Wednesday, April 6, 2011

Government-run auto insurance systems provide the most generous benefits for consumers.

FACT: In all cases, benefits paid by private insurers are richer than those offered by government-run insurers। For example, in the no-fault system in Manitoba, an accident victim who is catastrophically injured has no right to sue for economic loss that exceeds the maximum pre-set payments. The average claim paid in Ontario is nearly $9,000 but in BC the average is only about $2,400. That’s a huge disparity that shows that in Ontario, you get a lot more for your insurance dollar.

The fact is that there are no economies of scale in government-run auto insurance systems. The 2003 administrative expense ratios for Saskatchewan Government Insurance (SGI), Manitoba Public Insurance (MPI) and the Insurance Corporation of British Columbia (ICBC) versus the national private industry (5.7%, 7.3%, 3.3% and 15.4% respectively) are significantly misrepresented.

For example, in ICBC’s 2003 annual report, its operating expense ratio is reported as 18.1%; the private industry’s operating expense ratio for the same period is reported as 28.1%. ICBC’s 18.1% operating expense ratio includes commissions and taxes, but excludes general expenses related to claims. In contrast, when the private auto insurance industry quotes operating expenses, it includes all expenses.

When these differences are accounted for, the operating expense ratios become 18.1% for ICBC and 21.2% for private insurers in BC.

Therefore, the private industry’s expense numbers compare very favourably to ICBC’s and, where they are higher, this can almost wholly be attributed to:

ICBC’s tax status as a Crown corporation;
accounting changes at ICBC that have moved items out of expenses and into claims; and
lower commission rates that ICBC can afford to pay brokers as a result of holding a monopoly on mandatory auto insurance coverage।
Actually, no. Historically, not one of the government-run insurers has been able to contain claims costs. In fact, these insurers have resorted to increasing premiums and deductibles, changing rating territories and introducing significant product change, such as no-fault insurance, with greater frequency than private insurers.
The relatively small growth of claims reported by ICBC (3.2%) was accomplished by increasing deductibles and thereby eliminating an estimated 60,000 claims from the system. This move effectively transferred $160 million in the cost of repairs from the government-run insurer to policyholders. This was on top of a rate increase.

Further, according to ICBC’s 2005 year-end results posted on their website, their claims costs in the first nine months were up 11।5% from the same period last year. As a result, ICBC has filed for a 6.5% rate increase in 2006 to “manage” the rising trend in claims it is experiencing. Compare this to private insurers who saw claims rise only 0.2% between 2004 and 2005 according to Office of the Superintendent of Financial Institutions (the federal regulator of insurance companies) site. In light of this, how can it be said that government run auto can better control costs?
The 2004 report of the New Brunswick Select Committee on Public Automobile Insurance recommended that the province adopt a Manitoba-based model of government-run auto insurance. KPMG, the independent actuaries hired to review the findings of the committee, determined that the cost of establishing a public insurance system would outweigh the claimed benefits.
At a very minimum, the cost of a government-run auto insurance system to taxpayers would equal the cost of operating expenses (such as occupancy, advertising, furniture and equipment, and head office overhead), acquiring office space, and foregone insurance taxes and health care levies, which a government would have to recoup elsewhere. In NB, these costs and lost taxes and health levies would have amounted to at least $140 million in 2004, potentially having an adverse effect on the funding of other public services.

In addition, despite paying back start-up loans, every government-run insurer in Canada has required a taxpayer bailout, whether through direct cash injections or through dedicated tax revenues। In early 1976, less than two years after its inception, ICBC required a 25% rate increase and a bailout of $181 million ($627 million in today’s dollars). None of that money was ever paid back.

The fact is that MPI in 2001, and ICBC in 2000, did pay dividends to policyholders. However, advocates of government-run auto insurance have failed to mention that MPI had a deficit of $97 million following that surplus distribution and had to transfer $93 million from its capital surplus reserves to pay for it. This reserve declined steadily from $143 million in 2001 to $42 million at the end of 2003. Increasing claims pressure (claims costs in 2001 were $30 million more than expected) and a severe weather event would drain this reserve very quickly. MPI estimates that a severe hailstorm could increase claims by as much as $50 million (2001 annual report).

In ICBC’s case, the corporation lost $250 million in the year following the dividend. It couldn’t afford the dividend but paid it out prior to an election. In exchange for the $100 each received, drivers had their deductibles doubled and premiums raised and many were transferred into more expensive rating territories. ICBC paid for this giveaway through a reduction in reserves, which are now at dangerously low levels. This dangerous, politically motivated "dividend" is a perfect example of what is wrong about government-run insurance, not what is right about it. This is not how to run a business.

Tuesday, April 5, 2011

Government-run auto insurance systems provide the lowest rates for drivers.

FACT: Insurers provide car insurance within a strict framework of provincial laws and, because of that, insurance systems cost what they cost whether they are owned by government or the private sector.

Premiums in provinces where insurance is delivered by private companies are competitive with premiums in those provinces that have government-run auto insurance systems. However, when it comes to what consumers get for those premiums, the people in the privately run insurance systems are better protected with richer benefits and higher claims payouts.

Government insurers also change rating territories as a way of increasing rates for consumers without applying for a rate increase. Rating territories have been changed in BC frequently in recent years. In November 2002, ICBC made a number of dramatic changes to its rating territories and moved thousands of motorists into higher-priced territories. This resulted in these motorists’ rates increasing dramatically, some by as much as 30%. These are the kind of backdoor rate increases given to the public by government-run auto insurers who have had their “front-door” rate increases capped or limited by regulations or the politics of an election campaign.

Government-run auto insurance

Government-run auto insurance is often referred to as “driver-owned” auto insurance. A truly “driver-owned” auto insurance company would sell shares, have open elections for its board of directors and have annual general meetings. This does not happen with the existing “driver-owned” auto insurance systems in BC, Manitoba and Saskatchewan.

Truly “driver-owned” auto insurance companies already exist within the private sector. Mutual insurance companies are owned by their policyholders. If, at the end of a fiscal year, the mutual insurance company has a profit, the profit is shared among the policyholders. Conversely, if a mutual insurance company suffers a loss, there are provisions for all policyholders to be assessed a levy to make up for this shortfall.

Insurance companies collect premiums

Insurance companies collect premiums from consumers and use these funds to pay for claims. Money to pay for large legal settlements comes directly from these funds, or in other words, directly from the pockets of each and every policyholder. If claims costs increase, insurers adjust premiums to keep pace.

Until limits were put in place recently, pain and suffering awards for minor injuries, such as sore necks or backs, exceeded $20,000 in many tort-based provinces। This may have benefited a few claimants, but it cost the majority of policyholders in the form of higher premiums.

There is no evidence that no-fault insurance is more costly to consumers; there is no conclusive proof that insurance rates are less expensive in a tort-based system. Insurance premiums are a reflection of a number of different factors, including driver’s experience, driving record, and geographic location, to name a few. Insurance companies use these factors and deductible levels selection to determine the appropriate premium for the coverage. Comparisons of premiums in tort and no-fault systems across different provinces and cities in Canada are often misleading because they don’t take into account factors such as where a driver lives, levels of coverage, driving experience and driving record. In Canada, Quebec, Saskatchewan and Manitoba have the “purest” no-fault auto insurance systems। Quebec’s no-fault system was introduced in 1978, with Manitoba following in 1994 and Saskatchewan in 1995. (In 2003, Saskatchewan introduced an option for persons in the province to recover as though within a tort system. A very small number have requested that option.) In 1990, Ontario introduced a no-fault insurance system that is a “hybrid” system that blends no-fault insurance with the legal right to sue in certain circumstances. All of these provinces have retained strong, no-fault characteristics in their insurance systems.

The business of car insurance is actually highly regulated by provincial governments, who set the minimum coverage levels। Governments also keep tabs on how much insurance companies charge for their products. Insurance companies can change neither the basic coverage nor premiums without government approval.

It may be true that you do not pose a danger to other drivers when you don't wear a seatbelt, but you do pose a serious hazard to yourself. If you are in a collision and you are not wearing a seatbelt, you are much more likely to be injured. For example, think of the difference between the whiplash injuries you may experience if you are wearing a seatbelt during a collision and the more serious injuries you might sustain if you are not wearing a seatbelt and get thrown out of a flipped car or go through the windshield.

When you are injured in a car crash, it is your insurance company that pays your medical expenses. The cost of the rehabilitative care for a whiplash-type injury is lower than the cost of treatment for injuries sustained as a result of getting thrown out of a car during a collision. Therefore, if you do not wear a seatbelt you are a greater risk to your insurance company because you are more likely to submit high-cost claims. This is why insurance premiums may increase when you are convicted of driving without a seatbelt. As far as your insurer is concerned, driving without a seatbelt does make you a more dangerous driver।

No-fault insurance eliminates responsibility and fosters bad driving.

FACT: No-fault insurance is a system in which those injured in a car accident receive compensation and benefits from their own insurance company, regardless of fault. It is designed to reduce the delays of an adversarial legal (or “tort”) system and provide treatment and benefits to injured victims as quickly as possible.
Most provinces in Canada have some form of no-fault accident benefits that are paid to all accident victims. The difference is the degree to which tort (the right to sue) or no-fault (access to accident benefits) is emphasized. For example, Quebec has a pure no-fault system that eliminates the right to sue, but provides substantial accident benefits. Ontario has a “hybrid” system, which blends no-fault and tort.

No-fault insurance does not mean that drivers are never at fault in accidents. There are still fault-based rules of the road, which are enforced by police. If you are at-fault in an accident, your insurance premiums will be affected and, depending on the nature of the accident, you may be charged with an offence. These offences are governed by either provincial motor vehicle legislation, or federal legislation, such as the Criminal Code of Canada.

There is no evidence that no-fault insurance leads to increased numbers of accidents or fatalities/injuries. While some argue that a tort system provides a deterrent against poor driving behaviour, there is no correlation between the type of insurance system and the road safety record of the jurisdiction. Ontario, Quebec, Saskatchewan and Manitoba all have either pure or hybrid no-fault insurance systems. Ontario has one of the best road safety records in North America. British Columbia, Alberta and the Atlantic provinces have tort-based systems. BC has consistently had one of the highest incidences of highway injuries and fatalities of any province in Canada.

Monday, April 4, 2011

This cap on court awards for pain and suffering continues to cause some confusion

This cap on court awards for pain and suffering continues to cause some confusion. Here are the facts:

The cap does NOT apply to payments made by your own insurance company (regardless of who caused the accident) for medical treatment of your injuries or for lost income if you miss work.
The cap does NOT apply to awards for medical and/or other economic losses that you might recover in court if you sue the at-fault driver.
The cap applies ONLY to awards for pain and suffering, and only if the injury is minor. Pain and suffering awards compensate you for any loss of enjoyment of life you may have suffered because of your injuries. Minor injuries are those that will not have a serious effect on your life, such as neck or back pain that doesn’t linger too long.

So, to sum up, the cap would not necessarily apply if you were in a car accident and it would not limit what you would receive to help you heal from your injuries.

Car Insurance

MYTH: When I’m injured in a car accident, all my medical expenses are paid for by my government provincial health plan.

FACT: Car insurers pay out more for medical rehabilitation costs in Canada than do government health insurance plans, workers’ compensation plans or private health care plans combined.

Helping you return to health if you are in a car collision is one of the most important things car insurers do. Every year, car insurers pay at least $2 billion for the medical rehabilitation of injured Canadians. Insurers pay in three ways:

Through the Accident Benefits portion of car insurance policies. Accident benefits (or no-fault benefits) are paid directly to a person injured in a car collision, regardless of who caused the injuries.
Through the tort system. If you're in an accident that was caused by someone else and your medical and other needs are more than what is covered by the Accident Benefits portion of your policy (the amount of coverage differs from province to province), you may be able to sue the at-fault driver for the additional costs. The insurer of the at-fault driver pays for what you receive as a result of your court case.
Through health care levies. Often, medical costs resulting from car accidents are paid through government health care plans rather than car insurance policies. But car insurers pay governments back for these costs through provincial health care levies. In total, Canadian car insurers paid about $200 million in health care levies last year.

What My Insurance Company Does With My Premiums

There are some common and persistent misconceptions about what insurance companies do with the money they collect from you and every other policyholder. Some people think it sits in the bank until someone makes a claim. Not true. Others believe that premiums go to pay for claims that have already happened. Not true either.

Your premium dollar travels a long and winding road, but, in the end, most of it goes to assist consumers in one way or another. For example, if you suffer a loss, a portion of your premium dollar and those of several other policyholders finds its way back to you, to help you recover.

For the record, this is what happens to your premiums:

In the insurance system, money is always moving. On a daily basis, there are claims to be settled, taxes to be paid and other costs related to running a business (paying salaries, buying equipment, paying rent, etc.). Some money is always set aside so that the company can respond quickly to catastrophes, when a large number of claims will have to be paid in a short period of time. This is called a reserve.

Any money that is not needed for day-to-day expenses or reserves is usually invested by insurers.

Here are a few things you should know about insurers’ investments:

Contrary to what some people think, insurers have never had a year when they lost money on investments. Some years are better than others, but the industry has always generated positive investment returns.
Insurers are among the most careful investors in the country. On average, approximately three quarters of their investments are in government bonds.
In order to make sure that insurers are able to pay claims, the federal government monitors the industry’s investments to make certain that they are low-risk.
Insurers strive to maintain a portfolio that allows for quick liquidation of investments to pay claims.

Why do insurance companies invest the money?

The nature of insurance is such that your insurance company holds your premium until it is needed to pay claims. By investing the money in the interim and making a return, your insurance company is able to offset the cost of claims and charge you less than you would otherwise pay.

In fact, there have been years when returns on investments were so good (10% or higher) that insurers only had to collect enough premium to pay for claims and expenses, and made all of their profit from investments. Even when investment returns are much more modest, this is an excellent way to keep premiums as low as possible for consumers.

Sunday, April 3, 2011

How Insurance Works

While it may seem complex, insurance is really quite simple: The payments (or ) of the many pay for the losses of a few. Your premiums go into a large pool, if you will, at your insurance company. The claims of the few are paid from that pool. Because there are more people contributing to the pool than there are making claims, there is always enough to pay the claims – even large single claims like when someone is permanently disabled as a result of a car collision, or many smaller claims like those resulting from a natural disaster. (The 1998 ice storm that hit parts of Ontario, Quebec and New Brunswick resulted in an estimated 700,000 claims for damage totalling $1.4 billion.) However, (such as the ice storm) do come close to emptying the pool.

The Pool

Insurance for insurance companies

Even when the pool comes close to emptying, there is another pool from which insurance companies can draw to pay claims. Some of your premiums are used by your insurance company to buy reinsurance – insurance for insurance companies. Sometimes losses are so big – like those resulting from an earthquake – that there is no way that an insurance company can cover the costs. Reinsurance is an extra layer of protection against large losses.

Annual replenishing

Your insurance is an annual contract, so the pool operates for only one year at a time. Your premiums and the premiums of others are based on how much money the insurance companies think they will need to pay the coming year’s claims. Your premiums do not build up over the years – unlike the premiums for some types of life insurance.

How premiums are calculated

Within reasonable limits, some of which are prescribed by law, your premium is calculated to reflect the probability that you will make a claim – that is, that you will draw funds from the insurance pool. Those who are unlikely to draw from the pool pay less than those who are more likely to draw from it.

Insurers take many factors into consideration to determine the likelihood that you will make a claim. A common misconception is that a policyholder who has never made a claim should pay less, little or nothing for insurance. While it is true that past claims history is important, a more reliable indicator of how likely a person or business is to make a claim is the statistical group to which he/she/it belongs.

Industry earnings

Insurance companies generally do not make money on the premiums gathered from policyholders. In 2005, insurance companies paid more than $21 billion in claims while taking in $35 billion in premiums. The difference between the premiums and claims, in this case $14 billion, is used by the companies to pay salaries and taxes ($6.2 billion in 2005), and to cover the overhead costs (such as electricity bills) of running a business. It is also used to pay the administrative costs of settling a claim.

Insurance pays for …

Insurance pays for only those types of losses described in your contract. It is very important that you read your policy and/or talk to your insurance representative about what you are covered for and what you’re not. Insurance will not pay for every problem that you may encounter, nor is it a maintenance contract. Insurance is generally intended – and priced accordingly – to help policyholders cope with the financial consequences of unpredictable events that are "sudden and accidental." If, for example, you live on a floodplain by a river, flooding of your property in the spring is not sudden or accidental; it is inevitable and, therefore, uninsurable.

Saskatchewan

Auto insurance in Saskatchewan is provided by a government-run insurance company, Saskatchewan Government Insurance (SGI). Since 1945, Saskatchewan consumers have had very little choice in how and where they buy their car insurance. If they are dissatisfied with the service provided by SGI or the premiums they are being charged, drivers in Saskatchewan do not have the same options as do drivers in other provinces – the option to switch insurance companies.

Everyone who wants to drive a car in Saskatchewan must, by law, buy a minimum amount of collision and comprehensive insurance (see minimums page) and has the option to buy more to suit his or her needs. Saskatchewan drivers must purchase the compulsory minimum insurance from SGI. Government and private insurers compete for business selling optional (fire, theft, comprehensive) coverage.

A competitive business environment is a powerful incentive for insurers to deliver the best service and to understand and meet consumers’ needs. Auto insurance is no exception to this rule. As consumers’ needs change, private insurance companies respond by offering innovative new products and services. Product innovations such as first accident forgiveness, replacement cost coverage, roadside assistance, and payment plans were all adopted in competitive jurisdictions long before they were available in provinces with government-run auto insurance systems.

All provinces in Canada have some form of no-fault accident benefits that are paid to all accident victims. The difference across the provinces is the degree to which tort (the right to sue) or no-fault (access to accident benefits) is emphasized. Saskatchewan is a no-fault province, but residents have the option to have their auto insurance through a tort system. This choice has been available to Saskatchewan residents since January 1, 2003. Fewer than 5000 Saskatchewan residents, representing less than .05% of the population, have opted for the tort system.

Impact on Insurance Premiums

Impact on Insurance Premiums
Supporters of PAYD proposals in California contend that restrictions on non-economic damages,
coupled with the elimination of uninsured motorists and therefore UM and UIM coverage, will
lower average insurance premiums. In this section we present some data on relative insurance
costs, type of liability system, and number of uninsured drivers by state. Several other factors,
such as minimum compulsory coverage levels, assigned risk plans for risky drivers, and other
32. Department of Taxation, the Hawaii Independent Insurance Agents Association, Hawaii Transportation Association.
17
state policies, such as drunk driving laws, the legal drinking age, and speed limits, can affect the
frequency and/or severity of vehicle accidents, and therefore state average insurance premiums.
After we examine the current situation in the states, we summarize the results of several studies on
the effect of introducing a no-fault liability system and compulsory insurance requirements on
average insurance premiums.
2.3.1. State liability systems and minimum compulsory liability coverage levels
Every state has financial responsibility laws that require drivers to be able to pay for a specified
amount of medical expenses and property damage they may inflict on others by their driving. ’
Drivers can fulfill their legal responsibility with a minimum liability insurance policy, by posting
bond for the same amount, or by depositing cash or securities in the same amount. Financial
responsibility laws by themselves do not require motorists to buy insurance before their cars can be
registered, and they do not make it a criminal offense to drive without insurance. Thirty-nine states
and DC do require the purchase of insurance coverage, whether it be first party (PIP) or third party
@I, PD and Mp) coverage, to cover the amount specified in their financial responsibility laws (see
Table 2). Compulsory insurance laws often require drivers to present proof of insurance before
they are allowed to register their car, and make it illegal to drive without such proof. Most states,
however, require only that people sign affidavits attesting that they have, and will maintain,
liability coverage.
Minimum coverage for bodily injury ranges from $20,000 for all people injured, limited to
$lO,OOO per person, (in several states) to $100,000, limited to $50,000 per person (in Alaska).
Minimum coverage for property damage ranges from $5,000 to $25,000. Table 2 also shows the
minimum coverage levels of each state, as well as which states require insurance coverage for these
levels.33 UM coverage is not compulsory in any state.34

Pennsylvania Mileage Proposal

Pennsylvania Mileage Proposal (PARVO W)
The National Organization for Women (NOW) has been backing auto insurance charged at per-mile
class rates (per-mile) as an alternative to the present system and pay-at-the-pump proposals.
Although NOW has been backing per-mile rating all overthe country?l the General Assembly of
Pennsylvania is one of the few states trying to enact the proposal.
Proponents argue that per-mile rating is simple, and can be implemented by adding one sentence to
the relevant state’s insurance code. The amendment would read as follows:
“The exposure units for calculation of private passenger automobile insurance premiums at
the appropriate classification rates shall be the car mile by audited odometer readings for
driving coverage and the car year for nondriving coverage.”
By specifying the unit of exposure, the amendment requires insurers to convert class rates from
dollars-per-year to cents-per-mile for on-the-road insurance protection. As now, car owners
would have to pay in advance to keep insurance in force. Premiums for driver coverage at centsper-
mile rates would be prepaid in mileage amounts and at time intervals as needed. The NOW
proposal would not restrict insurance companies from basing rates on driver characteristics such as
age, gender or place of vehicle registration.
Each car’s insurance ID card would display the current odometer-mile and date limits to its prepaid
protection. Policy renewals would be conditional on taking cars to company-designated gqages
for a once-a-year check of odometer readings and tamper-evident seals. Theft of insurance
protection would be controlled because odometer tampering automatically voids the policy.
Implementation of this proposal may be relatively simple, because odometer readings are already
recorded regularly as part of the emission control system inspection in many states, and odometer
tampering is already a federal crime.
For the last three legislative sessions, with the help and support of The National Organization for
Women, Pennsylvania Senator Michael M. Dawida has introduced legislation to amend the Casualty and Surety Rate Regulatory Act of 1947 relating to the regulation of automobile insursatnactee rates. If passed, the legislation would convert premium calculation for most automobile coverage
from dollars-per-year to dollars-per-mile class rates.
The latest version of the legislation (Senate Bill 1033) was introduced by Senators Dawida,
Afflerbach and Fattah, and has remained in the Committee on Banking and Insurance since April
28,1993. No version of the legislation has ever been discussed in committee.
Fairness in Automobile Insurance Rates (FHR)
For the last three legislative sessions, Colorado Senator Bob Pastore has introduced legislation that
is similar to PPN and UMA. Pastore’s plan, however, would focus only on uninsured motorists. FAIR has never come close to passing the legislature, and Pastore is trying presently to raise funds
to finance a voter ballot initiative. Much of the criticism of FAIR, coming mostly from the
insurance and petroleum industries, has focused on the plan’s feasibility.
FAIR would force drivers who do not have personal insurance into a “comprehensive automobile
insurance pool.” The measure would require uninsured drivers to pay additional premiums on
fuel, license plates, drivers’ licenses, and traffic offenses. All of these premiums would be
collected to fund the cost of providing automobile insurance for the uninsured.

Impact on Insurance Provision

Impact on Insurance Provision
Reform of state insurance systems has fueled much of the state-level interest in PAYD to date. In
this section we examine how PAYD systems would impact the provision of insurance. We first
provide some background on the different insurance systems the states currently have in place, and
describe the types of insurance coverage provided under each system. Next, we summarize five
PAYD systems that have been proposed in California recently, as well as proposals made in other
states. We then present data on the current costs of insurance by state, and look at how PAYD
systems might reduce average insurance premiums. Finally, we examine two concerns that critics
of PAYD have raised: 1) is annual miles driven, or its proxy, gallons of gasoline consumed, a
reliable predictor of accident. frequency/severity? and 2) will PAYD reduce overall automotive
safety by encouraging teenagers, who tend to be the riskiest drivers, to drive more?
1
2.1. Background on Insurance Issues
Automotive insurance reform has long been an issue in many states. In most states, medical costs
and property damages are paid by the insurance company that covers the driver who is judged to be
at fault in an accident. Typically, these systems allow victims to sue to recover damages for “pain
and suffering”, or “non-economic losses”, which are in addition to compensation for any property
damage, hospitalization, and health care costs. Insurance companies recover any non-economic
damages they pay out by raising insurance premiums on all drivers that they cover. For years
critics of auto insurance have proposed limiting liability damages as a means of reducing insurance
premiums. These proposals generally consisted of replacing current systems with no-fault
insurance systems; under no-fault, injured drivers are covered by their own insurance company,
rather than the company of the at-fault driver. Although several states have adopted variations of
no-fault auto insurance, currently none of these systems cap the amount of damages victims can
sue for.

Drive (PAYD) insurance

Introduction
Some states are considering adopting Pay as You Drive (PAYD) insurance as a means of reforming
how automobile insurance is provided. Under PAYD, insurance premiums would be transferred
from annual costs to variable charges, based either on gallons of gasoline purchased (sometimes
referred to as “Pay at the Pump Insurance”) or annual vehicle miles driven. Currently a significant
number of drivers are driving without insurance, even in states where insurance coverage is
required by law. Many drivers purchase additional insurance coverage to pay for damages caused
by uninsured drivers. PAYD would make it more difficult for drivers to avoid purchasing
insurance, thereby expanding coverage and reducing premiums for drivers currently buying
uninsured motorist coverage. In addition, PAYD would base premiums more on a driver’s relative
exposure to a potential accident, rather than other proxies for accident frequency, such as sex of the
driver. Since the likelihood of an individual driver to be involved in an auto accident is thought to
be related to the number of miles he or she drives, or (probably less closely) to the gallons of fuel
consumed, PAYD policies are being promoted as measures to reallocate insurance payments more
equitably among drivers. PAYD would reallocate premiums more equitably in two ways: by
forcing uninsured drivers to purchase insurance, and by basing premiums on a potentially better
measure of accident frequency and/or seventy.
PAYD could have an additional benefit by reducing fuel consumption, Co;? emissions, and vehicle
miles traveled (VMT). By transfering a portion of insurance costs from fixed to variable costs,
PAYD would give an economic disincentive to consumers to drive. To the extent that they reduce
gasoline consumption or VMT directly, PAYD policies may also address a host of problems
associated with vehicle travel, such as emissions of C02 and criteria air pollutants, as well as
traffic congestion. Other annual driving costs, such as vehicle registration fees, safety and
emission control system inspection fees, and driver license renewals, could also be charged on a
per-mile or per-gallon basis, to strengthen the signal to consumers.
Because PAYD can simultaneously address both insurance reform goals at the state level and fuel
consumption, C02, and VMT reduction objectives, it may be attractive to policy-makers at both the
state and federal levels. In this report we examine the effect different PAYD schemes would have
on the provision of automobile insurance. We also examine how PAYD or other variable driving
charges might achieve the national objectives of lowering fuel consumption, greenhouse gas
emissions, and VMT. The next section discusses insurance reform issues, summarizes several
PAYD proposals in California and other states, and investigates the impact of PAM) on insurance
provision. Section 3 summarizes the few attempts made to forecast the effect of a national PAYD
system on fuel consumption and C02 emissions. Based on the California experience, we analyze
in Section 4 the likely impact of a national PAYD system on several interest groups: certain classes
of drivers, the insurance industry, and trial lawyers. A range of possible PAYD systems is
discussed in Section 5, and four national PAYD alternatives are presented in Section 6.

Saturday, April 2, 2011

A second way to reduce average

A second way to reduce average premiums may be to place restrictions on lawsuits for noneconomic
damages, through the adoption of a no-fault insurance system. No-fault states tend to
have the highest average premiums, followed by add-on and tort states. However, very few states
have adopted a no-fault system that puts real restrictions on liability lawsuits. In addition, there are
many differences between states, such as minimum coverages (dollar amounts) required, how
risky drivers are handled (assigned risk plans), and other state policies (such as drunk driving
laws, the legal drinking age, and speed limits) which confound an analysis of what effect the state
claim system has on average premiums. A true comparison of alternative systems would require
estimating the average premium in a given state if it adopted a different insurance system. Such an analysis, performed by RAND, indicates that the effect of a traditional tort state switching to a nofault
system could range from a 13 percent increase to a 52 percent decrease in the average
premium, depending on the level of benefits and the type of threshold adopted.
Some critics of PAYD have argued that annual miles driven, or its proxy gallons of gasoline
consumed, are not good predictors of the likelihood a driver will be involved in an accident.
Several studies suggest otherwise; in particular, one recent California study indicates that location,
miles driven and driving record are the best predictors of accident frequency and severity. Other
critics are concerned that a PAYD system would reduce auto safety, by lowering insurance costs
for teenagers, and thereby encouraging them to drive more (teens are recognized as one of the
riskiest classes of drivers). This would only pose a problem if most teens are not currently
driving. However, it is likely that many, if not most, teens are currently driving, possibly either
uninsured or on their parents’ policy. A properly designed PAYD system, which would increase
the per-gallon costs of driving, may in fact act to discourage teen driving.
Many researchers have studied the impact of changes of fuel price on. driving behavior, and thus
fuel consumption and C02 emissions. However, none have explicitly analyzed the effect of
transfering a portion of fixed insurance costs to variable charges. Existing studies can give some
insight into the effect various PAYD systems may have on fuel use and C02 emissions, but a
detailed analysis of PAYD is needed (the California Energy Commission currently is analyzing this issue).
Several studies have documented the effect of gasoline taxes on various segments of the
population. In general, households with higher incomes, of non-Caucasian ethnicity, located in the
south and west, or located in suburbs and rural areas, purchase more gasoline, and therefore
would likely be more affected by a PAYD system. A recent study demonstrates that certain
households have a greater ability to mitigate the impact of changes in fuel price in the short term by
shifting their travel to a second, more fuel efficient vehicle. The only study of the impact of a
specific California PAYD proposal (the Uninsured Motorist Act, or UMA) on low-income
households concluded that UMA would benefit low-income drivers, who currently pay much
higher premiums than other drivers. Low-income advocacy groups supported UMA in hearings
before the California legislature. A simple comparison of national gasoline and mandatory
insurance expenditures of different income groups indicates that UMA would shift mandatory
insurance expenditures from the poorest households to other households.
It is possible to adjust several features of a particular PAYD system to address local concerns. For
example, a system proposed in California2 would collect about half of insurance revenue from
several annual registration fees.

Under Pay as You Drive insurance

Under Pay as You Drive insurance (PAYD), drivers would pay part of their automobile insurance
premium as a per-gallon surcharge every time they filled their gas tank. By transfering a portion of
the cost of owning a vehicle from a fmed cost to a variable cost, PAYD would discourage driving.
PAYD has been proposed recently in California as a means of reforming how auto insurance is
provided. PAYD proponents claim that, by forcing drivers to purchase at least part of their
insurance every time they refuel their car, PAYD would reduce or eliminate the need for uninsured
motorist coverage. Some versions of PAYD proposed in California have been combined with a
no-fault insurance system, with the intention of further reducing premiums for the average driver.
Other states have proposed PAYD systems that would base insurance premiums on annual miles
driven.
In this report we discuss some of the qualitative issues surrounding adoption of PAYD and other
policies that would convert other fiied costs of driving (vehicle registration, safety/emission
control system inspection, and driver license renewal) to variable costs. We examine the effects of
these policies on two sets of objectives: objectives related to auto insurance reform, and those
related to reducing fuel consumption, C02 emissions, and vehicle miles traveled. We pay
particular attention to the first objective, insurance reform, since this has generated the most interest
in PAYD to date, at least at the state level. We review the history of PAYD proposals in
California, summarize previous research on the impacts of PAYD, and discuss the elements and
design of a PAYD system.
There are two basic types of insurance coverage that pay expenses incurred in an auto accident:
first party coverage (e.g. medical payments, personal injury protection, uninsured motorist, etc.),
which pays the policyholder’s expenses, and third party coverage (Le. bodily injury and property
damage liability coverage), which pays the expenses of the victim of the policyholder. The type of
insurance coverage utilized depends on the liability system in a particular state. Third party
coverage is necessary in the 26 states with tort liability systems, which rely on determining which
driver caused an accident. Only first party coverage is necessary in the 10 states which have
adopted a no-fault system, where a policyholder’s damages are paid by one’s own coverage,
regardless of who is at fault.
A true no-fault system would eliminate a victim’s right to sue for non-economic damages (for
either so-called “pain and suffering” or punitive damages). However, no existing no-fault systems
have such a strict restriction. Instead, they only allow liability lawsuits for non-economic damages
if the damages exceed a “threshold”. This threshold can take the form of a monetary amount
(which can be quite low, and therefore pose a negligible restriction), or legislative language that
specifies injuries (such as “permanent disability” or “death”). If the injuries exceed the dollar
threshold, or meet the legislative language of the verbal threshold, then the victim can sue the atfault
driver for non-economic damages. Only three no-fault states currently have strict verbal
thresholds; as a result, the effectiveness of most no-fault systems in restraining liability lawsuits is
limited. The remaining 11 states, and the District of Columbia, require insurers to offer first party
coverage, but have not adopted restrictions on liability lawsuits; these states are referred to as “addon7,
states.1
Average insurance premiums for all coverages range from $319 in North Dakota to $974 in
Hawaii. Combined (bodily injury and property damage) liability premiums range from $171
(North Dakota) to $753 (Hawaii). Unfortunately, state-level data on premiums for uninsured or
underinsured motorist coverage are not available, so it is not possible to determine the potential
national savings from forcing all drivers to purchase insurance under a P A W system.

Loan/lease payoff

Loan/lease payoff coverage, also known as GAP coverage or GAP insurance, was established in the early 1980s to provide protection to consumers based upon buying and market trends.

Due to the sharp decline in value immediately following purchase, there is generally a period in which the amount owed on the car loan exceeds the value of the vehicle, which is called "upside-down" or . Thus, if the vehicle is damaged beyond economical repair at this point, the owner will still owe potentially thousands of dollars on the loan. The escalating price of cars, longer-term auto loans, and the increasing popularity of leasing gave birth to GAP protection. GAP waivers provide protection for consumers when a "gap" exists between the actual value of their vehicle and the amount of money owed to the bank or leasing company. In many instances, this insurance will also pay the deductible on the primary insurance policy. These policies are often offered at auto dealerships as a comparatively low cost add-on to the car loan that provides coverage for the duration of the loan. GAP Insurance does not always pay off the full loan value however. These cases include but are not limited to:

Any unpaid delinquent payments due at the time of loss
Payment deferrals or extensions (commonly called skips or skip a payment)
Refinancing of the vehicle loan after the policy was purchased
Late fees or other administrative fees assessed after loan commencement

Therefore, it is important for a policy holder to understand that they may still owe on the loan even though the GAP policy was purchased. Failure to understand this can result in the lender continuing their legal remedies to collect the balance and the potential of damaged credit.

Consumers should be aware that a few states, including New York, require lenders of leased cars to include GAP insurance within the cost of the lease itself. This means that the monthly price quoted by the dealer must include GAP insurance, whether it is delineated or not. Nevertheless, unscrupulous dealers sometimes prey on unsuspecting individuals by offering them GAP insurance at an additional price, on top of the monthly payment, without mentioning the State's requirements.

In addition, some vendors and insurance companies offer what is called "Total Loss Coverage." This is similar to ordinary GAP insurance but differs in that instead of paying off the negative equity on a vehicle that is a total loss, the policy provides a certain amount, usually up to $5000, toward the purchase or lease of a new vehicle. Thus, to some extent the distinction makes no difference, i.e., in either case the owner receives a certain sum of money. However, in choosing which type of policy to purchase, the owner should consider whether, in case of a total loss, it is more advantageous for him or her to have the policy pay off the negative equity or provide a down payment on a new vehicle.

For example, assuming a total loss of a vehicle valued at $15,000, but on which the owner owes $20,000, is the "gap" of $5000. If the owner has traditional GAP coverage, the "gap" will be wiped out and he or she may purchase or lease another vehicle or choose not to. If the owner has "Total Loss Coverage," he or she will have to personally cover the "gap" of $5000, and then receive $5000 toward the purchase or lease of a new vehicle, thereby either reducing monthly payments, in the case of financing or leasing, or the total purchase price in the case of outright purchasing. So the decision on which type of policy to purchase will, in most instances, be informed by whether the owner can pay off the negative equity in case of a total loss and/or whether he or she will definitively purchase a replacement vehicle.

Combined single limit

Liability

Liability coverage is offered for bodily injury (BI) or property damage (PD) for which the insured driver is deemed responsible. The amount of coverage provided (a fixed dollar amount) will vary from jurisdiction to jurisdiction. Whatever the minimum, the insured can usually increase the coverage (prior to a loss) for an additional charge.

An example of property damage is where an insured driver (or 1st party) drives into a telephone pole and damages the pole, liability coverage pays for the damage to the pole. In this example, the drivers insured may also become liable for other expenses related to damaging the telephone pole, such as loss of service claims (by the telephone company), depending on the jurisdiction. An example of bodily injury is where an insured driver causes bodily harm to a third party and the insured driver is deemed responsible for the injuries. However, in some jurisdictions, the third party would first exhaust coverage for accident benefits through their own insurer (assuming they have one) and/or would have to meet a legal definition of severe impairment to have the right to claim (or sue) under the insured driver's (or first party's) policy. If the third party sues the insured driver, liability coverage also covers court costs and damages that the insured driver may be deemed responsible for. If a state requires liability coverage, both parties are usually required to bring and/or submit copies of insurance cards to court as proof of liability coverage.

In some jurisdictions: Liability coverage is available either as a combined single limit policy, or as a split limit policy:

Combined single limit

A combined single limit combines property damage liability coverage and bodily injury coverage under one single combined limit. For example, an insured driver with a combined single liability limit strikes another vehicle and injures the driver and the passenger. Payments for the damages to the other driver's car, as well as payments for injury claims for the driver and passenger, would be paid out under this same coverage.

[edit] Split limits

A split limit liability coverage policy splits the coverages into property damage coverage and bodily injury coverage. In the example given above, payments for the other driver's vehicle would be paid out under property damage coverage, and payments for the injuries would be paid out under bodily injury coverage.

Bodily injury liability coverage is also usually split into a maximum payment per person and a maximum payment per accident.

The limits are often expressed separated by slashes in the following form: "bodily injury per person"/"bodily injury per accident"/"property damage". For example, requires this minimum coverage:

$15,000 for injury/death to one person
$30,000 for injury/death to more than one person
$5,000 for damage to property

This would be expressed as "$15,000/$30,000/$5,000".

In the state of Indiana, the minimum liability limits are $25,000/$50,000/$10,000,^{[citation needed]} so there is a greater property damage exposure for only carrying the minimum limits.

Auto insurance in the United States

The consumer may be protected with different coverage types depending on what coverage the insured purchases. Some states require that motorists carry liability coverage to ensure that their drivers can cover the of damages to people or in the event of an automobile . Some states, such as Wisconsin, have more flexible "proof of financial responsibility" requirements.

In the United States, liability insurance covers claims against the policy holder and generally, any other operator of the insured vehicles, provided they do not live at the same address as the policy holder, and are not specifically excluded on the policy. In the case of those living at the same address, they must specifically be covered on the policy. Thus it is necessary, for example, when a family member comes of driving age that they be added to the policy. Liability insurance sometimes does not protect the policy holder if they operate any vehicles other than their own. When you drive a vehicle owned by another party, you are covered under that party's policy. Non-owners policies may be offered that would cover an insured on any vehicle they drive. This coverage is available only to those who do not own their own vehicle and is sometimes required by the government for drivers who have previously been found at fault in an accident. Non-owners policies are also known as Named Operator Policies. The policies are useful for people whose drivers license has been suspended and they have to have insurance for their license to be reinstated.

Generally, liability coverage extends when you rent a car. Comprehensive policies ("full coverage") usually also apply to the rental vehicle, although this should be verified beforehand. Full coverage premiums are based on, among other factors, the value of the insured's vehicle. This coverage, however, cannot apply to rental cars because the insurance company does not want to assume responsibility for a claim greater than the value of the insured's vehicle, assuming that a rental car may be worth more than the insured's vehicle. Most rental car companies offer insurance to cover damage to the rental vehicle. These policies may be unnecessary for many customers as credit card companies, such as Visa and , now provide supplemental collision damage coverage to rental cars if the transaction is processed using one of their cards. These benefits are restrictive in terms of the types of vehicles covered

usage-based insurance

Odometer-based systems

Cents Per Mile Now^[23](1986) advocates classified odometer-mile rates, a type of . After the company's risk factors have been applied and the customer has accepted the per-mile rate offered, customers buy prepaid miles of insurance protection as needed, like buying gallons of gasoline. Insurance automatically ends when the odometer limit (recorded on the car's insurance ID card) is reached unless more miles are bought. Customers keep track of miles on their own odometer to know when to buy more. The company does no after-the-fact billing of the customer, and the customer doesn't have to estimate a "future annual mileage" figure for the company to obtain a discount. In the event of a traffic stop, an officer could easily verify that the insurance is current by comparing the figure on the insurance card to that on the odometer.

Critics point out the possibility of cheating the system by . Although the newer electronic odometers are difficult to roll back, they can still be defeated by disconnecting the odometer wires and reconnecting them later. However, as the Cents Per Mile Now website points out:

As a practical matter, resetting odometers requires equipment plus expertise that makes stealing insurance risky and uneconomical. For example, to steal 20,000 miles (32,000 km) of continuous protection while paying for only the 2,000 miles (3,200 km) from 35,000 miles (56,000 km) to 37,000 miles (60,000 km) on the odometer, the resetting would have to be done at least nine times to keep the odometer reading within the narrow 2,000-mile (3,200 km) covered range. There are also powerful legal deterrents to this way of stealing insurance protection. Odometers have always served as the measuring device for resale value, rental and leasing charges, warranty limits, mechanical breakdown insurance, and cents-per-mile tax deductions or reimbursements for business or government travel. Odometer tampering—detected during claim processing—voids the insurance and, under decades-old state and federal law, is punishable by heavy fines and jail.

Under the cents-per-mile system, rewards for driving less are delivered automatically without need for administratively cumbersome and costly GPS technology. Uniform per-mile exposure measurement for the first time provides the basis for statistically valid rate classes. Insurer premium income automatically keeps pace with increases or decreases in driving activity, cutting back on resulting insurer demand for rate increases and preventing today's windfalls to insurers when decreased driving activity lowers costs but not premiums

Vehicle classification

Two of the most important factors that go into determining the underwriting risk on motorized vehicles are performance capability and retail cost. The most commonly available providers of auto insurance have underwriting restrictions against vehicles that are either designed to be capable of higher speeds and performance levels, or vehicles that retail above a certain dollar amount. Vehicles that are commonly considered luxury automobiles usually carry more expensive physical damage premiums because they are more expensive to replace. Vehicles that can be classified as high performance autos will carry higher premiums generally because there is greater opportunity for risky driving behavior. Motorcycle insurance may carry lower property damage premiums because the risk of damage to other vehicles is minimal, yet higher liability or personal injury premiums because motorcycle riders face different physical risks while on the road. Risk classification on automobiles also takes into account statistical analysis of reported theft, accidents, and mechanical malfunction on every given year, make, and model of auto

Friday, April 1, 2011

Auto Insurance Policy Scam

Auto Insurance Policy Scam

Newspaper advertisements claiming to be able to help people find low insurance rates are luring consumers into purchasing fraudulent auto insurance policies by calling a 1-800 number.

The criminals behind this scam request payment for the insurance policy by wire transfer (through wire transfer companies). They receive payment but do not provide the consumer with a liability slip – which serves as proof of insurance – and no insurance coverage exists.

If you suspect you have been offered or have purchased a fraudulent auto insurance policy, take action immediately to confirm whether or not you have coverage. Contact the insurance company which is set out in the policy. Do not contact the broker or agent named in that policy.

If you discover that you have been offered or have purchased a fraudulent auto insurance policy, contact Insurance Bureau of Canada’s TIPS Line at 1-877-IBC-TIPS or the Canadian Anti-Fraud Call Centre (PhoneBusters) at 1-888-495-8501. If you live in Ontario, you may also contact the Registered Insurance Brokers of Ontario at 416-365-1900 or 1‑800-265-3097.

Premises Risks: Physical Loss

Premises Risks: Physical Loss Prevention*

There are various causes of physical losses, including:

fire
crime
weather

Implementing physical protection may result in direct premium savings such as discounts, and actually save you more money in the long term. First, however, you must analyze the cost of installing physical protection versus the premium savings over time and the potential reduction in losses.

Risk Management

1. Comply with all government regulations, codes and standards.

2. The building must be suitable for your organization’s use. Take into consideration processes, occupancy, surrounding buildings, etc. For example, it may not be appropriate to house activities involving children in industrial areas where there is heavy vehicle traffic, poor lighting or no public transit.

Ensure there are regularly scheduled upgrades and replacements of building components that are subject to deterioration over time and with use.

3. Install fire detection and suppression systems where appropriate.

4. Ensure everyone who works in or otherwise occupies the building knows the:

location of the nearest fire extinguisher;
location of the nearest fire alarm station;
location of the nearest two exits; and
emergency response procedures, especially their designated responsibilities.

5. Train all employees in recognizing and reporting hazards.

Check for hazards that may cause fires.
Perform hazard checks where potentially hazardous weather conditions exist or are forecasted. Board up windows, bring loose items inside or secure them outside, etc.

6. Implement an inspection and maintenance policy. This should include finding and repairing the cause of the damage. For example, check regularly for wind and water damage, clean drains, eavestroughs and gutters, repair or replace corroded, damaged, aged, or worn electrical equipment, etc.

7. Implement a policy of good housekeeping to minimize clutter and to remove hazardous dust and debris. When combustible dusts such as sawdust and metal filings accumulate, or when furniture, boxes or other combustibles are stored in large, dense quantities, they can contribute significantly to the spread of fire and hamper fire-fighting efforts.

8. Indicate and enforce designated smoking areas (if any).

9. Comply with all applicable codes and standards regarding storage and use of flammable liquids.

Store only the types and quantities that are necessary to have on site.
Store flammable liquids in approved rooms and containers, in approved quantities and in proper ways (e.g., small cylinders should be chained in place to prevent accidental tipping).
Dispense flammable liquids in approved ways, in areas where the electrical equipment is certified for that use, and where appropriate ventilation exists.
Prevent unauthorized access.

10. Reduce cooking risks. Kitchens are common sources of fire because of heating appliances and cooking with combustible liquids (fats).

Install and use proper ventilation and grease filters over all frying operations.
Regularly inspect and clean grease filters and vents.
Unplug all electrical appliances when they are not in use.
Install appropriate automatic fire suppression equipment to protect fryers and other heated cooking appliances.
Install and regularly inspect fire extinguishers.

11. Develop emergency procedures. For example:

Warn people nearby.
During a fire, sound the nearest alarm or use a PA system to inform people what is happening.
Call emergency services from a safe location.
Know the location of at least two exits (one alternative).
Evacuate the building in an orderly fashion.
Move away from the building and proceed to a designated meeting area.
Do not use the elevators; use the stairways.
Know the location of and how to operate the nearest fire extinguisher.
Perform head counts to ensure that all employees have safely exited the building.
Do not re-enter the building until it is safe to do so.

12. Create evacuation routes

Keep aisles clear. Ensure that all furnishings, including screens, coat racks, and potted plants that may be upset under emergency conditions, are out of escape routes.
Have evacuation plans and escape routes professionally designed.
Display evacuation routes throughout the building.
Train employees on evacuation procedures.
Designate a meeting place that is at least 100 metres away from the premises, where employees can gather after they are evacuated.
Perform emergency drills.
Regularly inspect and maintain evacuation routes. Ensure passages are not blocked by items stored in halls. Ensure exits open and close properly and that snow or other debris outside is cleared.

13. Purchase enough insurance

Insurance for Cottages, Camps and Other Vacation Properties

Your vacation property is, like your home, one of your most valuable assets. It’s important to protect your investment with insurance. But you should note that vacation property insurance works a bit differently than insurance for your primary home.

How’s it used?

How the vacation property is used and how often it is occupied will dictate which insurance packages are appropriate for you. How much time do you spend there? Do you use it year-round? Do you rent it out at some point during the year? The answers to these questions are important when you are considering what type of coverage to buy for your vacation property.

Coverages for your vacation property

Most insurance companies will consider providing insurance for your vacation property only if you insure your primary residence with them as well. You can have your vacation property listed on your home insurance as a “secondary” or “seasonal” location, or you can have insurance for the property as a separate, stand-alone policy.

There is one main difference between insurance for you primary home and insurance for your vacation property: Vacation property insurance is almost always provided as a Named Perils policy, instead of a Comprehensive policy, because of the risk associated with the part-time occupation of the vacation home. “Named perils” means you have insurance coverage for specific risks, such as fire, explosion or smoke damage. Coverage for certain risks, such as water damage or vandalism, may be more difficult or expensive to arrange, because of the part-time occupancy. For example, if a water pipe bursts or if vandals break into your vacation home while it is vacant, the damage is likely to be more severe because no one will be there to take action.

There are some common exclusions in insurance policies for second homes. These include coverage for sewer back-up and damage to, or loss of:

fences
food in a freezer
garden equipment
outdoor plants
trees and shrubs

Even if you have a “fixer-upper” and the building is worth little, you will still need to have Third-Party Liability coverage to protect yourself in case someone gets hurt on your property or if you happen to start a fire that spreads to neighbouring properties.

Some other coverages you may want to consider including are:

Contents coverage: Some vacation property packages provided by your insurance company automatically include contents up to a certain limit. This coverage applies to contents that are permanently kept at the vacation home. (Anything that you take back and forth – e.g., clothing – is covered by your primary home insurance policy.) If coverage provided is inadequate, additional coverage may be purchased.
Detached private structures: Some vacation property insurance packages include a limited amount of coverage for any outbuildings, including boathouses, garages, or sheds. But you may need additional coverage to ensure that you are fully protected.
Replacement cost: This type of coverage covers the cost of repairing an item or replacing it with a new one, without any deduction for depreciation.

To get more information about your vacation property insurance options, please contact your insurance representative.

Insurance for Financed Vehicles

One common misconception in the United States is that vehicles that are financed on credit through a bank or are required to have "full" coverage in order for the financial institution to cover their losses in the case of an accident. While most states do require additional coverage to be purchased, some such as only require Comprehensive and Collision to be purchased in addition to liability and not "full" coverage. Vehicles bought on cash or have been paid off by the owner are generally required to only carry liability. In some cases, vehicles financed through a --in which the consumer (generally those with poor credit) finances a car and pays the dealer directly without a bank--also only require liability coverage. [CITATION]

Requirements by State

The tables below contain liability limits for almost all states within the United States. See the table to the right for an explanation.

Compulsory States

United States

Accident

In the , automotive insurance covering for injuries and property damage is compulsory in most states, but different states enforce the insurance requirement differently. In , where insurance is not compulsory, residents must pay the state a $500 annual fee per vehicle if they choose not to buy liability insurance. Penalties for not purchasing insurance vary by state, but often include a substantial fine, license and/or registration suspension or revocation, and possible jail time. Usually, the minimum required by law is third party insurance to protect third parties against the financial consequences of loss, damage or injury caused by a vehicle.

and have enacted "Personal Responsibility Acts" which put further pressure on all drivers to carry liability insurance by preventing uninsured drivers from recovering non economic damages (e.g. compensation for "pain and suffering") if they are injured in any way while operating a motor vehicle.

Some states, such as , require that a driver hold liability insurance before a license can be issued.

Some states require that insurance be carried in the car at all times, while others do not enforce this law. For example, does not specify that you must carry proof of insurance in the vehicle; however, does state that you must have that information to trade with another driver in the event of an accident.

Department of Transportation Research Project Manager John Semmens has recommended that car insurers issue license plates and be held responsible for the full cost of injuries and property damage caused by their licensees under the . Plates would expire at the end of the insurance coverage period, and licensees would need to return their plates to their insurance office to receive a refund on their premiums. Vehicles driving without insurance would thus be easy to spot because they would not have license plates, or the plates would be past the marked expiration date.

A recent study linked an increase in food stamp use to insurance premiums.

United Kingdom

In 1930, the UK government introduced a law that required every person who used a vehicle on the road to have at least third party personal injury insurance. Today UK law is defined by the , which was last modified in 1991. The Act requires that motorists either be insured, have a security, or have made a specified deposit ( 500,000 as of 1991) with the Accountant General of the Supreme Court, against their liability for injuries to others (including passengers) and for damage to other persons' property resulting from use of a vehicle on a public road or in other public places.

It is an offence to use a car, or allow others to use it, without the insurance that satisfies the act whilst on the public highway (or public place Section 143(1)(a) RTA 1988 as amended 1991); however, no such legislation applies on private land.

Road Traffic Act Only Insurance differs from Third Party Only Insurance (detailed below) and is not often sold. It provides the very minimum cover to satisfy the requirements of the Act. For example Road Traffic Act Only Insurance has a limit of £1,000,000 for damage to third party property - third party only insurance typically has a greater limit for third party property damage.

The minimum level of insurance cover commonly available and which satisfies the requirement of the Act is called third party only insurance. The level of cover provided by Third party only insurance is basic but does exceed the requirements of the act. This insurance covers any liability to third parties but does not cover any other risks.

More commonly purchased is third party, fire and theft. This covers all third party liabilities and also covers the vehicle owner against the destruction of the vehicle by fire (whether malicious or due to a vehicle fault) and theft of the vehicle itself. It may or may not cover vandalism. This kind of insurance and the two preceding types do not cover damage to the vehicle caused by the driver or other hazards.

Comprehensive insurance covers all of the above and damage to the vehicle caused by the driver themselves, as well as vandalism and other risks. This is usually the most expensive type of insurance. For valuable cars, many insurers only offer comprehensive insurance.

Vehicles which are exempted by the act, from the requirement to be covered, include those owned by certain councils and local authorities, national park authorities, education authorities, police authorities, fire authorities, health service bodies and security services.

The insurance certificate or cover note issued by the insurance company constitutes legal evidence that the vehicle specified on the document is insured. The law says that an authorised person, such as the police, may require a driver to produce an insurance certificate for inspection. If the driver cannot show the document immediately on request, and proof of insurance cannot be found by other means such as the Police National Computer, drivers are no longer issued a HORT/1. This was an order with seven days, as of midnight of the date of issue, to take a valid insurance certificate (and usually other driving documents as well) to a police station of the driver's choice. Failure to produce an insurance certificate is an offence. The HORT/1 was commonly known - even by the issuing authorities when dealing with the public - as a "Producer".

Insurance is more expensive in than in other parts of the UK.^{[ ]}^{[ ]}. In 2010 the cost of car insurance rose by an average of 33%.

Most motorists in the UK are required to prominently display a (tax disc) on their vehicle when it is kept or driven on public roads. This helps to ensure that most people have adequate insurance on their vehicles because an insurance certificate must be produced when a disc is purchased.

The compensates the victims of road accidents caused by uninsured and untraced motorists. It also operates the Motor Insurance Database, which contains details of every insured vehicle in the country.

On 1st March 2011 the European Court of Justice in Luxembourg ruled that gender could no longer be used by insurers to set car insurance premiums. The new ruling will come into action from December 2012.

Auto Insurance in India

Auto Insurance in India deals with the insurance covers for the loss or damage caused to the automobile or its parts due to natural and man-made calamities. It provides accident cover for individual owners of the vehicle while driving and also for passengers and third party legal liability. There are certain general insurance companies who also offer online insurance service for the vehicle.

Auto Insurance in India is a compulsory requirement for all new vehicles used whether for commercial or personal use. The insurance companies have tie-ups with leading automobile manufacturers. They offer their customers instant auto quotes. Auto premium is determined by a number of factors and the amount of premium increases with the rise in the price of the vehicle. The claims of the Auto Insurance in India can be accidental, theft claims or third party claims. Certain documents are required for claiming Auto Insurance in India , like duly signed claim form, RC copy of the vehicle, Driving license copy, FIR copy, Original estimate and policy copy.

There are different types of Auto Insurance in India :

Private Car Insurance - In the Auto Insurance in India, Private Car Insurance is the fastest growing sector as it is compulsory for all the new cars. The amount of premium depends on the make and value of the car, state where the car is registered and the year of manufacture.

Two Wheeler Insurance - The Two Wheeler Insurance under the Auto Insurance in India covers accidental insurance for the drivers of the vehicle. The amount of premium depends on the current showroom price multiplied by the depreciation rate fixed by the Tariff Advisory Committee at the time of the beginning of policy period.

Commercial Vehicle Insurance - Commercial Vehicle Insurance under the Auto Insurance in India provides cover for all the vehicles which are not used for personal purposes, like the Trucks and HMVs. The amount of premium depends on the showroom price of the vehicle at the commencement of the insurance period, make of the vehicle and the place of registration of the vehicle. The auto insurance generally includes:

Loss or damage by accident, fire, lightning, self ignition, external explosion, burglary, housebreaking or theft, malicious act. Liability for third party injury/death, third party property and liability to paid driver On payment of appropriate additional premium, loss/damage to electrical/electronic accessories The auto insurance does not include:

1).Consequential loss, depreciation, mechanical and electrical breakdown, failure or breakage

2).When vehicle is used outside the geographical area

3).War or nuclear perils and drunken driving

Auto Insurance in India

There are different types of Auto Insurance in India :

1).Consequential loss, depreciation, mechanical and electrical breakdown, failure or breakage

2).When vehicle is used outside the geographical area

3).War or nuclear perils and drunken driving

public auto insurance

Several provinces ( , , and ) provide a system while in the rest of the country insurance is provided privately. Basic auto insurance is mandatory throughout Canada with each province's government determining which benefits are included as minimum required auto insurance coverage and which benefits are options available for those seeking additional coverage. Accident benefits coverage is mandatory everywhere except for . All provinces in Canada have some form of available to accident victims. The difference from province to province is the extent to which tort or no-fault is emphasized. Typically, coverage against loss of or damage to the driver's own vehicle is optional - one notable exception to this is in , where provides collision coverage (less than a $700 , such as a part of its basic insurance policy. In Saskatchewan, residents have the option to have their auto insurance through a tort system but less than 0.5% of the population have taken this option.^[3]

Germany

Since 1939 it is compulsory to have third party personal insurance before keeping a motor vehicle in all federal states of . Besides, every vehicle owner is free to take out a comprehensive insurance policy. All types of car insurances are provided by several private insurers. The amount of insurance contribution is determined by several criteria, like the region, the type of car or the personal way of driving.

The minimum coverage defined by Germany law for car liability insurance / third party personal insurance is:
7.5 Million Euro for bodily injury (damage to people), 1 Million Euro for property damage and 50,000 Euro for financial/fortune loss which is in no direct or indirect coherence with bodily injury or property damage. Indeed Insurance Companies usually offer all-in/combined single limit insurances of 50 Million Euro or 100 Million Euro (about 135 Million Dollar) for bodily injury, property damage and other financial/fortune loss (usually with a bodily injury coverage limitation of 8 to 15 Million Euro for EACH bodily injured person).

AustraliaPublic policy

Australia Public policy

In , Third Party Personal insurance from the is included in the licence registration fee for people over 17. A similar scheme applies in .

In , Third Party Personal insurance from the is similarly included, through a levy, in the vehicle registration fee.

In , Compulsory Third Party Insurance (commonly known as CTP Insurance) is a mandatory requirement and each individual car must be insured or the vehicle will not be considered legal. Therefore, a motorist cannot drive the vehicle until it is insured. A 'Green Slip,' another name by which CTP Insurance is commonly known due to the colour of the pages which the form is printed on, must be obtained through one of the five licenced insurers in New South Wales. Suncorp and Allianz both hold two licences to issue CTP Greenslips - Suncorp under the GIO and AAMI licences and Allianz under the Allianz and CIC/Allianz licences. The remaining three licences to issue CTP Greenslips are held by QBE, Zurich and IAL - NRMA.

In , CTP is a mandatory part of registration for a vehicle. There is choice of insurer but price is government controlled in a tight band.

These state based third party insurance schemes usually cover only personal injury liability. Comprehensive vehicle insurance is sold separately to cover property damage and cover can be for events such as fire, theft, collision and other property damage.

Saturday, March 12, 2011

certificate of insurance

The Road Traffic Act, 1933 requires all drivers of mechanically propelled vehicles in public places to have at least third-party insurance, or to have obtained exemption - generally by depositing a (large) sum of money with the High Court as a guarantee against claims. In 1933 this figure was set at 15,000. The Road Traffic Act, 1961 (which is currently in force) repealed the 1933 act but replaced these sections with functionally identical sections.

From 1968, those making deposits require the consent of the Minister for Transport to do so, with the sum specified by the Minister.

Those not exempted from obtaining insurance must obtain a certificate of insurance from their insurance provider, and display a portion of this ( on their vehicles windscreen (if fitted). The certificate in full must be presented to a police station within ten days if requested by an officer. Proof of having insurance or an exemption must also be provided to pay for the .

Those injured or suffering property damage/loss due to uninsured drivers can claim against the Motor Insurance Bureau of Ireland's uninsured drivers fund, as can those injured (but not those suffering damage or loss) from hit and run offences.

Friday, December 3, 2010

California Medical Insurance – Child Only Plans

To get started with the process of applying for child only plans in the state of California, you should first compare a side by side analysis of the different options that are out there. Managed health care programs are often recommended for children's health care needs, because they offer consistent access to doctors without paying high fees for each visit. A lower co-pay amount is often a better idea, because children make more frequent trips to the doctor for common childhood infections, diseases, and regular checkups. With other types of California medical insurance, the out of pocket costs could be higher.

However, these are not always child only plans, so that is something to specifically ask about if you are planning to use separate California medical insurance for yourself. If you have the need to visit specialists for your own health needs, for example, but your child needs a more general coverage, it makes sense to try and use two separate plans rather than one more expensive family plan. That will not always be the case. It's difficult to tell which plan or combination of plans will be the most cost effective and comprehensive until you have taken a close look at the various features that each one has.

To help cut through the technical language that accompanies many California medical insurance plans, including those child only plans, seeking the assistance of a qualified insurance agent is highly recommended. He or she can help lay out the various features of these plans in a format that is more visual, so that you can see what exactly it is that you are paying for, and how this could impact your children in various scenarios. Not all plans will allow this, so if it is really child only insurance that you seek, you must be willing to put in a bit of time and research.