CURE’s Eric Poe: ‘Thorn in the side’ of traditional auto insurers

If you’re asking Eric Poe what irks him about auto insurance industry, it’s best to have a healthy chunk of time to spare.

As chief operating officer of CURE Auto Insurance, which offers policies in New Jersey and Pennsylvania, Poe is railing against large auto insurance companies for using factors like your education, profession and credit score to determine your rates. His company’s philosophy? Your driving record alone should determine how much you pay for auto insurance.

InsuranceQuotes.com asks Poe — who’s also a lawyer and a CPA — why he believes this practice is wrong and what he thinks needs to be fixed in the auto insurance business.

InsuranceQuotes.com: One article said that you’re making a career out of being a thorn in the side of your industry. Do you agree with this? Is it a goal of yours?

Eric Poe: I definitely agree with it. Is it so much my goal? I would say it’s not my goal. It’s actually out of complete default, to be honest with you.

Eric Poe, chief operating officer, says CURE Auto Insurance operates on a “platform of fairness.”

CURE has always been rooted in consumer advocacy, but we’ve never really made that our platform. It wasn’t until New Jersey — in order to attract some of the larger carriers like GEICO and Progressive to the state — allowed credit scores, education and home ownership as factors to determine your rates that we launched into consumer advocacy. I understood that there were credit scores being used by other companies, but it wasn’t until GEICO re-entered the state in 2004 that I discovered that nationally they use a person’s education level and whether or not they work in a white-collar, traditionally high-paying job according to the U.S. Census, to determine your rates.

When you take a position that’s a complete 180-degree difference from the rest of the industry’s trends and objectives, you become a thorn in the side whether you want to or not.

InsuranceQuotes.com: Simultaneously being an advocate and a service provider seems like a rare combination. How do you balance those roles?

Poe: People say to me all the time, “Does that mean people with good credit and high incomes are going to see higher rates with CURE?” The answer is “no,” because as long as you’re a good driver, we have discounts that may supersede any of those other discounts from other providers who adopt these practices.

With that being said, on average, it is a well-accepted correlation that higher-income drivers produce higher profits for the auto insurance industry. People will say, “It doesn’t make any sense that you would go after less profitable risks than what you already know to be profitable in higher-income drivers.” My answer to that question is if there’s a profit margin of 20 percent for a stratified sample of drivers that are higher-income drivers and there’s a 10 percent profit margin on lower- to middle-income drivers that are responsible, I can live with 10 percent if that’s what’s going to keep my business doing what I think is right in the industry.

InsuranceQuotes.com: What’s wrong with factoring education level, occupation and credit history into auto insurance rates?

Poe: What’s wrong with it is that in 49 out of 51 U.S. territories, auto insurance is mandated. We live in a capitalist market where everybody should have the freedom to compete on any grounds to make profits. The problem with that ideology is when it actually mixes in with more of a socialistic marketplace. In other words, you’re mandating people to buy insurance and if they don’t, you’re going to fine them and eventually throw them in jail. When you as a government, as a legislature, mandate that every person who owns a car has to buy insurance, you have a burden and an obligation to make sure those rates are affordable to everybody.

If you were to tell me that buying auto insurance was voluntary, I’d have absolutely no problem with this practice. The problem becomes when you say to middle- or lower-income people, “If you don’t buy insurance, you’re going to jail.” Then when that person turns around to buy insurance, he’s going to pay twice as much as someone who lives five miles down the road in a higher-income area.

Essentially what you have in this business model is that higher-income people are being subsidized by lower-income people. It’s usually the opposite. That’s where I think it gets a little confusing, because you can use any statistic you want to correlate to something and companies can just determine what that is.

People say to me all the time that competition is good for the marketplace; consumers can choose to get their insurance through a company like CURE. The problem with that is we’re such a small minority. The most recent study done shows that 92 percent of national insurance companies use credit scores to determine rates.

InsuranceQuotes.com: All of the profits CURE accrues go back to the policyholders. How does being nonprofit in that sense help you in the auto insurance industry?

Poe: To be honest with you, it helps that we don’t have any outside investors. That’s the key, because if we were a traditional company like Allstate, for example, who sells their stock on the stock market, the executives have one primary objective – that is to make a profit so you can make your stock price go up. It doesn’t matter whether there’s a social good involved. You’re not going to sacrifice $500 million in profits because you think something is wrong.

InsuranceQuotes.com: What are the plans for future expansion for CURE? Will we see it coming to other states?

Poe: We hope to solidify and entrench ourselves more in Pennsylvania before we go to another state, but that’s certainly not something we’re ruling out. I think going forward our business model is going to continue to be on the platform of fairness.

–Kevin Allen