Pay as You Drive (PAYD) Car Insurance

Many Mainers, especially retirees and those who bike, walk,  bus or live close to work, drive less than the average American. That’s one reason Maine’s auto insurance premiums are among the lowest in the country, despite our harsh winters.  Still, many of our clients ask about Maine auto insurance discounts for driving fewer miles.

The idea appeals to our common sense, doesn’t it? Even the Freakonomics guys agreed. Here’s some of what they wrote in their April 20 column in the New York Times Magazine:

Imagine that Arthur and Zelda live in the same city and occupy the same insurance risk pool but that Arthur drives 30,000 miles a year while Zelda drives just 3,000. Under the current system, Zelda probably pays the same amount for insurance as Arthur.
While some insurance companies do offer a small discount for driving less — usually based on self-reporting, which has an obvious shortcoming — U.S. auto insurance is generally an all-you-can-eat affair. Which means that the 27,000 more miles than Zelda that Arthur drives don’t cost him a penny, even as each mile produces externalities for everyone. It also means that low-mileage drivers like Zelda subsidize high-mileage drivers like Arthur.

Every auto insurer in Maine uses the system described above. They ask how you use your vehicle, and give a small discount to those who tell them that they use theirs for “pleasure use” or a “short commute”.

But one insurer, Progressive, has introduced a “pay as you go” system they’ve dubbed “MyRate“.  It promises discounts for driving fewer miles, not driving late at night, and driving defensively. Sounds good, huh? As with many seemingly simple ideas that appeal to our “common sense”, the devil is in the details.
  1. The program requires credible monitoring that yields reliable results. Progressive has developed a chip that you plug into your car’s OBD (on-board diagnostic) port. The device monitors your speed, the time of day you’re driving, and how many miles you drive. It’s not a GPS – it doesn’t report WHERE you are – but the amount of data it does collect and send to Progressive has given pause to some who are concerned with privacy in the digital age.
  2. Your insurance rates can also INCREASE if your driving habits change (new job? take up hiking or camping? new long-distance love interest?), or reflect a higher risk profile (kid starts driving?). While you can quit the program, if you stay with Progressive, they may use the data about you that they’ve collected when rating your future policies.
  3. The device costs about $30.00 to buy, and the premium quote you used to evaluate whether to buy the policy was only an up-front estimate. So, even if you thought that your discount would more than pay for the up-front cost, that can change (see #2 above).
  4. MyRate is currently not available in Maine. In fact, it’s only available in 8 states, New Jersey being the closest. And, what we consider the biggest drawback of all…
  5. You can’t buy a MyRate policy from an independent insurance agent; the only channel where it’s available is from Progressive Direct. This means that you’re on your own in dealing with the insurance company if you choose to buy a policy this way.

Maybe MyRate makes sense for you after reviewing the facts of the program. We do like some of the features. It rewards safer driving and less-risky behavior. It also rewards those who choose to drive less, which is good for the environment and for our communities too.

What we don’t like is that Progressive chooses to only sell the product directly to consumers. Of course, part of that is self-interest: we’re insurance agents after all. If we don’t believe we add value to the insurance transaction, then we should just wither away to extinction. But most Progressive customers agree, and prefer to buy from an independent agent. The vast majority of their Maine auto insurance business is produced through local agencies.
Insurance is complicated enough; this new method offers its own twists, not to mention the privacy concerns mentioned above.  We wonder how many people will feel comfortable facing this new insurance model without a local professional to help, advise and advocate for them. Why not allow customers to use an agent to help them vet this model to see if it really makes sense for their situation?

Wind, Rain, Loss of Power Threaten Area

Today’s forecast calls for high winds in the Greater Portland area, along with 1.5 to 2 inches of rain. The west side of South Portland lost electrical power this morning, forcing school officials to dismiss students early. 

The combination of heavy rain and no electricity is a recipe for flooded basements, as sump pumps are literally powerless to remove groundwater that may back up through basement drains. This type of damage is NOT covered by most Maine homeowners insurance policies, unless you buy a separate endorsement. Although it may be too late for you today, check your policy and talk to an agent about adding this coverage. Also, general flooding is not covered by homeowners policies. Coverage is available via separate flood policy. Talk to an insurance agent for details. 
Our Maine insurance agency is ready to respond to any insurance claims caused by today’s storm. Contact Noyes Hall & Allen Insurance at 207-799-5541.

A Warm Hand

Concord Group Insurance just announced a fuel assistance lottery for its Maine homeowners insurance policyholders. The company expects to donate $500,000 in fuel assistance during the one-time program, over $200,000 of it in Maine alone.  

Anyone who had a Concord Group homeowners policy in force as of October 31 can register for a chance at a $100.00 fuel payment. A drawing will be held each month from December through March. For more information, check Concord Group’s public web site,  or register here. 
The State of Maine has enthusiastically welcomed Concord’s generous program. “We appreciate the significant effort being made by The Concord Group to assist policyholders in meeting their home heating expenses this winter,” Governor John Baldacci said. “This unique initiative will help many Mainers remain safe and warm as the weather grows colder.”
Kudos to Concord Group for extending A Warm Hand!

Car Sharing Comes to Portland Maine – with Insurance?

This week, the Press Herald reported that  Portland UHaul plans to bring its U Car Share program to town in the form of four white PT Cruisers. In August, we addressed the issue of car sharing and insurance in this post.

To reiterate: car-sharing services can be a great alternative for those who rarely need a car. They help to reduce parking congestion, greenhouse gases and other automobile-created problems. But don’t forget that when you get behind the wheel, you’re in a position to put all of your assets at risk. You’re relying on the car sharing service’s insurance to protect you. The U Car Share website doesn’t say what extent of liability protection their policy provides. We recommend that you get the answer to that question BEFORE you join.


Insurance Service in the 21st Century

Our insurance agency prides itself on providing personal service. We figure that when people call us, they want to talk to someone as soon as possible. So, we avoid voice mail as much as possible, and give callers options to speak with someone who can help them – even if they're not the person they originally called for. 

But we try to be tech-friendly, too – for those clients who want to communicate that way. We're proud to offer:
  • Real-time chat support. Clients or prospective clients can click on an icon on our home page which opens up a chat window. This is great for those who have relatively simple questions that might take a minute or two to answer: "was my payment received?" or "how much do I owe on my car insurance?", or the ever-popular "can you send me another insurance card so I can register my car?". Clients can work or play on their computer while we research their question. We can even send documents -an insurance card or payment receipt – right in the chat window. It's perfect for multi-taskers. It's also good for those who might be hard of hearing, or who want a written transcript of our answer (one can automatically be emailed after we're done). After business hours, the "chat button" automatically generates an email to us that we can answer later.
  • Extensive email capabilities. We can email virtually any form, application or documentation that we can mail, speeding up the turnaround time by hours or days compared with faxes or snail mail. 
  • Web-based request forms. Our commercial clients can request Certificates of Insurance, and our other clients can easily download forms for discounts, electronic payments or underwriting information.  
  • This blog, which we hope provides timely information on various risk-management trends, tips and topics. There's even an RSS feed, so you can have updates automatically emailed to you. 
  • Text messaging to cell phones and PDAs.  Let's suppose that your mortgage company pays your homeowners insurance premium. Except, they sold your mortgage last year, or changed addresses, and your insurance policy wasn't updated. When the insurance company doesn't receive your payment by the due date, they send you a cancellation notice. The only problem is you're away on an extended trip, so you don't get the notice. Wouldn't it be helpful to get a reminder that your policy is about to cancel tomorrow? That's one example of when text messaging (SMS) to a cell phone can be handy. We have that capability, if you notify us you'd like to be contacted in that way.

Insurance will always be a people business, no matter what the 800 number and web site insurance sales people say. But, technology can help a good agent provide excellent service. Our goal is to be positioned on the busy intersection of service and technology, providing the best insurance experience we can.