Wednesday, July 31, 2013

Auto Insurance: Rising Rates Affect Customer Satisfaction

According to a recent study by J.D. Power, consumer satisfaction rates with auto insurance providers have dropped from the all-time high that was seen in 2012. One of the main reasons for this is the rise in insurance rates. While the overall satisfaction level is still a good 794 (on a 1,000 point scale) the score for price satisfaction is significantly less at 716. According to the study, the average price increase in 2013 has been $153 as compared to $113 in 2012.

The Levels of Dissatisfaction

If the number of people who change insurers is taken as a measure of the level of dissatisfaction there is a clear connection between the amount of increase in the rates and the dropping of satisfaction levels. 9 percent of consumers who had their auto insurance rates increase by up to $50 switched their insurance companies. This number doubles to 18 percent when the increase is between $51 and $100; and it jumps to 32 percent when the increase is more than $200.

The lack of communications from the insurance companies has only compounded the problem. It appears that insurance companies are not informing their customers about impending rate increase prior to issuing the renewal notice. Also very little effort was made to help customers examine options available to them that could have reduced the impact of the rate increase. Where customers did receive advance intimation of the rate increases and were able to discuss the options available to them with their insurance companies the satisfaction levels were 67 points higher and the churn reduced. But only 16 percent of customers said they were able to discuss the rate increases with their insurance companies to examine the potential for making cost effective changes in their 
policies.

The Need For Better Communications

The J.D. Power study goes on to suggest that the communication between company and customer needs to be improved. Companies focus on communicating discount and other information that will be received positively by the customer. But little is done to explain to them the modalities of setting insurance rates or why, when shopping for insurance policies, the rates can vary by hundreds of dollars between insurance companies. Very few customers know that in the current low interest market insurance companies are suffering in terms of underwriting losses. The only viable option available to them to rectify the problem is via rate increases.

With the situation unlikely to improve in the near future, a drop in the satisfaction index and higher attrition levels can be expected unless some positive steps are taken by the insurance companies. The seemingly best option before them is be more proactive in reaching out to customers and explaining the rationales behind rate increases. If information flow could be improved and customer understanding increased, it is possible that the satisfaction levels will increase, or at least not drop further. If not, the insurance industry may have to brace itself for even lower levels of customer 
satisfaction and increased attrition.

Tuesday, July 30, 2013

Vacant Rental Units: Are You Sure You're Covered?

Vacation Rental Insurance
Everyone leaves their home vacant for an extended period at one time or another.It could be for going on a long vacation, a short term change of location for work reasons, because they are not in a position to occupy the house and do not want to sell or rent it out, they cannot find a buyer, or anything else. When a house is left vacant, the normal precautions are usually taken – locking everything up securely, informing the neighbors and the police, stopping deliveries etc. But what a lot of people do not realize is that when a property is left vacant for a period of time, the insurance cover may be affected.

An Increased Risk

Insurance companies feel that an unoccupied property has an increased risk over an occupied one. A vacant house is like a magnet that attracts vagrants, vandals and thieves who would not risk entering an occupied dwelling. And then there is the liability aspect. Kids climbing a fence to enter and explore a vacant building could get hurt. Or teens partying in an empty house could get into all kinds of trouble and risk a variety of injuries.

A normal home insurance policy will not cover the property if it is left vacant for an extended period of time – this is known as a ‘neglect’ or ‘abandonment of property’ exclusion. The time frame will vary from policy to policy (it is generally 30 to 60 days) but before leaving a property empty the owner should check to see for how long the property will remain covered and what will be the status after that.

Even though the home is vacant, the liability remains with the owner and this is something that a lot of people forget.

The Solution

If your home is going to be vacant for an extended period of time, it is important to inform your insurance company of the change in the status of the property. Insurance terms and conditions vary from state to state and restrictions vary according to the insurer. In most cases, insuring a vacant home is not a problem. All it requires is purchasing an endorsement to the existing home insurance policy to cover the period when the house will be empty. To not do so will not only expose the owner it the risk of substantial loss, it could be construed to constitute insurance fraud and the status of the property was changed –and the risk increased - without the insurer being informed.

When a property is empty and up for sale, it can be tempting to ignore the need for insurance.  Even if thieves break in, the damage will typically be a broken window or door. But those who enter the property could do significant damage that will affect the selling price and then there are the liability issues mentioned earlier. The risk is not worth it especially when getting vacant property insurance coverage is so easy.

Contact Your Insurance Broker

If your home is going to be vacant for any reason, contact your insurance broker and find out exactly what kind of coverage you will have during the period of vacancy and discuss with him or her the options available to you to increase the coverage and the protection you have.