Car Insurance

The Drive Group of Progressive Insurance Companies Debunks Common Car Insurance Myths; Insurance Agents and Brokers Can Help Consumers Separate Fact From Fiction

The color of a car influences how much it costs to insure it, Comprehensive coverage protects drivers in all situations because, after all, it’s “comprehensive,” and car insurance companies can charge whatever they want. Have you ever thought one or more of these statements to be true? You’re not alone.

A recent online survey of 1,000 drivers conducted by DriveSM Insurance from Progressive (NYSE:PGR), the largest writer of personal auto, motorcycle, recreational vehicle and boat insurance through independent insurance agencies in the U.S., finds many drivers accept common car insurance myths as true. Here’s a sampling of the survey findings along with the facts behind each:

Myth: Car insurance companies consider vehicle color when
determining rates.
Survey Says: Twenty-five (25) percent of drivers surveyed
mistakenly believe that the color of their car affects their
auto insurance rate.
Fact: Color is not used to calculate auto insurance rates.
Information that is used includes the vehicle’s year, make,
model, body type and engine size, as well as information
about the driver.

— Myth: Car insurance rates are not regulated and car insurance
companies can charge whatever they want.
Survey Says: More than half of those surveyed (54 percent)
did not know that each state has a regulatory body that
oversees insurance companies operating within that state.
Fact: Each state has regulators who review the information
companies collect as well as the rates they charge; insurers
cannot deviate from those rates.

— Myth: Comprehensive coverage protects drivers in all
situations.
Survey Says: Almost half of drivers surveyed (48 percent)
wrongly believe their car insurance policy’s Comprehensive
coverage protects them in all situations because, after all,
it’s “comprehensive.”
Fact: Comprehensive coverage is one type of protection
available on an auto insurance policy (others being Collision,
Uninsured Motorist, etc.). Comprehensive coverage pays only
for damage caused by an event other than a collision, such as
fire, theft, or vandalism; it also covers weather-related
(e.g., hail, flood) damage, damage caused if a vehicle
collides with an animal and it provides a rental car if a
vehicle is stolen.

— Myth: Rental reimbursement coverage protects drivers who crash
their rental car while on vacation.
Survey Says: One out of three drivers surveyed (33 percent)
did not know what protection is provided through rental
reimbursement coverage.
Fact: Rental reimbursement coverage pays for the cost of a
rental car if a driver’s personal car is in the shop as a
result of an accident and he or she needs a replacement
vehicle.

— Myth: Bundling insurance coverages always results in a cheaper
car insurance rate.
Survey Says: The majority of drivers surveyed (51 percent) say
they’ll always get a better rate if they “bundle” their
insurance, i.e., buy their car insurance policy from the same
company that insures their home.
Fact: Just because a driver buys more than one product from
the same insurance company doesn’t always mean they are
getting the best rate available. In many cases there are
savings to be had by talking with an independent agent or
broker who can create a custom insurance package with
policies from competing insurance carriers.

— Myth: Car insurance rates go down dramatically when drivers
turn 25.
Survey Says: Sixty (60) percent of those surveyed mistakenly
think rates go down drastically when a driver turns 25.
Fact: Young and older drivers typically have the most car
crashes and different car insurance companies’ customers have
different claims experiences. At Drive Insurance, for
example, crash frequency starts to decline when a driver
reaches their mid to late twenties. However, when developing
an auto insurance rate, insurers generally consider a variety
of other information about the driver in addition to their
age, including information about their vehicle, their past
claims history and the claims experience for other customers
like them. One or more of these pieces of information could
lead to a driver getting a higher, lower or the same rate
when they turn 25.

“Car insurance is complicated stuff. Adding to the confusion are the myths floating around out there,” says Rick Crawley, product development general manager, Drive Insurance from Progressive. “It’s important for drivers to have accurate information so they can make more informed decisions. We hope that by debunking these myths, and by letting people know that independent agents and brokers can help separate fact from fiction, they’ll ultimately get the right coverage and services for their needs.”

Drive Insurance is represented by more than 30,000 independent insurance agencies across the country, and it’s easy to find one locally. Simply go to driveinsurance.com and use the “Find an Agent” tool to locate an independent agent or broker who sells Drive Insurance.

The Progressive Group of Insurance Companies, in business since 1937, is the nation’s third largest auto insurance group and the largest writer of personal auto insurance through independent agencies in the U.S. based on premiums written. Progressive companies under the DriveSM Insurance from Progressive brand provide consumers with competitive prices and superior service along with knowledgeable advice from an independent agent or broker. More information can be found at driveinsurance.com. The Common Shares of The Progressive Corporation, the holding company, are publicly traded at NYSE:PGR.

Rick Crawley, product development general manager, Drive Insurance from Progressive, is available for interview.

The Utah Supreme Court has ruled that car rental companies must carry basic liability insurance on all of their vehicles, up to $25,000, and cannot substitute that insurance with a customer’s personal auto insurance.

In a ruling issued Tuesday, the court said Utah law was clear that all car rental companies must carry basic liability coverage regardless of whether customers have auto coverage of their own or not.

The ruling stems from the case of a July 2000 fatal auto accident in which the victim’s surviving estate and family sued Enterprise Rent-A-Car plus several insurance carriers.

The estate of Beizhong Li included Enterprise in its suit for its $25,000 insurance policy, which the estate claimed was required by Utah law. However, attorneys for Enterprise pointed out that Li had waived coverage by initialing a box on his rental agreement, declining the “optional” liability protection because he had personal automobile insurance.

A district court judge dismissed Enterprise from the suit, finding that Utah law allows car rental companies an exception if customers have insurance of their own. However, the Utah Court of Appeals overturned that decision, holding that Utah law requires car rental companies to insure their vehicles while they are on the highways. The appellate court also found that the section in Utah law that appeared to have an exception did not excuse companies from coverage but only prioritized insurance policies.

In its opinion, the Utah Supreme Court agreed with the court of appeals, saying it was clear the Utah Legislature “did not intend the availability of other valid or collectible insurance coverage to excuse rental car companies from maintaining insurance coverage on their vehicles in accordance with the requirements of Utah’s Financial Responsibility of Motor Vehicle Owners and Operations Act.”

AIG Private Client Group, a division of the property and casualty insurance subsidiaries of American International Group, Inc. (AIG), today announced the launch of the AIG Private Client Group Auto Program, a new insurance offering designed specifically for owners of collector cars.

Collector cars are typically maintained for use in car club activities, exhibitions, parades or private collections, and are driven with less frequency than everyday vehicles. However, many owners of these vehicles obtain mass-market auto insurance or deal with different carriers for each type of car. With the AIG Private Client Group Auto Program, collectors can purchase insurance that takes limited usage into account during the underwriting process and allows for collector and regular-use vehicles to be covered on one policy.

The AIG Private Client Group Auto Program is currently available in California and New York. Developed for high net worth individuals who own vintage automobiles, the AIG Private Client Auto Program includes:

– Agreed value provisions: Coverage amount determined at the

onset of a policy is locked-in for the entire term;

– Coverage for specialty vehicles, including motorcycles;

– Freedom to choose a repair facility if damage occurs; and

– A single bill for all auto insurance needs.

“Collector cars should not have to be insured as if the owner is driving them every day,” said Ross Buchmueller, President, AIG Private Client Group. “With the AIG Private Client Group Auto Program, we recognize that collectors need another coverage option and are offering a policy that specifically serves their needs.”

AIG Private Client Group offers innovative insurance products and risk management services that enhance protection and help minimize threats to the personal wealth and safety of high net worth clients and their families. Insurance product offerings, underwritten by member companies of American International Group, Inc., include automobile, homeowners, private collections, excess liability, excess flood, kidnap and ransom, aviation and yacht coverage. In addition to a comprehensive portfolio of products, AIG Private Client Group provides access to art collection management, security and residential services.

For more information, contact your local broker or visit the AIG Private Client Group Web site at www.aigpcg.com.

AIG is the world’s leading international insurance and financial services organization, with operations in approximately 130 countries and jurisdictions. AIG member companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In the United States, AIG companies are the largest underwriters of commercial and industrial insurance and AIG American General is a top-ranked life insurer. AIG’s global businesses also include financial services, retirement services and asset management. AIG’s financial services businesses include aircraft leasing, financial products, trading and market making. AIG’s growing global consumer finance business is led in the United States by American General Finance. AIG also has one of the largest U.S. retirement services businesses through AIG SunAmerica and AIG VALIC, and is a leader in asset management for the individual and institutional markets, with specialized investment management capabilities in equities, fixed income, alternative investments and real estate. AIG’s common stock is listed on the New York Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.

The above described coverage may not be available in all states, and the above description thereof is neither a complete description nor a complete list of all terms, conditions and exclusions. Note that certain terms used above are defined in the policy. Please see the policy for a complete description of its scope and limitations of coverage. Issuance of coverage is subject to underwriting. Insurance is underwritten by member companies of American International Group, Inc. Non-insurance products may be provided through independent third parties.

This article deals with the non-owned automobile exposures faced by people who are furnished a car by their employer and who do not have their own personal auto policy. Providing insurance for nonowned auto exposure(s) is not new. However, many agents either do not have a knowledge of the solution or have some misconceptions about it.

In Madison, Wisconsin, in the early 1960s an electrical contractor had all of his vehicles titled to the corporation he and his wife owned. All of the vehicles were insured. Their daughter, a college student, hit a parked car while driving her boyfriend’s car. There was no insurance on the boyfriend’s car. The daughter asked her parents if she had coverage on their policy. Hired and non-owned auto coverage was included on the insurance policy for their corporation. However, their insurer denied coverage saying that the boyfriend’s car was not hired by the corporation. And, the use of the non-owned vehicle was not for corporation business. As the daughter’s trip was not on behalf of the business, non-owned auto coverage did not apply in any way.

In another example, the president of a local computer service went to a trade show to pick up ideas for new products to carry and to update herself to the new trends in the business. A travel agent had made the arrangements for the entire trip. When the company president got to the car leasing booth, the leasing agency asked for her driver’s license. As she did not have any credit cards for the business, she used her personal credit card to pay for the leased car.

After finishing an early dinner, she went to a shopping center to pick up some presents for a family member she had left behind. Not being familiar with the area, she made a mistake at a very busy intersection, causing an accident. Several people were taken to the hospital. She reported the accident to the insurer of her business.

The leasing agreement did not show the name of her business. Payment for the car lease was made using the company president’s personal credit card. And, at the time of the accident, she was on a personal trip. Because of these facts, the insurer denied coverage for this loss.

In the above two auto accident situations the insurance for a business did not provide coverage for people who were otherwise insured by their firm’s auto insurance program. In both cases, the insurer denied coverage stating that the auto trips involved did not pertain to the business. The other part of the scenarios was that neither person had an auto insurance policy in her own name.

1. Any “auto” you don’t own, hire or borrow is a covered “auto” for LIABILITY COVERAGE while being used by any individual named in the Schedule or by his or her spouse while a resident of the same household…

This is a form where there is very little automatic coverage. Only a spouse residing in the household with the person named is automatically covered. Everyone else who is to be covered must be named in the schedule on the endorsement. Agents will commonly name either the husband or the wife. Children of driving age might also be named.

My recommendation is to name both the husband and wife on the drive other car coverage schedule of covered persons. Only one premium charge is made for the two of them. When explaining this at seminars, I am often asked, “Why name both of them when they are both already covered?” This recommendation is made in light of the current social situation in this country. Statistics indicate that about half of all marriages end in divorce. After a divorce, the individuals generally take care of their own insurance. In the early days of a pending divorce, however, it is typical for one of the marriage partners to move out of the house. Calling an insurance agent to change their drive other car coverage is probably the last thing on that person’s mind. If the person who moves out is the spouse not named on the DOC, he or she does not have coverage while driving non-owned vehicles. By showing both of their names on the DOC, both of them are covered should one of them move out of the house.

In central Wisconsin in the 1980s, a very professional agent insured a substantial contractor. The contractor had a commercial umbrella liability contract (umbrella) with a $2 million limit in addition to the limits shown as being on the primary auto policy.

Primary auto insurance was provided by a business auto policy (BAP) with a $500,000 limit. DOC was on the policy. Listed on the DOC were the contractor and her husband, plus only their children of driving age at the inception date of the policy. The insured understood that their children could drive a friend’s car and, sometimes, the friend’s car might not have insurance.

During the policy period, another one of their sons became old enough to drive. While this son was driving a friend’s car, an accident occurred where several lost their lives and others were seriously injured. There was no insurance on the friend’s car. As this son was not of driving age at the inception of the policy, he was not listed on the Drive Other Car coverage. The claim was submitted to the insurer for the contracting firm. The denial of coverage came quickly. As this son was not named on the DOC for the firm’s BAP, there was no coverage.

An errors and omissions claim was made against the agent as a result of this uncovered loss. The basis of the claim was that the agent should have known of this potential exposure and should have done something about it. These are two of the allegations from the insured’s Complaint and Request for Summary Judgment. One was that the client should have been told to inform the agent when the child started to drive, so that the child could be added to the Drive Other Car coverage. The other was that the agent should have taken care of the exposure by adding the son without the insured’s needing to notify the agent.

Another illustration of the challenge of providing proper drive other car coverage involves a situation that occurred in eastern Pennsylvania in the early `SOs. A young sales representative felt pleased about getting a new job. Her employer provided her with a car and drive other car coverage as part of the compensation package. The young sales representative sold her old, worn-out car and canceled her personal auto policy. One of the neighbors in the mobile home court where she lived agreed to baby-sit her two-year-old son while she was working.

Everything was going fine as she left for a day of making sales calls. About mid-morning, there was a message waiting for her on her mobile phone. The message said to call the lady who was taking care of her son. When the young sales representative called the baby sitter, she was told that her two-year-old had gotten into a neighbor’s car and released the parking brake. As the car had been parked on a hill, it rolled down the hill and ran into a mobile home. Damage to the mobile home was about $4,000, and the car sustained about $1,500 in damages.

A claim was presented to the DOC insurer. As the son was not named on the DOC, there was no coverage.

There is a very definite reason for including these two actual losses. Children without driver’s licenses can have auto losses while driving a non-owned car. In personal lines, it often happens that a child reaches driving age without the agent’s becoming aware of it until some time after the young adult has begun to drive. The same problem exists in commercial lines. While some insureds would notify an agent when a young driver is added, not all insureds would call their insurance agent the same day the young adult gets a learner’s driving permit. The young adult’s potential for driving a non-owned car starts that day. And, as illustrated, drive other car exposure can happen before a child or young adult reaches driving age.

My recommendation is to always name all of the children regardless of their age. Commercial underwriters, however, may be reluctant to do this. If your insurer is insuring 300,000 personal autos, they are automatically providing drive other car coverage for all of the children in those households. So, you are just asking for similar coverage for your commercial accounts.

The loss involving the two-yearold mentioned collision damage to the non-owned car. Collision can be written on DOC. Liability, medical payments, uninsured motorist, underinsured motorist, comprehensive (full coverage) and collision ($50 deductible) can all be written on DOC. While, historically, only liability coverage was written on DOC, my recommendation is to always offer all of the DOC coverages to your business clients.

Typically, drive other car coverage is written for business owners. Sometimes, an account will furnish cars to key employees. Many of those key employees will not have an auto in their own name and, therefore, will not have a private passenger auto policy. Of the eight employees at the auto dealership I use, five have a furnished car. Upon explaining the DOC to them, the employer added the names of the employees to DOC. The employees paid for the coverage. With another account, DOC was provided to 15 of 30 key employees who were furnished autos.

A risk management tip: Earlier we mentioned the problem encountered by the woman who signed her own name and used her personal credit card to lease a vehicle while on a business trip. Suggest that your clients sign the auto leases by writing on the lease the name of their firm, their name and their business title. Then the signature on the lease will say the client (or any of their employees traveling for the business) is acting as an agent for a firm.

The generally-accepted interpretation of this type of a signature is that it is a “qualified signature.” Usually this results in others being made aware that the individual is acting within the scope of the limitations implied by the firm named and the job title. A lawsuit will name the firm and might by-pass the individual. In any case, signing in the way we suggest at least will give the individual a chance that the employer will be brought into the claim. When an individual signs using a personal credit card and without indicating that he or she is working for someone, it is highly unlikely that the employer would be brought into the claim.

It’s important to re-examine your car insurance about once a year and every time you acquire a new car. The reason is that insurance companies frequently change their rate structures. A company that offers the best rates today may be the highest cost company in a couple of months after they raise their rates.

Furthermore, a company that offers the best rates for minimum-coverage, high-deductible insurance may not offer the best rates for the higher level coverage you need for leasing. Actually, you may be able to find a car insurance company that offers high level coverage for about the same rate as another company’s low level coverage.

Recommendations

Before the Internet came along, it was quite a chore to shop for auto insurance. Now, however, it’s a breeze because the companies are all online with excellent web sites. Insurance brokers are also online, making it extremely easy to get multiple instant quotes from different companies from a single source. They save you the trouble of contacting individual insurance companies because they do it for you. The services of these online brokers are free to consumers; they make their money from the insurance companies.

You are under no obligation to accept any quote offered by these companies. There are no fees or costs involved to get quotes from them. It’s a no-lose deal. If you don’t get rates you like, you can shop elsewhere.

Here are the online car insurance companies and brokers that we recommend.

GEICO is one of the well-known top four car insurance companies in the country with low prices and the top-ranked customer service web site of all. You not only get free quotes from their site but, you can also file claims, view estimates and photographs, contact your adjuster, and get payment status. Not only that, but they also explain exactly how they process a claim, what to do if you’re in an accident, and where to find a repair shop near you. What a great web site!

21st Century Insurance Company is a well respected car insurance company serving California, Arizona, Florida, Georgia, Illinois, Indiana, Nevada, Ohio, Oregon, Pennslyvania, Texas, and Washington.They insure over 1.4 million automobiles and have an annual renewal rate of over 93%, which says something about how satisfied their customers are with the company. If you live in one the states they cover, we suggest you get a quote from them.

InsureMe is an established and popular car insurance broker, having been around since 1993. They have a network of thousands of participating insurance agents and companies across the United States, including in your area. Once you complete their online form, they match your profile to as many as five companies, who will provide you free rate quotes that you can compare and choose from. Remember, you are not obligated to accept any of the offers. The chances of your finding a rate that beats your current insurance company is high.

Insurance.com is a free car insurance insurance shopping service that allows you to compare rates from multiple carriers by simply filling out one online form. By matching your profile with multiple insurance companies, their detailed application form ensures you will receive only quotes that best fit your particular situation. They claim their customers’ average savings is $451 a year. We particularly like the wealth of educational articles they provide that answers questions you may have regarding auto insurance, including how to save money by selecting the right coverage. It’s well worth a visit.