More Stinky Insurers?

“As I read Steve’s experience with property insurance,” writes Tom from Novell, “I was reminded of an experience I had with auto insurance a few years ago. Luckily it involved only my premium, not a refusal of my company to pay. It illustrates, however, the industry’s indifference to customers.

“My wife and I had three teenagers, a very modest new car, and an old clunker. Both cars were insured under the same policy. When the clunker no longer ran, we decided not to repair or replace it. This was based in part on the cost of insurance. I called our insurance company at once and told them to take the car off our policy.

“The customer service representative was helpful. She gathered information, ran figures through her computer, and told me what the increase in my premium would be. I patiently explained that I was dropping, not adding, a car. She understood, but our children had been rated against the older car and were now rated against the newer. Hence, our premium was higher.

“I had a discussion with her, and then with her supervisor, neither of whom understood why I thought it unreasonable to be charged more to insure one car than two. I suggested we go back to insuring both, but they refused.

“I could only conclude that insurance premiums, like airline fares, are designed to be incomprehensible to those who pay them.”

Fascinating — as anything counter-intuitive is fascinating. I don’t think the company was being “indifferent to its customers,” as you put it, just intriguingly rational. I guess they figured that in families with two cars, the kids get to drive the clunker. And so now, with just one car, they would be taking out the Jaguar from time to time (OK, I know it wasn’t a Jag, but to make the point) . . . and dented Jaguars cost a lot more to fix than dented clunkers. The liability portion of your policy remained unchanged (I’m guessing), because your kids were no more or less likely to run over a little old lady in the Jaguar than in the jalopy. But the collision — coverage you probably didn’t even carry on the old clunker, if you were smart — increased in price because now any fender they dented would be the Jaguar’s.

Of course, it’s always a good idea to shop around for insurance — even today, as you read this. But not, in this case, in my view, because the insurer was uncaring. Their one mistake was in not managing to explain it more clearly.

“Similar story,” writes Dr. D, “only with an A.M. Best A+ rated company and disability insurance. This company no longer sends premium notices as they want me, and no doubt others, to drop their policies. Their response is, ‘the policy does not ****require**** us to bill you, it is your responsibility to pay.’ Switching companies is not possible for me as most companies consider me ‘overinsured.’ Insurance companies are clearly, and legitimately, in the business of making money for their stockholders; but if they need to pay some benefits to do that, so be it.”

Now that one’s a little closer to skanky, if you ask me. If their normal practice is to send bills, they should probably just take their lumps on this policy and treat you nicely, and send bills, even if their actuaries tell them you are not a good risk. (If I read you right, their problem is that they’ve committed to pay you so much if you’re disabled, they fear they’re giving you an incentive to fib a bit, or exaggerate, if you ever have an accident or hurt your back or start injecting yourself with some of the pain killers in your doctor’s bag.)

It’s kind of like an all-you-can-eat restaurant that sees Haystacks Calhoun coming up the steps. (Is anyone else old enough to remember that name? Is he still alive? Not still wrestling, I presume. What does he weigh now?) Heck, the sign says “all you can eat,” and so they should be as gracious to old Haystacks as to anyone else, even if the owner in the back expects to lose money on him.