November 5th, 2013 by adminNo, I'm not talking about your swimming pool. I'm talking about your insurance pool. Insurance has become increasingly complicated and commoditized. Many people do not understand why there are different rates on insurance. How can one insurance company offer substantially lower rates with better coverage than another? The answer can be found in how insurance pricing works. Insurance basically works by pooling risk. The pool you want to get in is the one where there have been the fewest claims, therefore allowing the company to offer lower prices, better coverage, and make a profit. On the surface it makes sense. But in practice it becomes somewhat difficult to accomplish. Do you call seven or eight companies that collectively spend billions of dollars on advertising? No great shock, the rates they offer are all about the same, they are competing for the same customers. The ones that respond to tireless advertising. But there are other pools, that are a little more private and particular about who they let in. It sounds like discrimination, and it is, but the insurance companies call it underwriting - so it's legal. Many people ask why the insurance company wants so much information to offer a quote? Can’t the insurance company just look at my house and figure out how likely it is that I may file a claim? The answer is no! Surprisingly to many people, claims severity and frequency are more often a factor of the owner than the property. If you have a history of filing claims, you are more likely to file more claims in the future. If you have not, or do not file a claim, that too is also likely to continue. The same is true to credit scores and payments. People with better credit tend to pay their bills on time and file fewer claims than people with poor credit. Often times it is because when something needs repair, they repair it or replace it before it breaks and leaks and causes property damage. Likewise, they are more likely to have the trees trimmed, and therefore avoid having them fall on the house. Also by showing they are responsible and have good credit, it is likely that they are responsible in other areas and aspects of their lives. They probably remember to turn off the stove, lock the front door, have the chimney cleaned, and other risk avoidance behaviors that go hand in hand with being responsible. In other words, they keep their pool clean! Both the pool in the back yard, and the insurance company pool they put their risk in. And everybody enjoys a clean pool. If you are responsible, and you think you might like to save money on your home or auto insurance. I invite you to dip your toe in our pool, and see if you like the water better. We are an independent California Insurance agency, offering personal lines auto and home insurance to our clients. We specialize in finding the right fit for our customer, and making a good match to protect your assets from risk at an affordable price.
Posted in: Insurance