Author Topic: Insurance pricing must be a scam!  (Read 3807 times)

FIRE_at_45

  • Magnum Stache
  • ******
  • Posts: 3062
  • Location: Vancouver, BC, Canada
    • I found happiness! Now what!?
Insurance pricing must be a scam!
« on: October 12, 2016, 07:29:01 PM »
When I recently started to really grind away at saving opportunities I thought I was doing well on insurance...or should I say the best I could do.  This weekend I went online and found a couple companies who would give free quotes for tenant's insurance.  So I entered my information and I got a quote for $152/year and I'm paying $359/year.  I was shocked that I've been wasting all this money on something I have never used. 

So I call my company and ask for a new price.  Granted there were a few concessions.  I had $59,000 for personal property and I have no where near that amount of stuff so that's now $30,000 but I kept the liability the same and everything else for the price of $159/year.  So, I ask you just how much profit are they making if they can drop their price that much! 

In the end I re-learned a lesson that I already knew.  It always pays to do your research and ask the questions. 


ender

  • Walrus Stache
  • *******
  • Posts: 5114
Re: Insurance pricing must be a scam!
« Reply #1 on: October 12, 2016, 07:31:11 PM »
yeah insurance companies profit off of laziness.

FIRE_at_45

  • Magnum Stache
  • ******
  • Posts: 3062
  • Location: Vancouver, BC, Canada
    • I found happiness! Now what!?
Re: Insurance pricing must be a scam!
« Reply #2 on: October 12, 2016, 07:37:39 PM »
yeah insurance companies profit off of laziness.

Ha, right after reading your comment I open their statement where they lay out the costs...including, "The initial payment includes the $20 non-refundable annual processing fee."

I think I'll call and get them to waive that bullshit fee. 

KMMK

  • Handlebar Stache
  • *****
  • Posts: 1468
  • Age: 43
  • Location: Edmonton, AB, Canada
    • Meena Kestirke Insurance
Re: Insurance pricing must be a scam!
« Reply #3 on: October 12, 2016, 09:36:19 PM »
While I disagree with the premise that insurance pricing is a scam, it always blew my mind, when I worked in pet insurance, that occasionally clients would not cancel their policy with a deceased or lost pet, accidentally have two policies at once for no reason (different brands), or buy very expensive insurance that covered routine care and NEVER submit a claim.
I don't know how you can be so unaware of your monthly bills or insurance policy coverages.
We would never do anything illegal but we weren't going to call up clients and ask them to pay us less money either. Presumably they know what they are doing. And we would never know if the pet was deceased if no one told us.

Those people paid for the others who had claims well above their premiums paid.

Moral: you need to watch your own finances (as we discuss here all the time)

FIRE_at_45

  • Magnum Stache
  • ******
  • Posts: 3062
  • Location: Vancouver, BC, Canada
    • I found happiness! Now what!?
Re: Insurance pricing must be a scam!
« Reply #4 on: October 12, 2016, 09:49:25 PM »
My title may be a bit dramatic and I get that insurance is based on actuarial calculations.  And I also get business - take as much as people are willing to pay.  But aside from the calculations that's a shocking difference in premiums from the same company.  I should also add that I did not even show them the quote which means this was no surprise to them.  Shame on me for not looking harder originally. 

misshathaway

  • Bristles
  • ***
  • Posts: 390
  • Age: 62
  • Location: Massachusetts
Re: Insurance pricing must be a scam!
« Reply #5 on: October 13, 2016, 06:21:44 AM »
They don't always cave on price. Last year I switched to GEICO for auto and of course I called my current auto insurer Liberty before the switch to see if they would match. They said they couldn't.

So I figure that means that GEICO will raise my rate as soon as the year is up and I will shop again. Same situation with cable.

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Insurance pricing must be a scam!
« Reply #6 on: October 13, 2016, 10:57:34 AM »
Renters insurance is pretty low risk for insurance companies, and a sub $250 yearly premium is very typical.  However, you also have to think like the insurance company does.  Let's assume they have 15 fires in a year, with a $30k loss per each policy, that's $450k in losses.  To offset that, and to keep their TCR under 100% (so they are profitable), they'd have to have 1800 renters policies inforced with a $250 premium.  Throw in overhead, and that number probably goes to 2500.

Given, insurers are on a MUCH larger scale than what I mentioned above, but it takes a lot of policies with low premiums to offset the risks of having several total loss and smaller claims in a year. 

Insurance is just like a lot of things, you hate paying for it if you never use it, but the minute you have a loss, you'll be sure glad you had it in force!

Jack

  • Magnum Stache
  • ******
  • Posts: 4734
  • Location: Atlanta, GA
Re: Insurance pricing must be a scam!
« Reply #7 on: October 13, 2016, 11:13:11 AM »
Basing insurance prices on risk as calculated by actuaries is not a scam.

Basing insurance prices on the imposed costs of forcing people to shop around every year (or the opportunity costs of not doing so) is a scam.

dogboyslim

  • Bristles
  • ***
  • Posts: 468
Re: Insurance pricing must be a scam!
« Reply #8 on: October 21, 2016, 09:59:03 AM »
In the US, Insurance prices are filed with the state insurance departments and companies cannot deviate from filed rates (speaking personal lines here).  The "concessions" from the OP were not concessions, they were reductions of coverage with corresponding reductions in premiums.  I've done pricing for 4 different companies over my career, and they all price for a typical return on surplus(similar to equity but in insurance accounting) of 10-12%.  Most companies right now have premium to surplus ratios near 1.0, so a reasonable estimate of the profit built into the plans is 10-12%.  If you really want to know, call the state insurance department and ask them for the ROE target used by your company for the product in question.  They might charge you a small amount for making copies of the filing.

marty998

  • Walrus Stache
  • *******
  • Posts: 6623
  • Location: Sydney, Oz
Re: Insurance pricing must be a scam!
« Reply #9 on: October 22, 2016, 09:54:38 PM »
In the US, Insurance prices are filed with the state insurance departments and companies cannot deviate from filed rates (speaking personal lines here).  The "concessions" from the OP were not concessions, they were reductions of coverage with corresponding reductions in premiums.  I've done pricing for 4 different companies over my career, and they all price for a typical return on surplus(similar to equity but in insurance accounting) of 10-12%.  Most companies right now have premium to surplus ratios near 1.0, so a reasonable estimate of the profit built into the plans is 10-12%.  If you really want to know, call the state insurance department and ask them for the ROE target used by your company for the product in question.  They might charge you a small amount for making copies of the filing.

Mmm... agree with all that, but it doesn't stop them from sucking you in with a cheap advertised 1st year premium and then bumping it up to 'normal' the following year.

dogboyslim

  • Bristles
  • ***
  • Posts: 468
Re: Insurance pricing must be a scam!
« Reply #10 on: October 24, 2016, 11:18:42 AM »
Rates are typically adjusted on an annual basis.  Many companies have filed switch & save type discounts, as well as early shopper discounts that only last for 1 to 3 years, but those are supported by expected costs.

I don't refute that insurance companies price based upon their profitability goals, but the world of insurance pricing in the US is very regulated, and you can see what they are doing by checking with the DOI.  Insurance departments will not let carriers file rates if they cannot be supported based upon differences in cost.

Jack

  • Magnum Stache
  • ******
  • Posts: 4734
  • Location: Atlanta, GA
Re: Insurance pricing must be a scam!
« Reply #11 on: October 24, 2016, 11:45:05 AM »
Insurance departments will not let carriers file rates if they cannot be supported based upon differences in cost.

In some utopian, Platonic ideal of an insurance regulator I could believe that. In reality though, my default expectation, absent strong evidence to the contrary*, is for the arrangement to have long since been corrupted by regulatory capture.

(* The only such government entity not yet corrupted that I can name off the top of my head is the CFPB (Consumer Finance Protection Bureau), which is why payday lenders and Republican congressmen are trying so hard to destroy it as we speak.)

dogboyslim

  • Bristles
  • ***
  • Posts: 468
Re: Insurance pricing must be a scam!
« Reply #12 on: October 25, 2016, 07:55:54 AM »
If you find any instances of a company not following their filed rates, contact a good trial attorney, because after the class action suit, you will be set to FIRE.

GrumpyPenguin

  • Bristles
  • ***
  • Posts: 292
Re: Insurance pricing must be a scam!
« Reply #13 on: October 28, 2016, 06:04:45 AM »
I have renters insurance because I have to for my building. The annual premiums are just around $120 though, not sure why some peoples rates are much higher than that.  I just get what I have to and consider it part of the cost of renting.

Jack

  • Magnum Stache
  • ******
  • Posts: 4734
  • Location: Atlanta, GA
Re: Insurance pricing must be a scam!
« Reply #14 on: October 28, 2016, 06:59:14 AM »
If you find any instances of a company not following their filed rates...

That's different from the claim I objected to. I think the regulator might allow the company to file rates that cannot be supported by difference in cost.

dogboyslim

  • Bristles
  • ***
  • Posts: 468
Re: Insurance pricing must be a scam!
« Reply #15 on: October 28, 2016, 11:36:51 AM »
If you find any instances of a company not following their filed rates...

That's different from the claim I objected to. I think the regulator might allow the company to file rates that cannot be supported by difference in cost.

This is not my experience, but I understand that claim better than the one I thought you were making.