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November/December 2002

Insurance Talk

    policy briefs

Insurers Move Toward Mileage-Based Rates; Pilot Program Launched in Texas

Several insurers are considering moving toward a new way of charging for policies—the way of mileage-based rates, according to an article that appeared in The Wall Street Journal. Cleveland-based Progressive Insurance Co. has already launched a pilot program using this system in Texas, and says it has proved successful so far. Progressive spokesperson Leslie Kolleda told The Wall Street Journal she expects the system to soon take off for the rest of the insurance industry.

“This is absolutely the future of auto insurance,” Kolleda said.

However, other major auto insurers are waiting to join in. Northbrook, Ill.-based Allstate Insurance Co., for example, said it didn’t feel that there was enough historical data to support such a move. “[Switching] would require a massive restructuring of a well-functioning underwriting system,” said Justin Schmitt, an Allstate spokesperson.

Progressive’s pilot program in Texas employed global-positioning systems to measure mileage. However, the systems had to be installed in auto service shops, which many policyholders considered too much of a hassle—despite the savings on their rates. Likewise, it would be possible to purchase a certain number of miles, just as a consumer could purchase a certain number of minutes on a phone card.

While the impact on the industry will be small to non-existent as only pilot programs exist, it could grow if more companies make the switch as coverage issues arise.

AutocheX Puts CSI Reports Online
AutocheX of San Mateo, Calif., has announced that its insurance company and body shop customers can now access Customer Service Index (CSI) reports online at the AutocheX website, www.autochex.com. Each company receives a score on the website based on interviews with customers of numerous companies and files these online for companies to stay up-to-date on how the customers feel about their services.

“Our data is updated daily, so claims managers and shops can check their CSI scores on an almost real-time basis,” said Dennis Kiyohara, president and co-founder. “This will allow our customers to confirm that they are on the right track or to spot potential problems for quick remedy.”

Olympic Ordered to Cease Deductible Waiving
Olympic Auto Glass of Kent, Wash., recently was ordered to cease offering $125 cash-back for replacing customers’ windshields, as the result of an order by the King County Superior Court, according to an article in the July 22 issue of the Puget Sound Business Journal. Judge Sharon Armstrong ordered that the cash-back offer violated a 1997 permanent injunction agreement signed by Olympic with the Washington attorney general and the Independent Glass Professionals Association (IGPA).

Olympic president Frank Kuhn said he hoped that the auto glass playing field might soon become more level, despite the decision.

“I just hope that something—based on the judge’s decision—will create a level playing field,” Kuhn said. “Several companies in the state do the same thing I was doing. Many offer even more than I did.”

While, according to the article, Kuhn said he was trying to remain competitive, the association’s suit argued that Olympic’s offer violates the Insurance Fraud act by offering to waive or rebate all or part of a customer’s insurance deductible. 

 

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