J.D. POWER STUDY ON INSURERS AND DATA: A MATTER OF TRUST

As insurance professionals, we’re always talking about harnessing new data streams to improve our products. The benefits are obvious, we tell ourselves – think of the potential to align prices with real risks! But sometimes, we also need to ask ourselves: do our customers actually want us to use these data? Do they like the idea of us scouring their social media footprints to help price their insurance coverage?

A recent J.D. Power survey asks exactly these questions – and found that we have a long way to go before our customers get comfortable with their personal insurance company collecting troves of their data. The survey found that 55 percent of customers don’t trust their insurance company to collect and use “alternate data”. Only 22 percent affirmatively trust their insurer. (Alternate data includes anything from driving behavior to social media; basically, anything that goes beyond what we traditionally consider insurance-relevant data, like age.)

But the issue is somewhat more nuanced than that. Customers are, unsurprisingly, more comfortable sharing data that they already share. Thirty-nine percent are okay with sharing utility, phone, or rent payment information.  And 45 percent are willing to share their driving data with an insurer.

This could actually be good news for insurers. It shows that customers might change their perceptions of trust regarding their insurer as they become more used to sharing the data. J.D. Power notes that “Initially, customers are more comfortable sharing alternative data they are more accustomed to sharing elsewhere. Driving data and its use in telematics or usage-based insurance programs is fairly common knowledge among customers.”

It’s when the data becomes more personal, like social media posts, that customers grow wary. Only 15 percent and 14 percent were willing to share online activity and social media data, respectively. And a sizable chunk (35 percent) isn’t willing to share any alternative data at all.

Additionally, insurance customers are sensitive about what their insurers are using their data for. For example, 65 percent think it’s reasonable for an insurer to use alternative data to help recover stolen vehicles; 63 percent for an insurer to tailor coverage; and 60 percent for more accurate premium pricing. But they become less accommodating when it comes to using data for things like marketing – 55 percent don’t think that’s a reasonable use of their data.

According to J.D. Power, customers are “jaded by the current overwhelming state of marketing, [so] insurers need to underscore the value” of the data their collecting to the customer. That means the responsibility lies with insurers to prove to their customers that the data collection is worth it.

Not surprisingly, even if a customer thinks it’s okay for an insurer to collect their data, the odds are good they’re worried about privacy. Fully 85 percent consider the risks of privacy and security breaches a disadvantage to sharing their data – even if they’re okay with sharing to begin with. And 74 percent think insurers should ask their customers before collecting and using their alternative data.

The upshot is that customer acceptance of alternative data is a gradual process. Customers want to know what data is being collected. They want to know how it’s being used. And if insurers can connect the dots for them – can demonstrate the value that the alternative data is bringing – then their trust and acceptance will grow. As the J.D. Power survey shows, this has already started happening with driving data. How this will play out with other alternative data will largely be up to how well insurers can prove themselves trustworthy data custodians.

Understanding the insurance claims payment process

After a disaster, you want to get back to normal as soon as possible, and your insurance company wants that too! You may get multiple checks from your insurer as you make temporary repairs, permanent repairs and replace damaged belongings. Here’s what you need to know about claims payments.


The initial payment isn’t final

In most instances, an adjuster will inspect the damage to your home and offer you a certain sum of money for repairs, based on the terms and limits of your homeowners policy. The first check you get from your insurance company is often an advance against the total settlement amount, not the final payment.

If you’re offered an on-the-spot settlement, you can accept the check right away. Later, if you find other damage, you can reopen the claim and file for an additional amount. Most policies require claims to be filed within one year from the date of disaster; check with your state insurance department for the laws that apply to your area.

You may receive multiple checks

When both the structure of your home and your personal belongings are damaged, you generally receive two separate checks from your insurance company, one for each category of damage. If your home is uninhabitable, you’ll also receive a check for the additional living expenses (ALE) you incur if you can’t live in your home while it is being repaired. If you have flood insurance and experienced flood damage, that means a separate check as well.

Your lender or management company might have control over your payment

If you have a mortgage on your house, the check for repairs will generally be made out to both you and the mortgage lender. As a condition of granting a mortgage, lenders usually require that they are named in the homeowners policy and that they are a party to any insurance payments related to the structure. Similarly, if you live in a coop or condominium, your management company may have required that the building’s financial entity be named as a co-insured.

This is so the lender (and/or, in the case of a coop or condo, the overall building), who has a financial interest in your property, can ensure that the necessary repairs are made.

When a financial backer is a co-insured, they will have to endorse the claims payment check before you can cash it.

Depending on the circumstances, lenders may also put the money in an escrow account and pay for the repairs as the work is completed. Show the mortgage lender your contractor’s bid and let the lender know how much the contractor wants upfront to start the job. Your mortgage company may want to inspect the finished job before releasing the funds for payment to the contractor.

If your home has been destroyed, the amount of the settlement and who gets it is driven by your policy type, its specific limits and the terms of your mortgage. For example, part of the insurance proceeds may be used to pay off the balance due on the mortgage. And, how the remaining proceeds are spent depend on your own decisions, such as if you want to rebuild on the same lot, in a different location or not rebuild at all. Tthese decisions are also driven by state law.  

Your insurance company may pay your contractor directly

Some contractors may ask you to sign a “direction to pay” form that allows your insurance company to pay the firm directly. This form is a legal document, so you should read it carefully to be sure you are not also assigning your entire claim over to the contractor. When in doubt, call your insurance professional before you sign. Assigning your entire insurance claim to a third party takes you out of the process and gives control of your claim to the contractor.

When work is completed to restore your property, make certain the job has been completed to your satisfaction before you let your insurer make the final payment to the contractor.

Your ALE check should be made out to you

Your check for additional living expenses (ALE) has nothing to do with repairs to your home. So, ensure that this check is made out to you alone and not your lender. The ALE check covers your expenses for hotels, car rental, meals out and other expenses you may incur while your home is being fixed.

Your personal belongings will be calculated on cash value, first

You’ll have to submit a list of your damaged belongings to your insurance company (having a home inventory will make this a lot easier). Even if you have a replacement value policy, the first check you receive from your insurer will be based on the cash value of the items, which is the depreciated amount based on the age of the item. Why do insurance companies do this? It is to match the remaining claim payment to the exact replacement cost. If you decide not to replace an item, you’ll be paid the actual cash value (depreciated) amount for it.

To get replacement value for your items, you must actually replace them

To get fully reimbursed for damaged items, most insurance companies will require you to purchase replacements. Your company will ask for copies of receipts as proof of purchase, then pay the difference between the cash value you initially received and the full cost of the replacement with an item of similar size and quality. You’ll generally have several months from the date of the cash value payment to purchase replacements; consult with your agent regarding the timeframe.  

In the case of a total loss, where the entire house and its contents are damaged beyond repair, insurers generally pay the policy limits, according to the laws in your state. That means you can receive a check for what the home and contents were insured for at the time of the disaster.

NICB: Top five states for hail claims

The National Insurance Crime Bureau (NICB) recently released a three-year analysis of insurance claims associated with hail storms in the United States.  According to the NICB review of claims data from ISO ClaimSearch®, there were a total of 2.9 million hail loss claims in the United States from 2016 through 2018.

The top five states for hail loss claims were:

  • Texas (811,381)
  • Colorado (395,025)
  • Nebraska (163,336)
  • Missouri (153,403)
  • Kansas (146,206).

The top five cities for hail loss claims during that period were:

  • San Antonio, Texas (75,187)
  • Colorado Springs, Colorado (67,920)
  • Omaha, Nebraska (52,803)
  • Denver, Colorado (48,357)
  • Plano, Texas (42,659).

Over the three years covered by the report, May had the highest monthly average for hail loss claims with 203,296. June was next with 178,881. April (164,232), March (153,716) and July (96,947) round out the top five.

Of the five policy types providing hail loss coverage, Personal Property-Homeowners was the most affected with 1,657,663 claims or 57 percent of the three-year total. It was followed by Personal Auto with 898, 500 claims and Personal Property – Farm with 149,215 claims.

“Hail damage fluctuates year-to-year, but what seems to be consistent is the number of unscrupulous contractors ready to swoop in promising a quick fix, which is why NICB encourages policyholders to use caution when selecting a contractor or other workers to help repair your property or replace your windshield following a storm,” said Brooke Kelley, NICB vice president of communications. “Always check first with your insurance company or agent before signing any documents presented by a contractor whom you did not request to appear. It’s why we say, “If you didn’t request it, reject it.”

The following tips are also helpful:

  • Get more than one estimate
  • Don’t be pushed into signing a contract right away
  • Get everything in writing
  • Require references and check them out
  • Ask to see the contractor’s driver’s license and write down the number and the license plate on his or her vehicle

The I.I.I. has facts & statistics about hail here and here.

New York State Proposes Regulation to Combat Discriminatory Auto Insurance Rates

A proposed regulation could help protect New Yorkers from excessive and unfairly discriminatory auto insurance rates.

Following an investigation, the state Department of Financial Services regulation would prohibit insurers from using an individual’s occupational status or educational level as factors in setting rates, unless the insurer demonstrates to the satisfaction of the superintendent of financial services that the use of those factors does not result in rates that are unfairly discriminatory.

“This new protection cracks down on this unfair practice that soaks drivers for not having a college degree or a high-paying job,” Gov. Andrew Cuomo said in a statement. “These metrics are discriminatory, have no relationship to how good a driver you are and should not be used as an excuse to overcharge New Yorkers.”

The department’s  multiyear investigation revealed some insurers in New York use an individual’s education level and occupational status in establishing initial tier placement. As a result, classes of insureds have been placed in less favorably rated tiers, which may lead to higher premiums without sufficient support that an individual’s education level or occupation related to his or her driving ability.

The state did not indicate which auto insurers had used education or occupation to charge some drivers more.

The proposed regulation is subject to a 45-day public comment period. The regulation provides 180 days for insurers that had been using education level and occupational status in initial tier placement and tier movement to amend their multitier rating programs and tier movement.