Car Insurance

Were comedian Jeff Foxworthy to make fun of risk management and insurance he’d find plenty of material in “Rupp’s Insurance & Risk Management Glossary.”

If you think a “drop-down provision” is a software function on a vendor’s application … you might be a redneck.

Drop-down provision: Provision contained in umbrella liability policies, where the policy will provide primary coverage in the event that the underlying aggregate limits are exhausted.

If you think a yield curve means giving way to traffic when making left-hand turns … you might be a redneck.

Yield curve: Graph showing the term structure of interest rates by plotting the yields of all bonds of the same quality with maturities ranging from the shortest to the longest available.

If you think a “flammable limit” refers to the point at which you combust when trying to get your carrier to pay a claim … you might be a redneck.

Flammable Limit: Gases and flammable liquids that can form flammable mixtures with air or oxygen have upper and lower limits to the concentrations that will provide ignitable mixtures.

If you think a silo is a tall, windowless building where farmers store grain … you might be a redneck.

Silo: A trench, pit, or tall cylinder sealed to exclude air and used for storing silage. *

If you think the only difference between ERM and ORM is a vowel … you might be a redneck.

ERM: Enterprise Risk Management. ORM: Operational Risk Management.

If you think the expression “admitted insurer” is a term of embarrassment … you might be a redneck.

Admitted insurer: Carrier authorized to do business in a state by the state’s insurance department.

If you think the term “evacuation expense” refers to the cost of doing business in the bathroom, you might be a redneck.

Evacuation expense: A form of political risk insurance.

If you think the words “maxi-tail” refers to flirting with as many members of the opposite sex at a re/insurance industry trade show … you might be a redneck.

Maxi-tail: A provision of some claims-made policies that permits the insured an unlimited length of time to report a claim under the policy after its termination.

If you think the difference between RIMS and RMIS … is but a letter transposed you might be a redneck.

RIMS: Risk and Insurance Management Society Inc. RMIS: Risk Management Information Systems.

If you think the “zone system” refers to what defenders do on a basketball court … you might be a redneck.

Zone system: A method of insurance examination set by the N.A.I.C. If you think “going bare” means parading about without any clothes … you might be a redneck.

Going bare: An uninsured organization or a firm without any type of insurance program.

If you think “in rem” means the fluttering of eyelids when people are asleep due to Rapid Eye Movement … you might be a redneck.

In rem: Authority granted by an admiralty court to take or keep in custody a ship until a claim has been decided.

If you think a “chain” means exactly what you think it means … you might be a redneck.

Chain: A land measurement used by surveyors that is equal to 66 feet, or 100 links, or 4 rods.

If you can’t understand why the insurance industry can’t agree on anything, even at a trade show called ACORD … you might be a redneck.

ACORD: Association for Cooperative Operations Research and Development. If you can neither hear nor understand the difference between indemnity and indemnitee … you might be a redneck.

Indemnity: Compensation for an incurred loss.

Indemnitee: A party receiving compensation from an indemnitor.

If you think “face value” refers to premiums paid by supermodels to insure themselves … you might be a redneck.

Face value: Value shown on a security.

If you think a “sinking fund” refers to your corporate savings account … you might be a redneck.

Sinking fund: Fund established by a self-insurer to pay for incurred losses.

If you think “skip-repossess insurance vehicle” refers to fleet vehicles impounded by a repo man named Skip … you might be a redneck.

Skip-repossess insurance vehicle: Coverage on cars or trucks taken as collateral by lending institutions.

If you think a bull is a 1,000-pound animal that you don’t want to stare down under any circumstances … you might be a redneck.

Bull: Driver of a ear intentionally crashed into another vehicle in a staged accident with the intent of filing a fraudulent claim.

If you think a cow is an animal that chews cud and gives milk … you might be a redneck.

Cow: Automobile struck in an accident staged in order mille a fraudulent claim.

If you attempt to buy liability insurance for your umbrella … you might be a redneck.

Umbrella liability: A special liability policy to go beyond a primary policy.

If you find the term “wet marine insurance” redundant … you might be a redneck.

Wet marine insurance: Ocean marine insurance covering ships and cargoes.

If you think “new for old” is a contract misprint … you might be a redneck.

New for old: Provision contained in older marine policies that when damaged for lost equipment or parts are replaced, there is an agreed discount to represent the depreciation of the old items.

If you think “chomage” is French for unemployed … you might be (a little more than) a redneck.

Chomage: An early form of business interruption insurance.

If you think a “sub-agent” or a “sub-broker” refers to middlemen who do a bad job representing carriers or buyers … you might be a redneck.

Sub-agent: Agent reporting to an MGA and not directly to an insurer.

Sub-broker: A reinsurance broker from whom another reinsurance broker is able to obtain reinsurance business.

If you think “bottomry” refers to carnal pleasure conducted by ancient Greeks … you might be a redneck.

Bottomry: The oldest known form of risk transfer. Used by ancient Greeks and provided that a ship not returning to port is absolved of any debt on the ship itself or on its cargo.

If you think a “‘D’ ratio” is what you expected on your school report card many years ago … you might be a redneck.

‘D’ ratio: Ratio used in calculating a workers’ compensation experience rating plan.

If you think the prefix “retro” accurately describes the reinsurance industry … you might be a redneck.

Retro: Prefix meaning backward or situated behind.”

If you think a retrocessionaire is a retiree selling trinkets in a booth in the 100-aisle at the RIMS convention … you might be a redneck.

Retrocessionaire: A reinsurer who assumes reinsurance from another reinsurer.

If you think the retrocessional marketplace spends too much time looking back instead of forward … you might be a redneck.

Retrocession: Transfer of assumed reinsurance to another reinsurer.

If you think somebody’s bound to end up short (preferably not you) in a “facultative semiobligatory reinsurance treaty” deal … you might be a redneck.

Facultative semiobligatory reinsurance treaty: Facultative obligation treaty whereby the ceding insurer may select which risks it will cede to the reinsurer who has the right to reject the risk.

If you think “Chinese retro” means the retrocessional market in China … you might be a redneck.

Chinese retro: A separate insurance policy, written in conjunction with a retrospective rating policy plan, protecting the policyholder against having to pay a penalty or extra premium in excess of the standard retrospective premium in the event of an adverse loss ratio.

If you think a “raise” means a salary increase … you might be a redneck.

Raise: An exploratory mining tunnel, excavated upward, to reach an ore load.

If you love a “double trigger” you are a redneck.

Double trigger: Policy form used for large commercial accounts where coverage is not provided until two triggering events occur.

# Decide how much money you can spend and what type of car best suits your needs.

# Research the various models to determine those that are the safest, most reliable, and otherwise suitable.

# Narrow your choices to several cars. Do not make the mistake of having your heart set on one car — it may reduce your bargaining power.

# Obtain updated price lists to compare dealer costs with prices listed on the window sticker. You will know how much bargaining room you have on the basic car and individual options.

# Get a firm quote, in writing, from the dealer.

# Shop around at several dealerships. Check out their reliability with the local Better Business Bureau.

# Keep all negotiations separate. Consider questions about financing, service contracts, trade-ins, or other extras after you have settled on a price.

# If negotiating over prices bothers you, consider a car-buying service.

# Shop around for financing and service contracts, and compare the terms carefully.

# Test drive the car before purchasing it.

# Read and understand the contract thoroughly before signing.

# Inspect your new car carefully before driving off the car lot.

Want to save money by driving less? Currently, low mileage drivers receive minimal discounts for driving less. You may put half the miles on your car that the average motorist does, but receive only a small discount on your insurance. Environmental Defense promotes Pay-As-You-Drive Insurance (PAYD), an innovative concept that links insurance polices to an odometer rather than just a date on the calendar. PAYD gives all drivers the opportunity to save money while protecting the environment.

PAYD provides financial incentive for driving less; it is expected to reduce driving and congestion by 10 to 12%. Driving less reduces air pollution, toxic runoff from roads, and climate impacts. Additionally, PAYD is expected to reduce accidents; a 10% reduction in driving is estimated to result in a 17% decrease in crashes.

PAYD also makes insurance more affordable by giving drivers greater control over their premium. Under the current system, low-mileage drivers (usually low-wage earners, seniors, carpoolers, bicyclists, and bus riders) subsidize high-mileage drivers.

PAYD links auto insurance policies to mileage by converting a portion of your annual fee into a per mile fee. The per mile fee incorporates all existing rate factors (i.e. vehicle type, driving history). Details may vary among the Pay-As-You-Drive policies auto insurance companies are expected to offer, but the general format will likely be one where you pay in advance for a predetermined number of miles, and either pay more, or receive a rebate depending on how much you drive. (Find out more.)
One way to buy PAYD insurance

GMAC Insurance and OnStar vehicle services have designed a new mileage discount program that will allow motorists who own GM Vehicles with OnStar service to earn an extra discount based on the miles they drive. This program is currently available in Arizona, Indiana, Illinois and Pennsylvania with plans to expand the program to additional states in the near future (read OnStar’s press release).

The On-Star system automatically reports vehicle odometer reading at the beginning and end of the policy term to verify vehicle mileage. Motorists can receive discounts of up to 40% and save hundreds of dollars annually. Discounts are offered to motorist driving less than 15,000 miles a year; the lower the vehicle mileage, the more significant the discount.
What’s happening internationally

Several countries – including, most notably, England – already offer PAYD insurance options. England’s Norwich Union Insurance began offering PAYD insurance to drivers on a limited basis in 2003, and is looking into further developing its PAYD program to meet growing demand. Marketing research estimates that approximately half of all English drivers are willing to consider the possibility of subscribing to a PAYD insurance policy. (Learn more at http://www.norwichunion.com/pay-as-you-drive/index.htm).

Additionally, Japan’s Aioi Insurance has recently started offering PAYD insurance using an odometer-based system. (For more information, visit http://www.ioi-sonpo.co.jp/).
What states are doing

In the past few years, some states have individually started promoting PAYD insurance as an option for consumers. In 2005, Congress reauthorized the federal transportation law called “Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users” (SAFETEA-LU). This law includes a new $3 million per year set-aside for non-toll market incentive projects like PAYD insurance. Eleven states have already applied for funding to study or pilot PAYD insurance policies.

Oregon

The Oregon Environmental Council (OEC) is working to bring PAYD to Oregon consumers. In June 2003 the Oregon legislature passed House Bill 2043 (http://www.leg.state.or.us/03reg/measures/hb2000.dir/hb2043.en.html), which provides $100/policy tax credits to insurers that offer Pay-As-You-Drive pricing. OEC has built a database of potential PAYD insurance customers to show the insurance industry that a market for PAYD insurance exists, and has met with insurance companies to encourage them to offer PAYD insurance. According to OEC, at least one insurance company recently expressed interest in offering PAYD insurance in the state, possibly beginning a program as soon as a year from now. For more information see OEC’S website.

Minnesota

In August 2004, Progressive Insurance began offering a modest PAYD incentive to 5,000 Progressive Direct Customers under its TripSense pilot program. Progressive is currently seeking customer feedback to decide whether to offer the TripSense program on a wider scale. This program will yield important driver behavior data that could advance PAYD efforts. (For more information see Progressive Insurance’s web site https://tripsense.progressive.com/faq.aspx).

Texas

During the 2001 session, the Texas Legislature passed HB 45 (http://www.legis.state.tx.us/BillLookup/History.aspx?LegSess=77R&Bill=HB45), giving insurance companies authority to offer PAYD insurance policies. The state insurance commissioner approved rules regarding mile based insurance rates in January 2002. In 2004, the North Central Texas Council of Governments (NCTCOG) allocated $1.5 million to help fund PAYD pilot programs. NCTCOG recently partnered with Progressive Insurance to launch the Driving Research Study, a two-year initiative that will offer PAYD insurance to 3,000 volunteers. The Driving Research Study will track the effects of PAYD insurance pricing on consumer behavior and air quality. (For more information see NCTOG’s PAYD website http://www.nctcog.org/trans/air/programs/payd/index.asp)

Washington

Washington State Department of Transportation market survey research indicates that offering vehicle insurance discounts based on reduced driving mileage is one of the most attractive incentives to encourage commuters to shift to ridesharing and transit. As a result, King County Metro, the largest rideshare and transit agency in the Puget Sound region, is in negotiations with an insurance company to run a five-year pilot program offering PAYD insurance to some of its 150,000 Transit Pass holders. King County is seeking $2.2 million from the government and partner agencies to fund a statewide PAYD pilot program.

California

This July, California’s Office of Administrative Law approved regulations that would require car insurance rates to be based more on miles driven and on driving records than on the zip code where a driver lives. This action could be a first step towards allowing a PAYD insurance system to be offered in the state. (More information on California’s regulatory change ).

Driving around large vehicles, especially 18 wheeler trucks, on the roadway or interstate can be intimidating. If you are in a little car driving next to a large truck on a freeway and are suddenly involved in an accident with them you are at a serious disadvantage. Knowing how to share the road with buses and other large vehicles can help you be a better, safer driver.

According to the Federal Motor Carrier Safety Administration (FMCSA), collisions involving large trucks and cars, the occupants of the car sustain 78 percent of the fatalities. It is usually the driver of the car that is killed in the crash. This is why it is important to be extra cautious when driving next to or around large vehicles such as trucks and buses.

There are limitations to what the driver of a large vehicle can do. Sharing the roadway with large vehicles means knowing where their blind spots are located, knowing how they maneuver on the roadway and knowing that the driver needs extra room to stop the large, heavy vehicle. Having this knowledge can make a real difference on the roadway.

Large vehicle drivers cannot see around their big vehicle as well as a normal motorist can see around their own car. There are many blind spots for truckers and other large vehicle drivers. It is wise to know where their blind spots are so you can stay out of them or pass by them quickly. Lingering in a truck’s blind spot could easily cause an accident, with your car getting the majority of the damage.

For trucks and most large vehicles, there are four main blind spots or “no-zones.” These include the front, back, and sides of the vehicle. Sounds like a lot of blind space because it is. Many trucks have pictures of their blind spots on the back of their truck to alert other motorist to not continuously ride around the large vehicle in these areas. A rule of thumb is if you cannot see the truck driver in the truck’s mirror, then the truck driver cannot see you or your vehicle.

Trucks, buses and other large vehicles need more time and distance than other cars do to maneuver and stop. So never cut in front of a large vehicle. You can create an emergency braking situation in which the driver of the large vehicle does not have time to get their heavy vehicle stopped. When pulling in front of a truck always signal and then make sure you can see the front of the truck in your rearview mirror before pulling in front of it.

Avoid moving in front of the large vehicle if you know you will have to immediately brake.The heavy truck or bus will need time to react to your lane change and plenty of distance if they need to brake. Being rear-ended by a large vehicle can shorten your car and even your life.

Truck drivers are maneuvering a big, lumbering vehicle that cannot stop or accelerate as well as the rest of us can in our cars. Large vehicles also cannot make turns like the rest of us motorists can in our mid-size cars or SUVs. Truck drivers have to make wide turns. Left turns are not quiet as perilous as right turns but are still wide so try to stay clear when a large vehicle, like a bus or truck, makes any type of turn.

For right hand turns, be especially careful. Never try to get between the truck and the curb when the truck driver is going turn. If you do you will be stuck in a “squeeze play” and are likely to get a lot of damage to your vehicle as it is hit in the side by the large vehicle. The driver of the truck usually needs to swing wide to the left before safely negotiating a right turn but do not try to sneak pass them when they do. The driver will not be able to see a car that is directly behind them or beside them in their blind spots so be cautious.

Driving around big vehicles takes extra care. You need to pay attention to where the truck or large vehicle is on the roadway, their blind spots and their signals. Being an inattentive driver around a large vehicle can cause you to drive in a truck’s blind spot, ignore their brake lights or signals and create dangerous situations.If you chose to not learn to properly share the roadway with large vehicles you can cause a potentially fatal situation, with you getting the worse end of the deal.

The sale of hybrid vehicles is beginning to take off. This increase in sales is greatly due to the current price at the pump for gasoline. The saving of gas money is not the only reason though that more people are buying hybrids. Hybrid vehicles are now being produced by more and more car manufacturers thus allowing consumers to have better choices. Here is a look at what Hybrid Vehicles are scheduled to be available in 2005 and beyond.

The hybrid revolution began with just a couple of car choices being available to American consumers. The leader of the pack, the one that seemed to spark the whole hybrid push in the marketplace, was the Toyota Prius. This was the first hybrid vehicle to be sold in the United States.

Prius is a Latin word meaning “to go before”. It indeed did come before all other hybrids in the U.S. It has held strong and is consistently increasing sales so much that in 2005 Toyota has had a hard time keeping production up with the demand. Toyota has even doubled the production of this vehicle for 2005 to catch up with the back-orders.

The Honda Civic hybrid was the second hybrid to come to the American shores. The first generation Civic hybrid that is out cannot function on electric power-only when at low speeds, which the Prius can do. The second generation Civic hybrid that comes out late in 2005 will change this as well as offering greater performance, fuel efficiency and even better styling.

Honda has also begun production of a hybrid version of its very popular Accord model. Consumer reports picked the Accord as the best family sedan and now in 2005 you can buy a hybrid version. What is amazing is that Honda claims the Accord hybrid is faster than the conventional Accord V6. The Honda Accord hybrid uses a third generation system. This system gives the hybrid Accord the extra power with better fuel efficiency.

The next step up after the aforementioned sedans is a small sports utility vehicle (SUV). The 2005 Ford Escape hybrid was the first hybrid SUV available in the U.S. The hybrid Escape is similar to the conventional version in its size and comfort level but allows you to have a step up in size from the sedan sized hybrid.

The Escape hybrid allows a family to own an SUV without being as concerned about the fuel efficiency they will get. The Escape hybrid has a variable transmission system that allows for the spreading of power to go between the gasoline engine and the electric motor. The distribution of the power varies due to the driving conditions it the vehicle is experiencing. This system allows the gas engine to shut off when the electric engine is able to provide enough power to run the SUV hybrid. This technology is what allows the Escape to give the driver better gas mileage.

Larger hybrid SUVs are also becoming available in 2005. The large SUV hybrids that are scheduled to be produced and sold in 2005 are the Toyota Highlander, Mercury Mariner and the Lexus RX400h. The Toyota Highlander hybrid is a hot commodity that is hard to find. Toyota will step up production in 2006 to help meet the consumer demand for the vehicle. The Mercury Mariner is also hard to find with the main supply believed to show up in 2006. Mercury’s big claim for the Mariner hybrid is that it works as well off-road as it does on normal roadway surfaces. That is something that one who enjoys off-roading will want if looking to purchase an SUV hybrid.

The Lexus RX400h is supposed to be the world’s most luxurious hybrid SUV according to Lexus. Lexus is known for making vehicles that exude luxury and comfort and they want to continue that reputation with their SUV hybrid. Lexus is a part of the Toyota family of car makers so it combines Toyota’s extensive hybrid technology with the stylish and elegant feel of a Lexus. This SUV hybrid promises to give you a luxurious hybrid sport utility vehicle that will out-perform most gasoline powered cars.

The last category of hybrid vehicles sold in 2005 is trucks. General Motors (GM) is the leader in hybrid trucks with two models coming out in 2005. GM is introducing both the Silverado Mild hybrid and Sierra Mild hybrid in limited quantities.

GM has decided to focus on larger trucks and SUV hybrid technology that is termed as mild. Mild means it is a lower-cost hybrid system compare to a full hybrid system, such as those made by Toyota. The mild hybrid system is easier to integrate into current models because fewer modifications are needed. These hybrid truck models are only going to be sold in a few select states at first.

The year of 2005 is showing more offerings than ever before in the hybrid category.There are sedans, sport utility vehicles and trucks to pick from if a person is shopping for an environment friendly hybrid motor vehicle. There are more models on the horizon as well.

The years beyond 2005 promise to be filled with more technological advances and more hybrid models to chose from. The car manufacturers have released the following list of hybrid vehicles that are to come out in the next few years. These vehicles are in addition to the current line up that is being sold.

In 2006 the Toyota Highlander hybrid should be available nationwide instead of in such limited supplies. Same goes for the Mercury Mariner hybrid. The newest addition to the hybrid models will be the Saturn Vue hybrid due out sometime during 2006.

In 2007 more manufacturers are promising hybrids. The lineup announced so far includes hybrids versions of the Chevy Tahoe, Chevy Malibu, GM Yukon, Mazda Tribute and Nissan Altima. So once again the car makers are planning a nice mixture of sedans, trucks and SUVs.

The price of gas and the finite amount of fossil fuel available is finally getting car manufacturers to use technology to try and relieve some of this strain. Hybrid vehicles have recently started being sold in the U.S. In 2005 and beyond the choices will continue to grow so that hopefully there will be a perfect model for anyone interested in purchasing a hybrid vehicle.