Auto, home, health and life insurance trends to watch in 2011
The ball has dropped in Times Square. The champagne is flat. The New Year’s hangover is cured.
Yes, New Year’s celebrations are over, but 2011 is just getting started. So what’s in store for insurance consumers in this new year? Here are some insights into trends for auto, home, health and life insurance in 2011.
Auto insurance
An idea that has been simmering for awhile is mileage-based or pay-as-you drive insurance. 2011 could be the year it boils.
Behind the mileage-based auto insurance policies already available in roughly 35 states is this question: Why should someone pay the same premium whether driving 5,000 or 15,000 miles in a year? After all, the less you drive, the lower your chance of an accident should be.
Texas-based MileMeter was the first to offer pay-as-you-drive policies without requiring a tracking device on the car. Instead, a customer submits an odometer photo to MileMeter. The company sells insurance in chunks of up to 6,000 miles at a time. Customers purchase additional chunks as needed.
“It’s been great,” says Rebecca Jackson, one of MileMeter’s customers.
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| In some places, homeowner’s insurance premiums may rise 2 percent to 3 percent in 2011, one expert says. |
Jackson drives about 4,000 miles a year and is saving $800 annually compared with her traditional policy. MileMeter plans to expand from Texas into other states, starting with California, where mileage-based rates recently were approved.
In addition to cost savings, mileage-based rates may offer social benefits as well. A 2008 paper from the Brookings Institution claims pay-as-you-drive policies would prompt motorists to drive less, meaning fewer wrecks and less pollution.
Other auto insurers that have jumped on the pay-as-you-drive bandwagon include American Family, Progressive and State Farm.
As for traditional auto insurance policies, continuing weakness in the economy could be beneficial for consumers.
Robert Hunter, director of insurance at the Consumer Federation of America, says: “As people drive less to save money, the accident frequencies have fallen.” He expects this to create pressure to keep rates from rising in most areas, and perhaps push rates down in some.
Home insurance
Jeremy Bowler, senior director of global insurance at J.D. Power and Associates, expects rates on property and casualty insurance, which includes home insurance, to increase only modestly in 2011 — 2 percent to 3 percent in some places.
Another trend he foresees is the increasing use of technology to serve customers. Examples include bill paying, claims filing and customer service delivered through mobile devices.
Bowler also notes that insurance companies are growing more competitive in terms of customer service, in some cases even bringing back to the United States some call centers that had been moved overseas.
“Don’t settle solely for price. Start by thinking about how you would ideally want to be served,” Bowler says.
Health insurance
One of the many negatives about a weak economy is that fraud may spike in 2011, particularly in health insurance. If the weak economy drags on, you can expect an upward trend in fraud to continue, says James Quiggle, a spokesman for the Coalition Against Insurance Fraud.
High unemployment, in particular, can inspire some otherwise law-abiding people to commit insurance fraud. “Everyone has to be on high alert,” Quiggle says, “because predatory insurance scams can be lurking around every corner in a down economy.”
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| The weak economy could cause a spike in health insurance fraud in 2011. |
In health insurance, some of the most common scams involve sellers representing policies as full coverage when they deliver only stripped-down benefits or medical discounts — or in some cases nothing at all.
Consumers can save themselves “a world of hurt,” Quiggle says, by making one phone call to their state insurance regulator to see whether the company in question is licensed.
He advises consumers to watch for these warning signs when considering a policy:
• Is the seller vague about specifics?
• Does the seller insist you sign by a certain date to get a special deal?
• Is the seller pushy, ill-informed or reluctant to show you the full policy?
• Does the deal sound too good to be true?
In addition to a weak economy, federal health care reform could prompt more fraud in 2011. Quiggle notes some door-to-door schemes have popped up in which scammers falsely claim to be from the government and offer to help seniors obtain Medicare’s “donut hole” prescription rebates.
On a more positive note, 2011 could see an increase in the availability of policies that comply with health care reform measures. Such policies should include free preventive care and no lifetime coverage limits.
Unfortunately, there appears to be little reason to expect a reversal of the trend of rising costs in health insurance. A Kaiser Family Foundation survey found that from 2000 to 2010, employer-provided policy premiums soared 114 percent, with the level of worker contributions rising 147 percent.
Life insurance
A 2010 study by LIMRA, a trade group for insurance and financial services companies, found that ownership of individual life insurance in the United States has hit a 50-year low. Where it goes from there may depend on the economy.
Regardless, LIMRA spokeswoman Catherine Theroux notes that an ongoing trend for life insurance is that insurance shoppers are seeking products with guarantees. These include whole life and universal life with guaranteed death benefits.
“In the annuity sector, guaranteed living benefit riders have been a significant driver … as consumers seek a lifetime income stream,” Theroux says.
The Consumer Federation of America’s Hunter advises consumers to consider term life insurance because “prices are low and should stay there.”
–Paul McDonnold
