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Schreiber is a division of Millennium Ventures, LLC |
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Insurance Companies Trading Individual Privacy for Profits? Near the end of last month a call reportedly went in to KOB radio in Albuquerque from someone who said that her insurance had been cancelled by SAFECO Insurance Company. It was understood that SAFECO did not cancel the policy for bad driving, traffic tickets, or lots of claims. It was because the company had run a credit report, and her credit score did not meet SAFECO’s requirements. Insurance agents say that this story could very well be true, and SAFECO is not the only company running credit reports. In fact, agents were told that credit reports were run on all SAFECO customers, but only those cancelled were notified at the time. In 1996, Progressive Insurance Company began using a new underwriting criterion, Financial Responsibility, to determine the correct market tier for each applicant. 50% of insurance companies have joined in using insurance scoring, which includes credit data, just since 1998. Today 92% of insurance carriers use it to quote and write new auto coverage, according to a study by Conning and Co. The use of consumer credit reports for underwriting purposes is expressly authorized under the federal Fair Credit Reporting Act. What does this mean for us? When you call an insurance company for a quote, they will now usually ask for your Social Security Number. However, in New Mexico many times your name, date of birth, and approximate address are enough to run a report that will reveal everything else, including your Social Security Number. Some companies require the agent to ask you if it is OK to use this information to run a credit report or "confirm financial responsibility". Others actually run the report and if it raises your rates or if the company says they can’t write your insurance because of it, then the agent should tell you. Insurance companies say it is a provable fact that those with poor credit tend to have more claims. Companies cite a strong statistical correlation between credit data and the amount paid on insurance losses. Progressive Insurance Company claims, "Approximately two-thirds of our customers get a lower rate than they would if [Financial Responsibility] was not used." They say that it is fair, because we have more control over our credit. Insurance agents complain that it takes away the ability to look at each circumstance individually. They point at customers who have poor credit due to circumstances beyond their control or those with spotless driving records who are cancelled simply because their credit rating is low. A new law, the Gramm-Leach-Bliley Act (GLB) took effect on November 13, 2000, which broke down some of the barriers that existed between various financial institutions, including banks and insurance companies. Companies in New Mexico are still waiting to hear when their deadline for compliance is. Title V of GLB deals with consumer privacy issues. It requires the provision of an annual privacy notice to a financial institution’s customers and generally prohibits financial institutions from disclosing a consumer’s nonpublic personal information to a nonaffiliated third party for marketing purposes, unless the financial institution has provided the consumer with a copy of its privacy policy and has given the consumer the opportunity to opt out of such disclosures. What this means is that before, insurance companies and banks could take your personal information, like your credit history, and actually sell it to another company or transfer it to another part of their own company so that they could try to sell you something else. Perhaps you have gotten a letter from your auto insurance company offering life insurance. Two different companies who shared your information sell those two products. With the passing of the GLB, they can still do it. They just have to give you a paper telling you what they are doing with a phone number on it where you can call to tell them you won’t allow this sharing of information. These Privacy Policy Statements may come with your regular bill, insurance policy, or they may come by themselves. As the law is currently written, if you don’t call the number on the paper or write to whatever address it provides, your personal information is fair game for whatever use your bank or insurance company may find for it. The moral of the story is this: that paper is not junk mail. The law also continues to allow insurance companies to use personal information not supplied by you, like your credit history, to underwrite a policy. It is up to individual states, therefore, to implement laws regarding both the use of personal information and the use of credit information in insurance underwriting. Bill Lebo, the executive vice president of Property & Casualty operations at SAFECO insurance was asked during a public teleconference held on July 26 what the company would do "if we’re starting to see some insurance departments across the country and other places that are frowning upon credit scoring and … consumer groups that seem to be attacking this style of underwriting." Mr. Lebo said, "The [underwriting] model that we’ve built currently does have credit scoring as one of the important components. But it’s not the only component and we’re building the model so that we can run it with or without the credit scoring component and capture the same, or nearly the same, benefits as we have from having our very best underwriter looking at each individual account. There are several states that do not allow credit scoring to be used for qualification for new business, and we fully intend to use this model absent the credit scoring component." He then said that there is a backup "Plan B, if everybody outlaws [credit scoring]." A SAFECO company sales representative told us that it would take a successful class-action lawsuit to stop the use of credit reports in quoting and underwriting policies. SAFECO has said "it will be making some major changes in the way it reviews homeowners business, namely in stepping up the use of insurance scoring," according to Best’s Insurance News. This has caused local agents to wonder, if the company feels they can ‘capture the same benefits’ without the use of credit scoring, why do they press the issue? The answer is that insurance companies everywhere are losing money. On homeowner’s insurance policies last year, SAFECO paid out $1.52 for every dollar that they took in. As a whole, the company lost $33.4 million during just the months of April, May, and June of this year. Allstate Corporation posted a 63.4% drop in income during the same period. A.M. Best, a company that rates insurance companies on their ability to pay claims, downgraded both Millers Insurance Group and Phoenix Indemnity from "Very Good" ratings to C++ (marginal). Phoenix Indemnity has been a popular insurer of vehicles in New Mexico, but now faces serious financial trouble. As insurance companies face more difficult times, no doubt they will reach for more desperate measures to keep costs down and underwrite out those who are more statistically prone to have losses. Local independent agents have the advantage of being able to help us with the complicated world of insurance. However, as the Gramm-Leach-Bliley Act reads, it is up to each of us to maintain control of our own privacy and personal information. Progressive Autograph*:Progressive Awarded Second Patent for Usage-Based Auto Insurance Rating SystemMayfield Village, Ohio, July 13, 2000 - The United States Patent Office has awarded Progressive Casualty Insurance Company, a subsidiary of The Progressive Corporation (NYSE:PGR), a second patent for its usage-based auto insurance rating system. This system, known as Autograph, bases consumers’ auto insurance rates, in part, on how much, when and where the vehicle is driven. Progressive is one of the largest auto insurance companies in the US. Bob McMillan, Business Development Leader, Progressive, said: “Usage-based auto insurance is rather simple, really. The less you drive, the less you pay. It’s the first-ever auto insurance product that gives consumers control over how much they pay.” The system bills consumers each month based on vehicle usage. The information is reported back to Progressive using a combination of Global Positioning Satellite (GPS) and cellular technology installed in the vehicle. The system has been successfully tested in Texas since 1998. There, hundreds of consumers have chosen usage-based auto insurance over a ‘traditional’ auto insurance rating system. In Houston, Autograph has been shown to save consumers an average of 25 percent compared to what they were paying using a traditional auto insurance product. “Our usage-based approach to auto insurance is producing savings for lots of people,” McMillan said. “In fact, people who live close to work or have a second or third car that isn’t used as much are seeing savings of up to 50 percent on their auto insurance premium.”
“The test proved the usage-based system is feasible from a technology standpoint and consumers liked the control and cost savings,” said McMillan. “We’ve concluded the test to move forward focusing on integrating our systems, forging alliances with companies that can provide technology embedded in the vehicle and obtaining necessary state regulatory approval for a wider rollout.” Progressive, with headquarters in Mayfield Village, Ohio, is the nation’s fourth largest auto insurance company. In business since 1937, the company provides all drivers with competitive rates and 24-hour, in-person and online services. The company sells its products over the phone at 1-800-AUTO-PRO, online at progressive.com and through more than 30,000 independent agents throughout the U.S. More information about the company can be found at progressive.com. Read Progressive's first press release on Autograph.
Effective 12-08-2000 Progressive offers new ratingThe leader in auto insurance sold through Independent Insurance Agencies announced that effective December 8, 2000 they are coming out with all new rates. As in the past, if you are one of the 40% of people who have better credit, you may qualify for better rates than someone with an identical driving history who has poor credit. If you haven't been paying attention, the rules are changing. Almost every preferred auto insurance company is leaning towards Progressive's long-standing policy of basing your auto insurance payments on your credit history. SAFECO joined the ever-growing list of credit-checking insurance companies in June. Since then, Ohio Casualty, Union Standard and others have joined in. What does this mean for you?If you notice that your Allstate auto rates are higher than your friend who has a speeding ticket, Allstate may have checked your credit and decided that your score wasn't up to its preferred standards. Get used to the idea that when you call for a quote on insurance, more and more companies will ask for your Social Security number. Schreiber Insurance Agency will be adding Social Security number to our quote forms, along with heightened security. We believe we need to encrypt your data before we can start getting that nosey. Look for the security indicator on your browser before sending personal information like that. If you don't see the padlock, don't do it. Click to read the article on insurance companies checking Credit Histories. 10 Tips to Keep Forest Fires From Hitting HomeLessons from Los Alamos, N.M., Blaze Could Save Northern Arizona HousesFLAGSTAFF, AZ–(June 14, 2000)–Wildfires destroyed more than 220 homes last month as they swept through Los Alamos, N.M. Research scientists for the U.S. Forest Service and FireFree prevention experts now report the New Mexico blaze might have destroyed less if homeowners had kept the areas around their homes free of ignitable debris. Most Los Alamos home fires were ignited by other houses and yards — not nearby forests. Arizona homeowners are advised to heed the fire prevention warnings Los Alamos revealed and create a 30-foot, non-combustible zone around their houses. "Within several hundred yards of most residential areas the forest fire burned only as a surface fire, largely fueled by pine needles, dead leaves, cured vegetation and flammable shrubs surrounding homes," explained Jack Cohen, a fire research scientist for the U.S. Forest Service, in a report issued last week. "In forests, it burned as an intense, continuous crown fire, but in residential areas it mostly remained on the surface." SAFECO, the seventh largest insurer of U.S. homes, has developed FireFree, a national public education campaign designed to help homeowners fight fires before they start. In Arizona, SAFECO partners with the Federal Emergency Management Agency’s Project Impact and the Ponderosa Fire Advisory Council to implement community-wide cleanup and disposal events. "Most people assume wildfires can only be combated by professionals," said Suzanne Romero of the Ponderosa Fire Advisory Council. "Through FireFree, we are teaching homeowners how they can fight back using simple preventative measures." 10 Steps to Wildfire Defense SAFECO and its FireFree partners cite several ways families can reduce their risk of wildfire.
"The key to preventing wildfire damage is constant vigilance," Romero adds. "With summer swinging into high gear, families must prepare for the worst and hope for the best." SAFECO, in business since 1923, is a Fortune 500 diversified financial services company based in Seattle. SAFECO and its more than 17,000 independent agents and financial advisors provide premier insurance and financial services to individual and business customers. |
Stick
This In Your CarMayfield Village, OHIO (October 26, 1999)--In August 1998, Progressive (NYSE:PGR), one of the largest auto insurers in the U.S., began a limited marketing test in Houston of a new product that bases auto insurance premium in part on when, where and how much a vehicle is driven. The product is called AutographSM. In August of 1999, the company expanded the test throughout the state of Texas.
Auto insurance rates are traditionally rated on variables including vehicle age, manufacturer and value, driver's age, sex, marital status, place of residence and driving record and types of coverages and deductibles selected. Auto insurers use this information, along with the company's loss experience on that "class" of driver and vehicle, to determine a consumer's auto insurance rate. In other words, current rating systems are primarily based on a company's past realized losses, or historical data.
Progressive's new auto insurance product, Autograph, determines a consumer's auto insurance rate based on actual vehicle usage, including when and how much the vehicle is driven. When a consumer decides that Autograph is right for him or her, the consumer and Progressive enter into an agreement that gives the company access to the data and affords the consumer protection as to uses of the data--only the company or the consumer have access to it.
A device the size of a videocassette is then installed in each vehicle. Data regarding when, where and how much the vehicle is driven is collected periodically and reported automatically using cellular communication technology. Progressive sought and has been awarded a patent by the Patent and Trademark Office of the United States Department of Commerce for the method of determining a cost for auto insurance with vehicle usage data.
"Up until now, no one has come up with a more accurate way of determining one's auto insurance premium," said Bob McMillan, Director, Consumer Marketing, Progressive. "Autograph works more like a monthly utility or telephone bill, with the consumer paying by the month based on actual usage rather than on historical data derived from groups of similar people and vehicles. It's simple, really. If you drive less, you pay less."
McMillan said: "In Houston, for example, consumers using Autograph are paying an average of 25 percent less using Autograph than they paid using a 'traditional' auto insurance product. Houston consumers tell us three things--they're paying less, they're in control and the system makes sense to them."
The company continues to offer its traditional auto insurance product everywhere it writes auto insurance. In Texas, however, some consumers who call Progressive will have a choice of auto insurance product that best fits their needs. Autograph may be the best choice for consumers who have more vehicles than drivers in the household, maintain low mileage on their vehicles, or use public transportation or use car pools.
Autograph may also be a good choice for consumers with security concerns. In addition to the auto insurance applications, consumers also enjoy the safety features that the technology provides for a small additional monthly fee including theft recovery, remote door unlocking, roadside assistance, directional assistance, and low battery detection. In addition, the system features a 'panic button' the consumer can use to be put in instant contact with a manned, 24 hour response center.
McMillan said: "Our strategy is one of offering consumers choices about their auto insurance. We offer them choices in how, when and where to buy and service their policy. With Autograph, we're expanding Texas consumers' choices to include which auto insurance rating method makes the most sense for them."
Progressive will continue the market test in Texas and will discuss the products' introduction with state insurance regulators in the year 2000.
Progressive provides consumers throughout the U.S. with competitively priced automobile insurance and in-person, 24-hour services and is the nation's largest writer of automobile insurance through Independent Agents. Progressive companies that write auto insurance receive the highest ratings available from A.M. Best, the independent company that rates the financial condition of insurance companies. The Progressive Corporation's stock is traded on the New York Stock Exchange (NYSE:PGR).
More information about the company can be found on the World Wide Web at: #.
*Information
on Progressive Autograph: Copyright © 2000
Progressive Casualty Insurance Company.
All rights reserved.
Last Updated: 07/31/2001 05:54:32 PM
"I read an article describing Progressives attempt in using a
black box that will record the miles driven for a certain period
of time therefore charging one for miles driven. I know this was
done on experimental basis in Texas or on the west coast. How is
that coming along? Are insureds being charged less, more, and is
it successful? Can you give me more information about the
black box?"