Suppose you had a question about insurance.
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The easiest solution might be to call your insurance company or agent and ask. But what if simply asking the question affected your rates?
That's something many drivers fear. Texas, in fact, recently passed a law to prevent home and auto insurers doing business in the state from raising rates or cancelling policies based solely on a customer inquiry. But that's not the case in most states.
“You may be wondering whether a ticket or claim will raise your rates,” says Penny Gusner, consumer analyst for CarInsurance.com. “Insurers assume that if you're asking about it, it must have happened.”
In some cases, a question might influence decisions on rates, policy renewal or future claims.
Tickets? Ask away
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Tickets are pretty easy for car insurance companies to nail down: Either you're guilty of the infraction or you're not.
"Insurance companies base their rates on apparent risk according to actuarial tables," says attorney John Szymankiewicz of Raleigh, N.C. "For some types of insurance, the list of factors affecting an actuarial table can be very long. But, for example, in car insurance, the single biggest factor is the driving record of the individual(s) being insured."
Your motor vehicle record is an official history maintained by the state; it reflects only convictions. Even if you asked about the impact of a 100-mph speeding ticket, your insurance company would not increase your rates until a conviction was in the books.
In fact, your insurance company has a menu of potential penalties for various infractions waiting for you. Ask for its surcharge schedule. (See “What is a surcharge schedule?”)
“I'd suggest asking for a surcharge schedule whenever you switch to a new insurance company,” Gusner says. “It's always good to know ahead of time what the consequences of a ticket might be.”
Claims questions pose a risk
Inquiries about claims are a different matter. Many insurance companies will note your question in their files even if you don't file a claim afterward. The inquiry also might show up on your Comprehensive Loss Underwriting Exchange (CLUE) report that most insurance companies use to make decisions on whether to insure new customers.
Gusner says the practice helps make sure that any future claims don't include damage from earlier accidents, and that drivers with patterns of incidents are charged appropriately.
“The insurance company acquired information that bears on the risk of the policy,” Szymankiewicz says. “They can adjust the cost of the policy because now they've got more information about the risk.”
Jim Sutton, president of the James F. Sutton Agency in East Islip, N.Y., agrees.
“The company is not trying to trick you; rather, they are trying to remain competitive based on their current underwriting standards," Sutton says. “You should pay rates that are based on your current situation. Your life situation will change over time and you will receive the appropriate rates for your area if you shop around."
Will your question backfire?
Both Gusner and Szymankiewicz say it's fairly unlikely that insurers will penalize you for asking a question about a possible rate increase. It is possible, though.
Surcharge schedules usually spell out the consequences of an accident as well. Consulting the surcharge schedule instead of calling the insurance company removes the risk that the company might note your claims question in its files.
A follow-up call asking for specifics is always an option.
It's also good to have an idea of the factors insurance companies consider when setting rates.
"Generally, customers typically have little understanding of how their rates are set by their insurer, or why prices may vary by sometimes hundreds of dollars between companies when they shop for multiple quotes," says Jeremy Bowler, senior director of the Global Insurance Practice at J.D. Power, which recently released its U.S. Auto Insurance Study.
If the insurance company does raise your rates, fail to renew the policy or cancel it altogether because of an inquiry, it's probably time to start comparing quotes.
“No two insurance companies have the same criteria,” Gusner says.
The original article can be found at CarInsurance.com:
Could asking a question raise your rates?