Driver’s “big brother”

You’re operating your car as you usually do. Your daily routine is not much different than many, many millions of others. You get up and start the car, pickup, SUV or hybrid, back out of the garage or parking spot and head to work. Perhaps you pop out somewhere for lunch and, later, back home. Hey, it’s the weekend, so maybe you take a day trip to see relatives or go to a nearby state park and do some camping. Maybe you stay in town and decide to enjoy the local music and clubbing scene. Who knows what adventures await for you and your vehicle? Well, increasingly, your insurer does.

For well over a decade car manufacturers have, without much publicity, manufactured and installed special boxes in your vehicles called event data recorders or EDRs. Though less sophisticated, they are quite similar to “black boxes” used on aircraft. While they aren’t equipped for tracking down the level of vehicle use you might expect from an act of espionage, they do perform at a level that may surprise vehicle owners.

EDRs can capture a large amount of information about a vehicle, particularly information about what occurs before a traffic accident. When vehicles are repaired or prior to being sent for salvage, EDRs can be taken out, have their data reviewed and statistics be reported on the speed of vehicle, time of incident, whether braking occurred, road surface response and other details.

While a vehicle is operated without incident, the data is, at some pre-set limit, written over. However, should an accident occur, the information is frozen and maintained for the pre-accident data. Manufacturers typically use the information to study vehicle response. It is meant to assist with future vehicle development. However, increasingly, authorities and private insurers have moved to get access to the information and use it for crime and claims investigation respectively.

An interesting twist involves privacy issues. Many vehicle owners are unaware of EDRs and what they are doing. A larger issue is the ownership of the information. Manufacturers treat the information as proprietary and do not share it with vehicle owners. Authorities and insurers get legal access to the information, yet vehicle owners do not. Currently, lawsuits are arising regarding whether the use of such information and the existence of EDRs constitute invasion of privacy.

As technology becomes more pervasive and advanced, both insurance companies and insurance consumers should be more aware of its impact on their business relationship.

Pay As You Drive?

Ever had to read your insurance policy for a home, seasonal home or rental property? Then you probably ran head-first into the terms “hazard,” “peril,” or “cause of loss.” These refer to events that could damage your property and which are covered by your insurance. While you may understand some terms, you may be confused by others. This article (and part two) briefly explains some common terms which, in some cases, may not mean the same as they do in the dictionary.

California, the nation’s frequent trend-setter, has thrown the switch on an idea that could affect the way the rest of the U.S. buys personal automobile insurance. In the last quarter of 2009, California’s drivers will have the option to buy insurance on a “Pay As You Drive” basis.

How insurance companies charge you and I for auto insurance remained roughly the same for decades; using two levels of characteristics called rating factors. The primary set of factors usually includes:

·         Territory

·         Age, Gender, and Marital Status

·         Vehicle Use

·         Discounts

Another (secondary) set of characteristics include vehicle age and original cost, susceptibility to damage, ease/difficulty to repair and vehicle performance capability.

The primary factors had long been proven as reliable guides on what type of risk an insurer took when considering providing coverage for a certain type of driver. For instance, a driver’s territory was based on a section of a state where a driver lived and operated his car for work and pleasure. Statistics are widely available about a given territory, such as traffic density, amount of city, vs. suburban and rural roads, accident and loss data, etc. Factors such as age, gender, and marital status relied on data concerning driver experience, maturity and stability with regard to likely operation of a vehicle. It also provides important information on long-term prospects, particularly the impact of becoming elderly operators.

The “Pay As You Drive” (PAYD) concept is not new. It has long been discussed as an alternative way for insurers to charge drivers according to, some say, the most important risk affecting auto insurance….how often a person actually drives a car. It is also used by insurers in other parts of the world, including the U.K and Australia. While most of the factors used to rate drivers would still be used; they would be strongly connected to actual usage.

Those who favor the idea cite the fact that, since it is tied to actual use, it gives drivers control over a major household expense. Fans of the concept’s use in the U.S. usually mention the following advantages:

·         Nationwide Driving would be reduced

·         Pollution from cars would decrease

·         The majority of households would experience lower auto insurance costs

Under the California plan, the state would have to approve all such programs and each insurer will be required to file its plan with state authorities. Insurers have two choices; they can convert to offering only PAYD plans or offer it along with traditionally rated insurance. Insurers may also offer coverage based on actual miles used, or upon low-mileage plans, based on selecting among monthly or annual mileage bands.

Other states in the U.S. do offer forms of low-mileage options, such as Texas. Further, various insurance companies have also used their own versions of PAYD in certain states. However, according to some critics, they do not offer the same level of potential savings and driving-reduction incentives as true PAYD.

PAYD does create a major privacy concern. In order to use the program, insurers must have ways to monitor and document a driver’s actual mileage. Methods of making such measurements include use of GPS devices, certifying odometers (self-reporting or installed devices) or use of inspection points (such as gas stations). The privacy issue arises from the use of GPS devices that would also provide insurers with many more details about driving behavior, such as the time of day that vehicles are operated, locations driven, car operating speed, etc. Naturally insurers claim such information would permit greater accuracy in rating. Consumer advocacy and other groups counter that insurers don’t have a legitimate claim for such information and they fear abuses. Under California’s recently approved plan, insurers are prohibited from collecting additional information.

For the time being, both Californians and the rest of us will be watching to see if PAYD translates into PAYDAY as a viable option for buying insurance.

Certificates of Insurance

Business transactions frequently require the valuable protection provided by insurance. A Certificate of Insurance is a document that is often requested as proof that adequate insurance exists. A certificate is not the same as a policy and certificates do not affect the coverage provided by a particular insurance policy. Therefore, requests to “endorse the certificate of insurance” are inappropriate and misleading. A certificate is a separate document that is used to comply with a common contract requirement to verify certain types and amounts of insurance.

Certificate holders, the entity or party requiring the certificate, often demand that they appear as “additional insureds.” This requires an endorsement (change) to the policy and it gives them coverage for injury or damage resulting from the contract.

Example: Tenant A leases a building from Property Owner B. Property Owner B demands that the tenant changes its insurance policy to also show the property owner as an additional insured. If a tenant’s customer is injured on the premises and sues both the property owner and the tenant, the tenant’s liability policy would provide coverage for both parties.

Construction contracts require certain forms of insurance, certain insurance limits, a hold harmless agreement and the inclusion on insurance policies as additional insureds. A “hold harmless” agreement is a contract provision that states how much responsibility each party accepts for damages arising out of the agreement.

A certificate of insurance can confirm that the appropriate policies were issued and that other requirements were also met. It is important to have a system for monitoring receipt of certificates BEFORE any sub-contractors are allowed to begin work. If certificates are not obtained or kept up-to-date, when the contractor’s Workers Compensation and General Liability policies are audited, the payroll for the sub-contractors without Certificates will be included with the contractor’s resulting in an additional premium charge.

Ask your insurance agent to help determine if you should be obtaining or providing certificates of insurance in conjunction with your business. In addition, when you’re required to provide a Certificate, send your agent a copy of the contract. The contract allows the agent to assist you in determining what liabilities you are accepting and what can be done to modify your insurance program to best protect your financial well-being.

Dining and Driving

Distracted drivers cause accidents. While you may suspect that this article is going to provide another warning about the danger of using cell phones in traffic….this warning is much more low-tech. While having conversing on cell phones behind the steering wheel continues to cause problems, a bigger problem lies with plain old eating and drinking.

Besides the fact that most food-related accidents happen in the morning (prime eating time), the most popular food distractions are:

• Coffee
• Hot soup
• Tacos
• Chili
• Hamburgers
• Barbecue
• Fried chicken
• Jelly Donuts
• Soft Drinks
• Chocolate

A lot of preparation accompanies the act of eating and drinking. Consider fumbling around with sandwich wrappers, adding sweeteners or cream to tea or coffee, putting in straws for cold drinks (how about getting poked in the eye with a straw), devoting one arm/hand for handling food or drink, dealing with condiments. Drivers who are eating/drinking also face reacting to spills; particularly when it involves something very messy or worse, very hot.

The key issue for drivers to remember is that, no matter one’s amount of experience; driving is difficult and dangerous. All forms of distraction should be avoided, or at least kept to a minimum. You and the persons sharing the roadways with you will be better off if you focus on driving and not on a meal.