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Insurance > Car Insurance
Risky drivers become a hot commodity for auto insurance industry
BRIGITTE GREENBERG, Associated Press Writer. Associated Press.
Copyright Associated Press
NEW HAVEN, Conn. (AP) - If you are a young driver with a couple of accidents and looking for insurance for that pricey new sports car - hey, no problem.
The insurance industry has taken a liking to you, even though you are in the class of high-risk drivers it once shunned.
The question is: Why are you so popular now?
"It's happening because it's good business," said Steven Goldstein, vice president of the Insurance Information Institute in New York, an industry trade group. "Customers are just happy to have insurance in the private market, and insurers can charge much more."
Allstate customer Tim Sawyer, 43, of Everett, Wash., is an example of someone who a few years ago might have had a hard time finding insurance.
Originally, his insurance was $300 per month for himself and his daughter.
Then he had problems with falling asleep behind the wheel and was involved in four or five accidents in the past four years, leaving three people injured and destroying his own vehicle.
Instead of losing his insurance coverage, he now pays an additional $150 each month, for a monthly premium of $450.
"I was surprised that I didn't have to look for insurance," Sawyer said. "I've been treated well. They've been more than cordial. They've always been very helpful."
Goldstein said the high-risk market is profitable in part because drivers such as Sawyer are so grateful to have private auto insurance that they become loyal customers, buying other insurance policies for their home or business.
"At one time, companies didn't want high-risk drivers," he said. "Now, the goal is that they will move into the primary market eventually."
Roughly 80 percent of all drivers in the United States fall into the standard or preferred market and have no problem getting auto insurance.
But for the other 20 percent buying insurance - required by many states - posed a challenge.
In the past, the majority of drivers whom nobody wanted to insure went into what's known as a state risk pool. In a pool, drivers are insured as a group in a plan underwritten by insurance companies, which are generally required to participate.
But the number of people in the state risk pools has dropped nationwide, from 2.24 million applications to state pools in 1995 to 1.36 million last year, said John Verruso, spokesman for AIPSO, formerly known as the Automobile Insurance Plans Service Office, of Johnston, R.I.
While the number of people in the state pool has been fallen, the number of premiums written for the high risk drivers has risen nationally an average 16 percent each year between 1992 and 1996, according to a report by Conning Insurance Research & Publications in Hartford.
The total of high-risk industry premiums was $4.4 billion in 1992. Four years later, it was $7.9 billion - a 79 percent increase.
By comparison, the total auto insurance market in 1992 produced $88.4 billion in premiums. In 1996, the total was $107.7 billion - a 22 percent increase.
Much of the change in the way of doing business can be attributed to new computer analysis of information about customers, said the author of the report, Mary Ann Godbout. Standard information, such as driver age, car type, driving record, car usage and location are looked at in new ways, and insurers also have access to drivers' credit ratings to determine their overall reliability.
"Now there are more sophisticated methods, so the companies can pick out better risks, or really, pick the best among the worst," Godbout said.
Susan McKenna of the National Association of Independent Insurers, a Des Plaines, Ill., lobbying group for auto insurers, said insurers can use new indicators to see that some drivers simply have had a bad string of luck.
Dennis Schain, a spokesman for Travelers Property Casualty Corp., which recently started offering high-risk auto insurance in New York, said it has become a more competitive market, in part because cars are now safer, and health insurance and related medical costs have been held down in recent years.
"I guess, quite frankly, it's an indicator of the competitiveness of the auto insurance business. You have to go where there are new pockets of customers," Schain said.
With 3 1/2 million customers and $3 billion in high-risk business, Allstate Indemnity Co. of Northbrook, Ill., is the largest high-risk auto insurer in the country.
Company President Steven Groot said that in 1995 and 1996, Allstate grew its high-risk business by about 14 percent, compared with an overall growth rate of 4 percent for the company.
"We expect them to have more accidents, but we charge them for that expectancy," Groot said. "They are fine people. They are just having a little driving difficulty. ... A lot of them are folks who don't like to stop at stop signs or drive too fast."
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People: Sawyer, Tim
Companies: Allstate Indemnity Co
Text Word Count 811
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