As though insurance wasn’t expensive enough, some insurers have now added even MORE weight to a factor that used to only slightly figure into homeowners insurance premiums.
Insurers have been using insurance scores to determine one’s insurance rates, and just the factors used for that upset many consumers.
Of course, we’ve known all along that our personal driving records play a huge part in the amount of auto insurance premium we pay. Additionally, the area we live in is part of the rating factors for an insurance score, so depending on where you live, you may pay more or less in car insurance premiums. The seemingly general rule is that if you live in a rural area, your premium will increase due to your lack of city driving, whereas living in the city brought its own set of risks too, like on-street parking and more theft and vandalism.
In addition to factors like these, your insurance score is also factored into your insurance premiums, increasing them as well. Usually the argument behind this is that the actuarial data used in developing the scores is connected to statistics and findings that are apparently true. Many felt that insurers using their personal credit scores was entirely unfair, and felt their credit score had nothing at all to do with the way they drive. However, insurers responded by saying that people in certain brackets (particularly those with poor credit scores) were apparently more likely to have accidents and claims.
Now, that same argument is about to hit the homeowners insurance market. In some states, like Pennsylvania and Michigan, insurance companies would actually refuse to write a new property policy at all if the person’s credit score wasn’t high enough.
It now appears as though driving records are going to be playing a part in determining your homeowners insurance premium. Which begs the question—if someone has frequent car accidents and/or claims on their driving record, does that definitely mean they’re more likely to make a claim on their homeowners insurance policy?
According to one large insurer, Allstate Insurance, it does make a difference. In October of 2011, Allstate launched a program called “House and Home” in the state of Oklahoma. Their intent is to move into other states as well, as reported to the Chicago Tribune.
In a public statement, a company representative said, “Allstate data shows a strong correlation between auto loss history and the likelihood of covered homeowners losses. Allstate’s new homeowners product recognizes this correlation and rewards customers who have good auto loss histories with lower homeowner rates.”
Sounds like if this catches on to other insurers as well, we could be looking at yet another problem when it comes to the stagnant real estate market, or we potentially share the roads with uninsured drivers as they refuse to let their less than cheap auto insurance premiums raid their bank accounts.
Similar to the way consumer advocacy program “Consumer Watchdog” is currently fighting for credit reports to not be a factor in auto insurance, they’ve latched onto this latest development as well. In a statement to Time Magazine, Joe Ridout, a spokesperson for the organization, doesn’t buy it.
“Insurers are always seeking ways they can increase premiums,” he said. He reminds consumers of a recent statement made by AllState chairman, Thomas Wilson, at an earnings conference call in January.
“We must continue to raise returns from the homeowners and annuity businesses. At the same time, we need to grow insurance premiums,” he stated. His belief was that by keeping households “multi-lined” that they could achieve this but would still be increasing average premiums moving upwards.
Allstate hasn’t made it clear yet whether they’ll be obtaining credit reports from their normal database, which is called CLUE. They may go through the driving records via DMV in order to find the information they need in order to increase claims. Unfortunately, some of the things they may find on drivers’ records are things which never even led to an accident, such tickets for not wearing a seatbelt, speeding, or running a stop sign.
Of course, most insurers (and even people) would probably agree that drivers who participate in such reckless driving behavior are at a higher risk for a car accident.
However, even if someone did have a lead foot, consumers are still demanding to know what their driving record has to do with their homeowners premiums—especially if they’ve never even had a homeowners claim. It’s quite possible that someone may treat their home differently than they do their car. Sadly, it seems that more people perform regular maintenance on their home than they do on their vehicles.
If policyholders aren’t enthused about the new rating factor, their only choice is to leave the company—which Allstate may take care of before they even have the chance to. According to the Chicago Tribune and the Winston-Salem times, consumers in New Jersey, North Carolina, and Georgia have stated they’ve been dropped from Allstate just because they didn’t have their car insured through them also.
All sort of insurance companies are beginning to refuse to write mono-line policies, and the ‘House and Home’ program may just be the first of many to follow. Although Allstate may have good intentions by using a classical psychological conditioning method (rewards for good behavior and punishments for bad behavior) it may not be the right one to go with. While it may work on dogs and children, it usually doesn’t work well with checkbooks.
-Desiree Baughman, Insurancequotes.org, @DesireeDb
Facebook Comments