knowing all of this, let’s revisit hurricane Sandy.  For most of the North Carolina residents, this storm was a nonevent in terms of damage to their property.  But you can see, this still doesn’t mean that we won’t have to pay for some of these losses ourselves.  The third impact of storm losses tells us that we will see higher rates in our area even though we did not experience many direct losses as a result of this storm.

 At Clinard Insurance Group, we insure thousands of families all across North Carolina.  We are here to help you with your questions and to help you save money on your home insurance, your auto insurance, your life insurance and even your business insurance.    Please feel free to call us toll free, at 877-687-7557 if you have any questions about your personal or your business insurance.  We are here to help you.

NC Steps Up Enforcement On Auto Insurance And Tag Possession

NC state law requires that every licensed vehicle in our state maintain continuous liability insurance in force.  This law has remained unchanged for many years but recently the NC Division of Motor Vehicles has started to change the way that they enforce this law.  And this change has caught many car owners off guard, resulting in nasty fines that were never expected by the car owner. 

The law requiring continuous liability insurance for all licensed vehicles is a good one and is designed to make sure that everyone who drives a car and puts others at risk has some way to pay for the losses that they cause.  In the past there was more flexibility in how this law was enforced, particularly for people who sold a car.  You used to be able to wait a week or so until it was convenient to run down to the tag office to turn in the tag and not risk a fine.  And we all know how this works, you sell a car and you immediately want to take it off your insurance policy and get your refund on the way to your mailbox.  The tag though is usually just a nuisance and you get around to turning it in when it is convenient for you.   That has all changed, and caught more than a few people off guard as the enforcement has been stepped up.  Now, with very few exceptions, if you have a tag in your possession even one day after your insurance has been cancelled, then you will probably have to pay the $50 fine, no questions asked.

There may be many reasons why the DMV has decided to stop going lightly on this rule.  I might speculate that perhaps the increased revenue associated with collection of these fines plays a part.  Or maybe there have been just too many uninsured vehicles out there involved in accidents and causing damages that the drivers can’t pay to fix.  Whatever the impetus behind this change, people who have become used to taking their time about turning in their tags after selling a car, will have to change their patterns or face fines.

After our office reached out to and spoke with a DMV officer, he confirmed that the DMV is more rigorously enforcing this rule and collecting more fines these days.  He also offered some pretty good advice for helping protect yourself from the system itself, even when you do turn your tags in on time.  He asked that we tell people to turn in their tags before they cancel their insurance on a car, and most importantly to ask for a receipt stating that the tag has been turned in.  This is necessary because your tag might otherwise be tossed in a box to be processed later.  This late processing might happen after you have called your auto insurance agent to remove the sold car from your policy.  If so, you would still be facing a $50 fine, even though you did everything correctly. 

At Clinard Insurance Group, we insure thousands of families all across North Carolina.  We hope that none of our clients get caught in this new fine trap.  If you would like any help with your home insurance, your auto insurance, your life insurance or even your business insurance, I hope you will give us a call, toll free, at 877-687-7557.  We look forward to helping you with all of your insurance needs.

HUD Rule Could Step On The Toes Of Homeowners Insurance Companies Meaning Higher Rates For You

Pity the North Carolina homeowners insurance marketplace.  The past year has been pretty rough.  The huge storm losses from 2011 have forced most insurance companies to dramatically raise their rates and limit which homes they are willing to insure.  Trying to buy insurance for your home without the support of your auto policy is rate suicide now.  And even with the auto insurance as support, many homeowners have had to sign the dreaded consent to rate form, giving their insurance companies the right to raise their home insurance rates far above the maximum rate allowed by the state.    And now, the home insurance marketplace faces another ratemaking hurdle – The new HUD rule and the unkown impact that it might have on the insurance industry’s underwriting practices.

This new HUD rule is called the disparate impact rule, and it would expand the Fair Housing Acts discriminatory effects standard and how it applies to actions that have discriminatory effects on minority groups.  Simply state, this new rule would hold companies responsible for policies that result in discriminatory effects on minorities whether or not there was ever any intention to discriminate against them as minorities.  What this could mean, is that home insurance rates might be held to be discriminatory and if so, then this could have enormous impacts on homeowners rates in North Carolina.

When it comes to pricing a homeowners insurance policy for your home, your insurance company will study many different factors that are individual to your specific house and you as the owner.   These factors can be as diverse as the quality of fire protection services are offered in your area to your credit score to your past claims history.   The very nature of insurance rate making is to isolate the high risk home from the lower risk ones in order to price each policy most appropriately.  By their very nature, many of these rate making tools could be seen to have a discriminatory effect on all kinds of different groups of people. All of these factors along with many others that are unique to the house itself as well as the life and attitudes of the home owner go into the process of determining a specific price for insurance for that home and that customer.  But what if the insurance company was unable to use some or all of this information to determine their rates for a home because their methodology could be seen as discriminatory against some particular minority?

  

A rule of this nature could limit the ability of insurance companies to provide more risk specific rates and this could result in an insurance marketplace with two flaws that will force upward pressure on pricing for all insurance buyers.  First of all, if we strip the insurance company’s ability to underwrite a specific location or area for risks that are unique to that location or area, then we will be forcing them to raise the rates on all other homes in order to subsidize those that deserve a  higher rate due to their higher risk factors.  The second flaw in this approach of insuring with more unknowns is that if you limit the information that an underwriter has to evaluate the risk of a home, then the underwriter will have to overestimate the risks, and thus the rate to cover this gap in knowledge about the home or its owner. In the end, this will mean that all homeowners will face higher rates.

At this point in time, we will have to wait for lawsuits to work their way through the system before we know for sure what impact this new rule will have on insurance companies and their home insurance rates.  Some feel that this rule could run afoul of the McCarran-Ferguson Act which gives states the power to regulate insurance.  Perhaps McCarran-Ferguson will protect the insurance companies and allow them to continue to discover the information that they need to create a fair rate for a specific home.   At this point we will have to wait and see what the higher courts rule as challenges to this new HUD rule wind their way through the court systems.

Clinard Insurance Group is an independent insurance agency located in Winston Salem, NC.  We insure thousands of homes all across North Carolina and it is important to us that all buyers of insurance products to be informed consumers.  If you have any questions about your home insurance, your auto insurance or your business insurance, please feel free to call us, toll free, at 877-687-7557.  We will take as much time as you need to help you understand the insurance products that buy.

Medical ID Theft – Some Facts and Figures

While the concept of identity theft is pretty well understood by most of the public, an offshoot of this problem, specifically medical identity theft is much less well understood.  Less than 15% of adults are familiar with the term medical identity theft and of that group, only 1/3 of them could correctly define medical identity.  Still worse, even those that understand the risks are for the most part unable to buy any kind of insurance protection for this risk exposure.   

If medical identity theft is not well understood, it is also grossly underappreciated by the public.  Take a look at a few rather daunting facts and figures relating to medical identity theft.  This crime victimizes some 1.5 million Americans every year.  And the costs of these attacks are now more than $30 billion.  And if this crime strikes you, then understand that the average cost of resolving a medical identity theft issue is $20,000 and the time it takes to do so averages between 4 and 6 months.  And while we are all very protective of our social security numbers, and rightly so, consider for a moment that the street value of a stolen social security number is about $1 while the street value of a stolen medical identity is $50.

There are many different scams designed to steal medical identities but we tend to group medical identity thefts into three broad categories.   

Financial medical identity theft – Someone is getting medical help using another person’s name or other information.

Criminal medical identity theft – A victim may be held responsible for the actions of another person’s criminal behavior.

Government Benefit Fraud – Someone’s medical benefits are being used by another person.

What strategies can you employ to make it less likely that you become a victim of medical identity theft?  Well, most of these are pretty easy steps and what is really required here is that you just take a little bit of time to constantly review and stay in touch with your medical paperwork.  For instance, you should carefully monitor and review all explanation of benefits letters that are sent to you by your health insurance company.  Make sure that each and every benefit listed is accurate and valid.  You can even be more proactive and go ahead and request a listing of benefits from your health insurance company and check this for accuracy.  Also, you can request a copy of current medical files from each health care provider that you use.  Move quickly to promptly correct any errors or false information that you find in any of your medical files.  Keep a close eye on your credit reports in case they show medical debts outstanding.  And you can request an accounting of disclosures from your health insurance company.

While the insurance industry is relatively silent in the area of insurance protection against this risk, there are a few insurance companies that are beginning to offer some options for protection against this type of fraud.  Check with your homeowners insurance agent to see if you can add medical identity theft insurance to your home insurance policy.  While you are at it, you may want to check and see if you can add identity theft to your policy as well.  While the number of insurance companies that provide medical identity theft protection right now is pretty small more and more insurance companies are evaluating this coverage each day and over time it may become much more of a mainstream type protection that you will be able to add to your homeowners insurance policy.

Clinard Insurance Group, located in Winston Salem, NC, currently insures thousands of families all across North Carolina.  We would love to help you with your homeowners insurance, your auto insurance, your life insurance or even your business insurance.  Please feel free to call us, toll free, at 877-687-7557.  We will take as much time as you need to help make sure that you are getting the protection that you want at a price that will pleasantly surprise you.

Homeowners Insurance – Did You Make Any Of These Three Mistakes When You Purchased Yours?

If you purchased a home and got a mortgage with it, then chances are you have had experience buying homeowners insurance.   For the first time home buyer out there, buying homeowners insurance is just one of many distractions in the process that have to be checked off before the loan can close.  That kind of scenario makes a homeowner pretty vulnerable to focusing much more on the cost of the policy rather than the protection it provides.  Now if several years later you find the fire engines are racing toward your home while you stand in the driveway watching it burn, then you may suddenly find yourself wondering what you left off or ignored when you bought your policy.   Here’s a list of some of the most common mistakes that homeowners make when buying home insurance.

The most common mistake that I see is not purchasing enough insurance.  I know;  you are buying a home and in the process you start to feel like you are being nickelled and dimed all the way through.  But your insurance policy is one item where you should focus on protection first and price second.  It’s true that for the majority of homeowners, the insurance policy turns out to be nothing but a promise.  You are purchasing peace of mind and financial stability after a disaster but there is nothing tangible to take home and enjoy after you write the big check to the insurance company.   This is why I don’t blame folks for zeroing in on price as the primary factor in the purchasing decision.  But this is where you really need to take a bit of care and insure your home for full value.  It will be too late to call and ask for an increase as the sirens are wailing through your neighborhood.

 The problem of underinsurance is often exacerbated by the fact that you should be focusing on and insuring for the replacement value of your home.   You will have to build it back after all, and this can often exceed the price you just paid for the home.  For some people that is a difficult concept to understand.    Your agent should help walk you through the process of determining the replacement value of your home so that you can insure it for full value.  This won’t leave you with as much of a queasy feeling as those sirens are getting closer.

Homeowners also often make the mistake of failing to check to see if their home is in a flood zone area.  Flood losses are not covered by your homeowners insurance policy.    Could you easily absorb the costs of repairing flood damage that is equal to 1/3 of your home’s value?   Luckily, if you have a mortgage, then the bank will often catch this and require you to purchase a flood insurance policy.  I’ve also seen several cases where a bank wanted to require a flood insurance policy somewhat unnecessarily when the flood zone only crossed a small portion of a lower corner of the homeowner’s back yard.  If this happens to you, your agent can be very helpful in speaking with the bank to attempt to waive the flood insurance requirement.

The third most common mistake that homeowners make when purchasing their home insurance is failing to insure valuable items separately.     If you own valuable items like jewelry, paintings, musical instruments, guns or silverware, or other collectibles or fragile items, then you should consider adding coverage for these items under a separate endorsement.  Doing so can result in better protection since insurance coverage for these items may be severely limited under your homeowners policy.  If these things are important to you, take a few extra minutes and make your agent aware of them and discuss the best way to protect them.  Some homeowners policies will allow you to add a blanket endorsement for a low limit of coverage for these types of items.  This is a simple, quick and inexpensive way to protect these items if your collections are not extensive.

Clinard Insurance Group is located in Winston Salem, NC, and we insure thousands of homes all across the state.  We will take as much time as you need to listen to your story and to help you fashion a homeowners insurance policy that best suits your needs and your budget.   If you would like help with your homeowners insurance or your  auto insurance, your life insurance or even your business insurance, please call us, toll free, at 877-687-7557.

Here Are The Types Of Workplace Injuries That Cost Employers The Most Money – Is Your Business Vulnerable?

When a worker becomes sick or injured on the job, the ways that this event can impact the bottom line of that business are many and varied.   Of course there are the cost associated with the down time your business may experience while that worker is at home recovering, but there is also the possibility of lost revenue due to lost business that you can’t engage in if you need that employee to get the work done.  And don’t forget that workers compensation insurance policies are experience rated so that means that your past losses will affect the rates that you pay in the future.  OSHA tells us that injuries and illnesses cause increased absenteeism, decreased productivity and reduced morale among the non-injured workers.   All of the effects can be expensive to a small business owner.   But among all of the types of workplace injuries, some in particular are more costly than others.   If your business model leaves you vulnerable to losses of these types, then this is a wakeup call for you to take protective action to prevent  these most expensive types of losses from happening to your company.

There are 5 types of injuries that currently account for 72% of all the direct workers comp costs for employers in the U.S.  These types of accidents  cause losses totaling over $35.7 billion dollars each year.  They are, overexertion, fall to the same level, fall to a lower level, bodily reaction, and struck by an object.  Take just a moment and think about each of these types of accidents, one at a time to determine if your business is vulnerable to that kind of loss anywhere in your work processes.    Once you have done this, think even more carefully about ways in which you could establish changed procedures or different workflow strategies that might help prevent that type of accident.

This is a big job and requires some out of the box thinking to imagine what might go wrong to lead to a loss of any of these types.  The good news is that there is professional help available to you to accomplish this.  Some insurance companies sell only workers compensation insurance policies and often those insurance companies offer a rich and inexpensive buffet of services and programs to help you evaluate and prevent injuries to your employees.  According to the U.S. Department of Labor,   employers can save $4 to $6 for every $1 spent on safety and health programs.  Also, workplaces with successful safety and health management systems are usually able to reduce injury and illness costs by 20% to 40%.  If you consider that overall lost productivity just from lost productivity due to injuries and illnesses in the U.S. costing companies an estimated $60 billion per year, you can readily see that taking a moment to consider loss prevention for your business could have an enormous effect on your bottom line.

I advise that you check in with yourself on these most costly types of injury causes, then check in with your workers compensation insurance company to see what they can offer you to help you prevent them.  If you find that your insurance company is not particularly helpful, or if they don’t have a rich offering of tools and knowledge to help you prevent more injuries, then I suggest you start looking for another workers compensation insurance company.

At Clinard Insurance Group, located in Winston Salem, NC,  we represent a number of workers compensation insurance companies who specialize in this type of coverage only.  They have ways to help you reduce and prevent injuries in the first place, and they also have tools and knowledge to reduce the overall costs of injuries once they occur. If your business is located in North Carolina, South Carolina, Georgia, Tennessee or Virginia, then give us a call, toll free at 877-687-7557 and put us to work for you today to lower your workers compensation costs, both now and in the future.

The Consent To Rate Letter – Additional Confusion For The Consumer

You may have come across one of my previous blog articles decrying the confusion caused by the North Carolina insurance industry’s consent to rate letter.  If you missed them, click here, or here to read a few.   All of these articles though will lead to one very important point for you to remember:  If you receive a consent to rate letter from your insurance company, do not blindly sign and return it.  This is because doing to just gives them carte blanche to charge you insurance rates that are likely to be far higher than you will need to pay for your home or car insurance policy.   This article will focus on just one more feature of this letter that has caused confusion among consumers and left them facing higher rates than they ever expected to have to pay.

I want to start though with a quick background lesson on why North Carolina has a consent to rate form as a part of its insurance system.  Here in North Carolina, the rates for homeowners insurance and auto insurance as well as many other types of insurance policies, are heavily regulated.   Generally speaking, rates are approved or not by the NC Insurance Department as the maximum rates that can be charged for various types of insurance policies.  The insurance companies then file their rates as deviations, or discounts below the maximum rates.  Very few people will pay the maximum allowable rates for their homeowners insurance or their car insurance.  Occassionally though, an insurance company may feel that they would need to charge a specific client more than the maximum allowable rate because that client is perceived to carry a higher risk of loss for the insurance company.  In order to charge rates above the maximum allowed rate, they must have the client’s permission in writing.  And in cases where that client understands that their risk is higher and also has nowhere else to go to obtain insurance, then this is a good arrangement.    Unfortunately the consent to rate letter, once a rare occurrence is now a work around for many insurance companies to get higher rates out of their customers than the Insurance Department would allow.  This has happened in North Carolina in particular because the rates that are allowed have come to seem inadequate by many insurance companies after all of the money they lost to storms in 2011.  Many now use a consent to rate letter on huge swaths of their books of business just to circumvent the rate making process.    This should make it clear that signing a consent to rate letter without checking around for a better rate is almost always going to mean that you will be left paying far more for your insurance policy than you would otherwise have to pay.

Now that we are seeing such widespread use of the consent to rate form in NC, I felt that it was appropriate to let you in on another aspect of this letter that has misled some insurance consumers.   I am talking about the estimated maximum premium that is shown in the letter.  If you receive a consent to rate letter to sign, you will probably see that there is a mention of the estimated rate that you will be expected to pay if you sign the letter.  While this price might appear to be an accurate estimate, often it is far from the total that you will be paying if you sign the letter.  This is because many insurance companies will simply print the new, higher, base rate on the letter.  But the  base rate does not include the additional costs of endorsements to your policy that help to make your policy unique to your needs.  Perhaps you added towing coverage to your auto insurance policy or you have added guaranteed replacement cost coverage for your dwelling to your homeowners insurance policy.  When the consent to rate letter shows a new price for your policy that doesn’t include these other endorsements and the charges that go along with them then you might find that the bill you receive after you sign the letter is quite a bit higher than the estimate shown on the consent to rate form.  This has led to many cases of double sticker shock, once when you read the letter for the first time and yet another shock when you actually receive your updated, consent to rate renewal policy with rates higher than those estimated on the original letter.

The consent to rate letter is a work around procedure caused by the regulations that North Carolina requires for the insurance rating making process.  It can be confusing and downright misleading.  If you receive a consent to rate letter from your insurance company, I would advise that you call your insurance agent right away and try and understand why you are receiving this letter and what other options you may have for your insurance policy.  If you don’t get an answer that suits you, please call us and we will help you find a better solution.

At Clinard Insurance Group, we have many options available to our policyholders as well as to others who are faced with a consent to rate letter decision.  We still have options for writing homeowners insurance in NC without the auto insurance to support it.  Please feel free to call us, toll free, at 877-687-7557 and we will work to help you explore options that don’t include signing over a consent to rate letter to your insurance company. 

Dealers Insurance – Not A Place You Expect To Get A Return On Your Investment Of Over 10%

I’m willing to bet that most car dealers out there don’t think of their insurance policy as an investment.  And the few that do probably don’t think that as an investment, their garage insurance policy will generate an investment return unless they have a loss.  But because insurance companies are always looking for ways to determine which of their clients will have losses and which will not, sometimes this search generates changes that can offer the dealer some very nice choices.  Such is the case with the paid in full discount. 

Dealers insurance is really not very different from other kinds of insurance policies when it comes to risk selection by the insurance companies.  Everyone understands that if the insurance company can tell in advance which dealers will have losses and which will not, then they will make a lot more money.   The search for just the right metric to help them determine this is a bit of a Holy Grail type search.  Now insurance companies have relied heavily on many different factors to choose which auto dealers to accept as clients and which ones to walk away from.  Some of these factors seem obvious to the lay person.  Some of the more obvious ones are the driving records of the dealers, the past loss history of the dealers or the general condition of the dealership location itself.  Others factors are less clear, like running a credit check on the dealer or refusing to insure dealers who have a buy here, pay here service on site.  But if the insurance companies have one thing going for them, it is past data.  If they can come up with a way to back check a new idea against past experience, then they will often assume that they can project this behavior and risk assessment into the future.  The paid in full discount idea was probably something that simply jumped into someone’s head one day.  They then simply had to compare the loss histories for dealers who paid in full for their garage policy against those that paid monthly or on some other schedule.  They must have found that the pay in full group had fewer losses and so this new idea was born.

Auto Owners Insurance Company, an insurance carrier who insures many dealers across many states must have made this discovery recently.  Once they knew that dealers who paid in full had fewer losses than those who used payment plans, they simply needed a way to add an incentive to these pay in full accounts so that they could attract more of them over time.  What they came up with, I think, is very generous, though it may just reflect the difference in loss histories between these two groups.   Auto Owners now allows a 10% discount to all dealers who pay in full on their garage liability and dealers blanket insurance policies. 

Now if you are a dealer and you purchase your insurance from Auto Owners, consider the math on what this means.  Saving 10% on the cost of your dealer policies by simply paying in full is like receiving a 10% return on your investment money. If you had to borrow the money from the bank to pay for your garage insurance, I doubt you would have to pay anywhere near 10% interest.    But actually the math tells us that it is even better than that.  Assume for a moment that the cost of your garage insurance policy is $1000 and you only have to pay $900 for the policy if you pay in full, then that is a quick 10% return.  But if you compare this to paying 10 monthly payments of $100 each then the return is much greater than 10%.  This is because each month that you pay off the balance, you have less and less left to invest somewhere else to obtain some return.  So in the long run a 10% discount might generate as much as 12% or more return, depending on how many payments you have and how quickly you pay off your garage policy.

Over time, this generous discount will probably go away.  That’s because although it is designed to attract the better risk dealers who usually pay in full, the incentive will now attract some of the monthly pay plan dealers as well since it is so generous.  Once that starts to happen, the risk assessment piece of the puzzle becomes less clear and over time the pay in full group’s loss history will more nearly reflect that of the monthly pay plan group.  So my advice would be to take advantage of this discount while it is still around.

Clinard Insurance Group, located in lovely Winston Salem, NC actively insures more than 300 used car dealers, all across North Carolina, South Carolina, Tennessee, Virginia and Georgia.  We would love to help you save money on your dealers insurance policies, so please call us, toll free, at 877-687-7557 or visit us on the web at www.TheAutoDealersHelper.com.   

Don’t Let An Auto Accident Turn Into An Identity Theft Loss

While auto accidents are a common occurrence all over the country on any given day, a recent NAIC study found that very few people know what steps they should take after an accident occurs and what information they should or shouldn’t share with the other parties to the accident.  The problem is that right after an accident happens; most people are so upset that they are not paying much attention to protecting their identity.  This momentary confusion provides a great opportunity for an identity thief to make his mark.

The National Association of Insurance Commissioners study recently discovered that most consumers are unsure about what they should do after an accident and which information they should record and what they should share about themselves.  There was also a lot of confusion about when and whether to call the police after an accident.  Here’s a short list of some of the most common misperceptions that this study revealed:

·         Nearly 30% of drivers believe that they are required to share their personal phone numbers.  This is not always necessary and calling the police will help you sort out exactly what you need to share with the other party.

·         25% of consumers would share their home address.  This of course gives identity thieves one more place to go to sort through garbage or mail to find out more about you to give them an edge in stealing from you.
·         Nearly 20% believe that the only time you need to call the police is if someone was injured in the accident.  The truth is that if the accident occurs on public property, the police would like to be called in every instance.  If you are not at fault, then calling the police is probably going to be to your advantage and quite often the police report is very helpful in facilitating your auto insurance claims process.
·         Nearly 40% felt that they should share their driver’s license with the other driver.  One in six would let the other driver photograph their license to save time.  But, since some retailers use driver’s license information to verify identity over the phone, this could be risky behavior.

T    The NAIC does have a downloadablechecklist on their website of the information you should obtain if you are involved in an auto accident.  Below is a list of the information that you should get and write down somewhere or record directly into your phone after you have been involved in an automobile accident:

1.       The date, time and location of the accident.
2.       The weather or road conditions if there are conditions that are not typical.
3.       A description of the accident itself, add direction of travel and estimated speed of each vehicle involved.
4.       Describe any and all injuries and include information about emergency response, either police or medical.
5.       Describe damages and take photos or video with your phone where possible.  You should photograph the license plates of the vehicles involved, the damages to all vehicles involved, the damage to your vehicle, and any damage to any other property or objects at the scene.  Also take photographs of landmarks and street signs to help identify the location.

At Clinard Insurance Group we insure several thousand families all across North Carolina.  We generally advise our clients to call us first before reporting their claim directly to the insurance company.  This is true for all types of claims from auto insurance and homeowners insurance claims, to business insurance or workers compensation insurance claims.  We may be able to better advise you the implications of your decision to either turn in the claim or not turn it in.  After that, you can make the choice based on this additional information.  We also provide a free phone app that will help you gather the information that you need after an accident.  You can find links to that app at www.ClinardInsurance.com or you may search for Clinard Insurance in the Android marketplace or the Apple app store.

Will Falling Bond Yields Mean Higher Insurance Rates For You?

It may at first seem a little disjointed.  How could volatility and falling yields in the bond market have any effect at all on your insurance rates?  I mean weather yeah, bad driving record yeah, but falling bond yields?  The answer lies in the way that insurance companies make a profit.  And in times of intense completion,  most of their profit comes from investment income as opposed to underwriting income.  The intense completion for your auto insurance dollars is on display on your television every day and probably in your junk email folder as well.  And this competition on pricing has put a lot of pressure on investment income.    The options in that arena these days may leave many insurance companies with no choice but to raise rates.

One very important metric that every insurance company follows very closely is called the loss ratio.  This metric has several different iterations. The easiest to understand is called the pure loss ratio.  This is simply a measure of all premiums taken in, divided by all losses paid out.  Of even more importance is a metric called the combined ratio which is all premiums taken in, divided by the sum of losses paid out plus all other expenses.  When the combined loss ratio goes over 100%, then the insurance company has lost money on their underwriting operations.  When this happens, they will need to find their profit in the income that they generate by investing your premiums until they need them to pay for losses.

Intense competition in the insurance marketplace has driven down rates steadily for many years and the combined loss ratio of many insurance companies is now up over the dreaded 100% level.  To protect themselves their choices are to cut expenses, increase investment income or increase the rates that they charge for the various insurance products that they sell.  As a rule,  insurance companies invest in very stable and safe government bonds.  But the volatility of the government bond market, along with dreadfully low yields has driven some insurance companies to invest more in corporate bonds.  The problem with this strategy is that it exposes the insurance company to debt risk if and when interest rates rise.  If we see more corporate defaults, then the insurance companies that have invested in corporate paper will suffer losses and will have to raise their rates even further.

With high quality corporate bond now yielding below a 2% return, corporate debt is no longer a viable option for helping to reduce the combined loss ratio to produce a profit for the insurance company.  This leaves insurance companies faced with the choice between reducing expenses or investing in riskier investments to chase higher yields.  If they reject these choices then they are left with one remaining option, raising rates.  When yields ran at 6% for grade A corporate bonds, then the insurance companies that took a chance on this type of debt had 4 additional points to play with on their combined loss ratio.  At 2% the margin is getting pretty thin.  Add in the risk of default by the corporations that issue these bonds and you can see the dilemma that may lead more and more insurance companies to raise their rates.  It is easy to see that while falling interest rates may be helpful to you from a mortgage or car loan standpoint, they can have a counter effect on your car insurance rates and your home insurance rates.

At Clinard Insurance Group, we insure thousands of families all across North Carolina with their auto insurance, their home insurance and life insurance as well as their business insurance needs.  If you would like to ask questions or receive help in any of these areas, I hope you will call us, toll free, at 877-687-7557.

New Workers Compensation Experience Modification Formula Increases Incentives For Getting Injured Employees Back To Work.

Starting with policy year 2013, the work comp experience modification formula will change.  The old formula has gotten long in the tooth and these changes are designed to give more weight to any given employer’s actual workers compensation experience than the old formula is able to better reflect any given company’s actual loss experience.  But for most people, the mod formula is confusing and complicated and grasping this change will be best understood once they receive their new, recalculated mod.  So while we won’t get into a lot of details about the math in this article, we will talk about the impact of getting your people back to work more quickly and how this one act can affect the final experience mod factors across different industries. 

Here is a simplistic answer to what is changing in the experience modification formula.  Your mod formula is the tool that the insurance industry uses  which attempts to compare your actual loss results with those that would be expected based on your payrolls for each class code on your workers compensation insurance policy.  Primary losses, one side of this formula, are currently capped at $5000, regardless of how much more than that is actually paid out.  This is called the split point and this is what is changing.  Beginning next year this cap will increase and by 2015 will be more than $15,000.  After that it will change to reflect the inflation rate.   For many employers with claims over $5,000, the primary impact of this change will be to push bigger numbers to this side of the formula.  While the mod changes should be nearly neutral over the entire universe of workers compensation policies, some companies will see big increases while others may see decreases.  So how vulnerable is your company and while we are at it, your industry to the potential for large experience modification factor increases?

Step one to control your mod factor is to control the existence of any losses in the first place.  This means prevention is your number one cure.   But the focus of this article is to look at things that you can do once you’ve had an accident to help reduce the negative impact of that loss on your mod.   When I look at the formula, and how it is calculated, it becomes increasingly obvious that you should try and get all injured employees back to work before the disability waiting period (7 days in NC) runs out.  This is because the mod formula applies a 70% discount to all medical costs for claims that have no disability component.  Once your injured employee starts drawing disability, then the discount goes away and all of the medical costs are now dumped into your mod formula.  You can see why it is so important for you to find a workers compensation insurance company that has the loss control and back to work programs that can help prevent you from owning a claim that has gotten deep into the disability coverage of your policy.

Because all industries are different and have different types of claims, the impact of an effective back to work program varies a bit by industry.   Summit Insurance recently released a study of several industries and the anticipated impact of the mods for businesses in those industries depending on whether or not they were able to access an effective return to work program.  Here’s a sample of some of their results.  If you are in the automotive repair business then an effective back to work program could reduce your mod on your garage workers compensation insurance policy under the new formula rules by 6 points.  That would be a savings of $600 per year on a $10,000 policy for every claim that you have.  Landscapers workers compensation insurance policies will average a 3 point reduction as do electricians workers compensation insurance policies and workers compensation insurance policies for HVAC contractors.  Plumbers are likely to see a 4 point reduction and restaurants with workers compensation insurance policies could enjoy a 6 point mod reduction per claim for choosing a workers compensation carrier with an effective back to work program in place.

These numbers reveal once again that choosing a workers compensation specialty company with their associated loss control and back to work programs can save you a substantial amount of money in the long run by helping you keep your experience modification factor lower.  Generally I advise people to place as many of their policies with the same insurance company for the best treatment and lowest rates.  But workers compensation is another animal.  Here your rates will reflect your past losses through your experience modification factor and so you will have to live a long time with your mistakes.  For that reason, every business should treat their workers compensation insurance a bit differently and make sure that they choose and agent and a company that have experience in this area.   I would suggest that you to take some time to read the loss control and claims costs control features on the web site for the company that provides you with your workers compensation insurance policy.  Take advantage of what they offer and implement where you can to prevent losses and to get your injured employees back on the job as soon as possible.  If you need any help at all with your workers compensation insurance, please call us, Clinard Insurance Group,  toll free, at 877-687-7557.

Pay As You Go Car Insurance – The Future Of Car Insurance Rates?

Telematics is the process of gathering data on your driving habits and transmitting them to your insurance company to determine your risk and thus your final car insurance rates.  While this used to sound like science fiction, telematics for car insurance is no longer just an idea that may happen someday.  This new technology is gaining acceptance and traction and it promises to have impacts on our society far beyond just insurance rates.  The impact of this technology could save your life one day.

Telematics is also known as pay as you drive, or usage-based insurance rating.  It has been a bit of a rating nirvana that the insurance industry has been eyeing for a long time.  Originally insurance companies only hopes that they could determine how many miles a year that you drive and use this information to provide you with a car insurance rate that more accurately reflects your driving risks.  But with the development of this technology, telematics will now go far beyond that original goal. 

Telematics and car insurance have hit several brick walls in their merging process over the years.  The main limiting factors were cost, data management, and privacy.  In the early years, the cost to install a device in the vehicle that could transmit data to the insurance company only really made sense for large corporate fleets of vehicles.  But over time these costs have come down and the devices are now very affordable in a one car installation situation.  Some insurance companies are working on apps for your smartphone to do all of the work so that no installation costs come in to play at all.   Data management was a problem until recently.  With the expansion of smart phones, more and more bandwidth has been created which allows the flow of the huge amount of data that any car will collect on its driver.  Some pay as you drive systems are now able to track and transmit over 100 data points on your driving at any given moment.   Privacy is still the last hoop to jump through, but that problem may be fading away.  This is because today’s youth seem to not have a great a concern or desire to protect their privacy.  This is already evident in the number of phone apps that track your location and post them publicly for others to see.

Telematics will allow the insurance company to adjust your car insurance rate based on your driving habits.  The data collected is now so rich that they can track how fast you accelerate, how fast you drive, how hard you brake or take corners in addition to where and how many miles you drive.   All of this data allows the insurance company to much more accurately predict the likelihood of you causing an accident than they ever could by simply studying  your credit score or the number of speeding tickets that you have been issued. 

Trucking companies that have installed telematics in their fleets, almost universally report that accident rates go down right away.  It turns out that drivers who understand that everything they do and everywhere that they go is being measured and monitored, suddenly become much safer drivers.  Can this effect be extrapolated out  to the population as a whole if everyone were to have a telematics device in their car?  We don’t know for sure but there seems to be evidence that this may be true.

Of course telematics won’t benefit everyone.  If the car insurance world has inadequate information on which to base their rates today, then that means that some people are subsidizing others.  If the insurance company doesn’t know for sure if you are a safe driver or a risky one, then you can be sure that the safe drivers are subsidizing the riskier ones.  This means that as telematics become more common, some drivers will save money as a reward for their safe driving habits, while other drivers, or those that refuse to use telematics will have to pay more to make up the difference.  This is why I firmly believe that eventually telematics will be ubiquitous in the insurance world and in fact, cars may soon come equipped with the telematics devices as a standard part of the vehicle.  Eventually it will be much more, if not simply too expensive to purchase a car insurance policy that is not based on telematics.  The insurance company will soon come to the conclusion that the old fashioned rating system blinds them from seeing the bad risks out there.  When that happens, they will charge a much higher rate for those policies.  Eventually no one will be able to afford a policy whose rate is not based on telematics data.

If telematics do change our behavior behind the wheel and force us change our habits to drive more safely, then I think that this technology can be a real game changer.  Just how long it will take for this technology to be the standard way car insurance rates are calculated remains unknown.  But I’ve learned not to underestimate just how quickly something like this can become the norm.    It’s hard to imagine that just a few years ago most people had never heard of a smartphone.  Telematics could make this jump into ubiquity just as quickly.

At Clinard Insurance Group, we work hard to help all insurance buyers become informed consumers.   We would love to help you with your home insurance, your car insurance, your life insurance or even your business insurance policies.  Please call us toll free, at 877-687-7557.  

Fallen Trees – What Does The Insurance Policy Say?

You and I both know it, almost no one actually reads their homeowners policy.   Although if you are having trouble sleeping at night, reading is might help with that problem.   And even if you do read it, you may have some trouble interpreting what is covered and what is not.  In this blog I’d like to tackle a common question and point out an area where no policy provides protection, yet could result in an expensive bill for you: fallen trees.

I love to see large old trees in the yard in front of or behind a home.  But large trees in the yard can pose several risks to homeowners.  The most dangerous of course is that a falling tree could injure someon in the house or on the property.  After that, there is risk to the property itself, from the house to outbuildings to fences, yards, patios and driveways.  Now for the legal disclaimer:  Insurance policy forms vary from state to state and from company to company so I suggest that you consult your own policy for exact and specific coverage.  This blog will try to answer these questions in a general way that should be accurate for the majority of NC homeowners with a North Carolina Homeowners Insurance Policy.

With the disclaimers behind us, let’s move on and talk about what is covered and what is not covered in the area of fallen trees for the standard NC HO-3 policy form.  The damages to your home or your structures caused by a windblown, fallen tree will be covered, subject to your deductible.  In addition, the standard HO-3 homeowners policy form will provide up to $1000 for the cost to remove the tree from your premises.  This applies if your tree was felled by wind, hail, or weight of ice, sleet or snow.  But here is where it gets tricky.  If that tree does not damage your home, outbuildings, or fences, then no removal coverage will apply.  There is one exception to this rule.  If the fallen tree is blocking your driveway, then you will have up to $1000 coverage to clear it from your driveway enough to let you get vehicles in and out of your driveway.

Sometimes when reading the coverage on an insurance policy, you have to look carefully for what is not written in the policy language.  So what is missing here?  Well, think about the $1,000 coverage limitation.  While generally $1000 seems like plenty of money for removing a fallen tree, if you have large trees, or if several come down at one time, then $1000 might fall far short of what you need.  I have seen situations where a tree fell in a difficult place between two houses  and while it didn’t hit any structures, a crane was required to remove it.  Those costs can run up into the $10,000 range in a big hurry.  I’ve also seen cases where one tree falling brought down a couple more trees with it, generating cleanup costs well beyond the $1000 mark.  So if you have large trees around your home, you might have a rather large loss exposure that simply won’t and can’t be covered by an insurance policy.

If you are a perceptive reader, then you may have noticed that lightning was not mentioned in the list of covered perils that can trigger the removal coverage.   There is good news on that front.  The Standard NC HO-3 policy form includes some direct coverage for trees, shrubs and other plants that are damaged by lightning.  The policy will pay up to 5% of the coverage limit on your dwelling for lightning damage to trees, shrubs, plants or lawns.  But, no more than $500 will be paid for any one tree, shrub or plant.  But here’s the good news, if that tree is hit by lightning, it is now considered covered property and is eligible for removal coverage as well.  So if that huge tree in your yard falls and hits nothing on the way down, you might find yourself hoping for some evidence that it was hit by lightning.  Otherwise, you are going to be writing some big checks to tree removal service companies.

Here at Clinard Insurance Group, located in lovely Winston Salem, NC, we want all insurance buyers to be informed consumers.  If you need any help with your home or auto insurance, or with your life insurance or even insurance for your business, we hope you will call us, toll free, at 877-687-7557.

Safety Technology For Cars – Which Ones Are Working, Which Ones Aren’t?

A recent study was done by The Highway Loss Data Institute to determine how well some of the new safety technologies installed on some new car models are doing in terms of preventing accidents.  The results showed that some of these technologies were clear winners while some were not performing as well.   Anyone who is considering purchasing a new car, could very well find themselves having to make a choice about which of these new safety systems to have installed  in the new vehicle.   This study can help you decide which ones might be worth the costs and which may not.

To find out more about which of these new technologies is doing its job, researchers looked at collision, property damage and bodily injury claims on vehicles with model years between 2000 and 2011.  They studied automobile insurance claims occurring between January 2008 and August 2011.  They decided to study insurance claims instead of just looking at fatal accident data because of the sheer number of insurance claims.  This large number allowed them to find statistically significant sample sizes to draw better conclusions than if they had just focused on fatality data.   

So which safety systems provided the best results?  Well, the two big winners in terms of reducing the number of crashes were adaptive headlights and forward collision avoidance systems.  The collision avoidance systems that worked best were those that allowed the car to activate the brakes, independent of the driver. 

 Adaptive headlights are able to bend with the road and shine around the curve that you are approaching.  As you approach a curve in the road, adaptive headlights will be aimed where you are headed as opposed to straight out in front of the car. This also minimizes the shine of headlights in opposing driver’s eyes.  These headlights manage this trick by using electronic sensors to detect the speed of the car, how far the driver has turned the steering wheel, and the yaw of the car.  Adaptive headlight systems were shown to reduce accident frequency by 10%.

Forward collision avoidance systems are systems that scan the road ahead taking measurements of the cars speed in order to either alert the driver or apply the brakes if an accident is imminent.  Researchers found that vehicles made by Acura and Mercedes Benz with a forward-collision avoidance system with autonomous braking had 14% fewer claims under property damage liability than the same models without this feature.  Volvo’s system reduced these types of wrecks by 10%. 

There were some safety systems that may not be worth the money.  The big surprise was with lane-departure warning systems.  These systems can alert drivers if they cross the center line or are in danger of running off the road. Some such as the Lexus system will even correct the steering to prevent the car from drifting out of a lane or from drifting off of the road.   The data studied showed that these systems actually increased claims.  Perhaps they were distracting the drivers.    While the increased chance of a wreck with these systems is not statistically significant, the researchers did draw the conclusion that these types of systems were not reducing accidents. 

A few other systems, like blind spot detection and park assist will require more study.   There was not enough data for the research to determine one way or another if these systems were reducing claims. 

At Clinard Insurance Group, located in Winston Salem NC, we insure thousands of families all across North Carolina.  If you would like an agent who will take the time to know you and your particular situation, and be here in the future when you need to speak to him or her again, then Clinard Insurance Group is the place for you.  We are an independent insurance agency so we can give you choices about pricing, coverage and which insurance companies to use.  We would love to be your helpful consultant for your auto insurance, your home insurance, your life insurance, or the insurance for your business.  Please call us, toll free, at 877-687-7557 and let us get to work helping you today. 

Auto Insurance Marketing Costs – The Ad War Continues….

If you watch any television these days then you know that as soon as an ad sequence starts, you are very likely to see at least one ad for car insurance.   It is no accident that you seldom see specific appeals for you to buy home insurance in NC.  But that is simply because most insurance companies are losing money on NC homeowners insurance.  But auto insurance is different.  The profit margins for this product are much higher, thus you see so many ads offering to save you money.    These ads must work though, since the insurance companies just keep upping the ante and spending more and more each year.    But just how much is being spent to try and convince you to switch your auto insurance policy?

The numbers are shocking.  In fact if you are one of those who would like to see more money spent on solving world problems rather than advertising, you may even be offended.    The insurance company that is currently spending the most money on marketing expenses is Geico.  Last year they spent $993.8 million dollars on marketing.  That’s almost a billion dollars!  Geico increased its expenditures in 2011 by 10% compared to what they spent in 2010.    And yet, this 10% increase, as amazing as that seems, is far below the 15% average increase in marketing spending industry wide.  Geico’s marketing budget amounted one sixth of all the marketing spent last year by the entire property and casualty industry.

You’ve heard the saying that bigger is not always better and I think it comes into play here.  The more ads they put on television, then the less impact each one has.  But this arms race that the largest insurance companies have joined in simply requires them to spend more and more each year to overcome the noise that the others have created trying to keep up with them.  Where it will end is not clear but at some point in time the return on investment will fall and this trend will slow down or stop completely. 

You may be interested to know that while auto insurance represents about 1/3 of the total of all property and casualty insurance sold, the advertising and marketing budgets for car insurance represent more than half of the total spent on property and casualty insurance marketing.  This is evidence to me that these direct writer insurance companies with their faceless call centers believe that the average television watcher is probably the biggest sucker for them to approach.  And they are probably right.  They boil the complicated process of protecting your hard won assets down to saving money.  Look, saving money on car insurance is easy, just reduce your coverage.  But doing that of course flies in the very face of why you would buy car insurance in the first place.  But hey, if they can distract you with comedy and talking reptiles, why not?  They surely won’t spend this same amount of money trying to reach commercial insurance customers because commercial insurance customers are too savvy to fall for the idea that all insurance policies are the same and that the lowest price is the only goal when buying insurance.  And people who buy car insurance should be just as careful as business customers because after all, you are buying car insurance to protect your assets that you have worked so hard for over the years.

At Clinard Insurance Group we do things differently.  We don’t have billion dollar ad budgets so we have to get it right with every person that calls us.  We do this by offering you an experienced, well informed agent who will take the time to listen to you, hear your story and then help you find the right policy for your needs at the lowest possible cost to you.  We insure thousands of families all across North Carolina and would love to have the opportunity to show the difference between huge ad budgets and one on one consistent, professional help.  Give us a call today; toll free, at 877-687-7557.