Car Insurance

Under a plan offered by British insurer Norwich Union, GPS helps determine how much drivers pay for their auto insurance.

The company’s Pay As You Drive plan uses GPS to calculate monthly insurance premiums based on how often, when, and where a person drives, basing the premium on the individual’s driving habits–rather than everyone else’s–and potentially saving the customer some money.

A black-box GPS unit provided by Trafficmaster is installed in the trunk or under the dashboard so it cannot be disturbed or tampered with. Once the unit is fitted on the car, the insured motorist’s journeys are monitored to see what types of road they drive on, and whether they drive at peak or off-peak times. This generates a price per mile that is totaled on their monthly bill.

The objective is to help drivers control insurance costs by making informed choices about when to use the car. Examples of pricing might be 1 penny per mile for off-peak motorway driving for 24 to 65 year olds, and as much as [pounds sterling]1 per mile for an under 24-year-old driver at night.

Norwich Union has been piloting the project since 2004, with 5,000 customers recording data on 100 million miles from more than 10 million trips.

The program especially targets young motorists. “We tested young drivers because they have an issue with high insurance charges so we wanted to find ways to help them,” said Norwich Union’s product development manager Sue Rowland. “On average, they saved 30 percent on their premium.”

The Pay As You Drive bill looks similar to a mobile phone bill, with premiums for each journey calculated and totaled. According to lain Napier, director of Pay As You Drive insurance, this transparent approach to motor insurance will help customers control insurance costs.

“We’re confident that Pay As You Drive insurance is simply a fairer way of calculating premiums and gives customers greater control, flexibility, and choice,” Napier said. “That is why we expect this unique UK proposition to be a huge success with motorists.”

The Association of British Drivers (ABD) is not fond of the plan. “Aside from the obvious implications for privacy and civil liberties, the ABD warns drivers that this information can also be used for the government’s planned road charging scheme.” In that proposal, aimed at cutting congestion, “pay-as-you-go” road charges would replace road and gas taxes. Every vehicle would be equipped with a GPS black box to track its journey. Costs would range from as little as 2 cents per mile in rural areas to [pounds sterling]1.34 per mile for peak time in city areas.

An ABD spokesman who participated in the initial 5,000-vehicle trial said, “Insurance premiums are already based on a driver’s accident/conviction history, age, the number of miles traveled annually, and the vehicle’s insurance group. Why do we need to attempt a micro-managed premium calculation? We don’t. The government’s own research shows that they are not trusted with an individual’s personal journey details by the majority of the British public. The use of service providers, such as insurance companies, is seen as a way around the problem.”

ENTREPRENEURS AGREE THAT the rising cost of health insurance is one of the biggest problems they face. According to a study by research firm Mercer Human Resource Consulting LLC, the average health-plan cost per employee rose by more than 10 percent in 2003. Costs have risen so much that some entrepreneurs are not insuring themselves or their workers.

But while everyone agrees that health insurance costs are skyrocketing, there is little agreement about the best ways to make health care more affordable for small employers. Rep. Nydia Velazquez and Rep. Rick Renzi see drastically different solutions to the healthcare crisis. Velazquez, a Democrat representing New York’s 12th District, is the ranking minority member on the House Small Business Committee; Renzi, a Republican representing Arizona’s 1st District, founded three small businesses before entering Congress.

What one change would most help small companies facing high health insurance costs?

REP. NYDIA VELAZQUEZ: There’s not one solution. In the House, we passed the Association Health Care Plan [a congressional initiative to let small employers pool and buy insurance], but the president didn’t back it. If we enacted the Association Health Care Plan, we could help working families. We still have 44 million uninsured, and many are owners [or employees] of small businesses. A 100 percent deduction for health insurance for the self-employed would help, too.

REP. RICK RENZI: I ran on [advocating] association health-plan legislation. Small businesses have to have the ability to pool together and expand their buying power. They should be able to pool for cost savings and better coverage–which is what the big companies get. The legislation hasn’t been completed because of concerns on the Senate side, where they’re able to filibuster.

Much of Washington is now talking about the recently passed Medicare reform bill, which begins to open Medicare provisions up to the private sector. Is this part of the answer to high health-care costs?

RENZI: Overall, the new Medicare bill will reduce health-care costs because it will modernize the system and reduce inefficiencies in the health-care codes. Health-care providers will gain higher reimbursements, [creating] a true incentive for them to provide better coverage.

VELAZQUEZ: I disagree. It may end Medicare as we know it–it will privatize it. The legislation will [hurt] older business owners.

RENZI: When I did town hall meetings on Medicare [before the legislation passed], one of the concerns I was getting was, Would the private sector drop their drug benefits, putting small businesses in the position of having to provide drug benefits? So [with] other congresspeople, [I] helped get offsets [i.e., cost reductions] in the legislation for businesses that provide drug benefits to employees so they can keep their best employees.

In addition to legislation creating new kinds of insurance benefits, is there anything Congress could do to impact healthcare regulation, which can be burdensome for small companies?

VELAZQUEZ: We definitely need to make some changes. But we need to make sure that whenever we change regulations, we assess the impact on small-business owners, not just decrease all regulation [affecting] health-care providers.

RENZI: We have to cut regulation. Right now, the insurance industry is able to point to tort reform as a reason they can’t lower costs [for health insurance]. If Congress acts on tort reform, [cutting] frivolous lawsuits, then the burden will be on the insurance industry to provide prices and solutions for small business.

An administrative court has ordered the French state to pay EUR3.2m to Air France and five insurance companies for failure to clear a runway.

A dozen seagulls were pulled into an Air France aircraft’s turbine and made the aircraft skid to an emergency stop in March 1998. The seagulls were eating a dead hedgehog on the runway at Marseille’s airport.

The court ruled that the state-employed airport staff member who was responsible for clearing the runway of dead animals had failed to carry out his duties, The Associated Press reported.

In the past, the phrase, “My daughter (or son), the doctor,” was said by parents with pride. After all, only the best and the brightest became medical doctors. And a physician’s status in the community was second to none–physicians were and still are viewed as healers, personal advisors, and occasionally even miracle workers. A parent’s pride was apparent just through the use of the phrase, “My daughter (or son), the doctor.” Did your parents ever introduce you as, “My daughter (or son), the accountant?”

But encouraging a daughter or son to become a physician is not as simple as it used to be. Consider the following conversation that could occur today between a father (who just happens to be a healthcare financial professional) and his daughter, who wants to become a physician.

Father: “So you want to become a doctor? That is an honorable profession, but you know a lot has changed in the past few years.”

Daughter: “Really? I’ve wanted to be a doctor for as long as I can remember. And with new medicines and new technologies, things have changed for the better, haven’t they?”

Father: “Well, yes, the practice of medicine has benefited from scientific and technological advances, especially during the last 20 years. But the life of a doctor has become much more complicated today, for a number of reasons: managed care and health insurance, Federal and state regulations, labor laws–the list goes on and on. And mergers and consolidations have changed the relationship between physicians and their practices. Few doctors are able to practice as independently as they once did.”

Daughter: “Yes, but all of that stuff relates to business and finance, and that’s your thing. It wouldn’t affect me. I want to help people, especially children.”

Father: “Ah, but these things would affect you. For example, once you saw a child in your office, you might order tests, prescribe medicine, or refer the patient to a specialist. How do you think you would get paid for your work?”

Daughter: “I don’t know. I guess the parents would pay for it.”

Father: “Actually, it depends. In some cases, the parents would pay for the services. In other cases, the parents might have health insurance and you, or someone who works with you, would have to bill the insurance company for payment. You would have to document what services you provided, justify why you provided them, and assign the appropriate codes for billing. The insurance company might pay all the bill or only part of it. And you might or might not be able to bill any balance to the parents.

“Or the payment might not be related to what you did at all. You might receive a flat payment per month for each patient you have, regardless of what services you actually provide. Of course, all of this would depend on the arrangements you have made with the various insurance companies and managed care plans–which may number in the hundreds.”

Daughter: “Why would I deal with so many insurance companies?”

Father: “Because many insurance companies limit the physicians they will do business with. If you don’t sign contracts with these companies, you might not be able to see patients covered by those companies. Oh, and I almost forgot. As a pediatrician, you probably would have to deal with state Medicaid agencies. Their rules and billing requirements often are different from those of private insurance companies; they vary by state, and by whether the patient’s family is covered by the standard Medicaid program or by the Medicaid managed care program.

“You also probably would have to see patients covered by workers’ compensation and auto insurance. These types of insurance also vary by state and have unique documentation and billing requirements.

“On the other hand, since you’re interested in pediatrics, you probably would have much less interaction with Medicare, which is a whole different world unto itself. You would have to be careful, however, because if you didn’t do the billing right, you and your organization could be found guilty of violating the law, and be fined or even put in jail.”

Daughter: “Ugh. And I thought medical school was going to be hard! Maybe I should get an MBA after I graduate from medical school.”

Father: “Oh, no! Two more years of college? Actually ‘My daughter, the accountant’ has a nice ring to it, don’t you think?”

IS YOUR company’s vehicle insurance too high? The Insurance Information Institute reports rates are declining in some states, but medical costs are rising. Meanwhile, a recent National Highway Transportation Safety Administration survey reveals many drivers aren’t aware that their coverage is insufficient until after an accident. Here’s how you can reduce insurance costs:

* CHECK YOUR STATE’S DEPARTMENT OF INSURANCE FOR MINIMUM INSURANCE REQUIREMENTS.* WITH YOUR EMPLOYEES’ WRITTEN PERMISSION, ask your local Department of Motor Vehicles for driving records if you insure drivers. Poor driving records mean higher insurance costs.
* STRESS THAT IF EMPLOYEES BREAK THE LAW–by speeding, for example–their actions can raise rates or cause lawsuits, putting your business in jeopardy.

* COMPARISON SHOP ON WEBSITES such as www.carsdirect.com and www.kbb.com. Use their on-screen calculators for free quotes. Be aware, however, that most sites work with specific insurance companies. If you use an insurance broker, ask if he’s an agent for an insurance company. Not all brokers will direct you to the best deals unless they represent them.

* CHECK FOR DISCOUNTS on safety equipment such as extra airbags, backup warning systems and theft alarms.

* IF YOUR SALESPEOPLE USE THEIR OWN CARS on business and you reimburse them for mileage, encourage them to add rental insurance to their personal policies–and reimburse them for the average annual premium of $25 as well. This preventive measure is less expensive than paying $300 to $500 a week for a replacement rental.

* PICK THE HIGHEST DEDUCTIBLES you can afford to keep the rates low. Buy as much liability as possible to protect your assets if you are sued. On older cars, consider lowering or dropping collision coverage.