Auto Insurance Contract Innovation

RiskProf: "The WSJ ($) reports that Allstate is offering  new kind of auto policy.  Last week I mentioned California's attempt at reducing insurer's incentives to drop people from their contracts after experiencing a loss.  Now Allstate is offering a policy that for a 7% fee will give you one "free" accident over the next three years.  This means that Allstate won't raise premiums if a driver in their premium plan has an accident.  For an additional amount one can get "unlimited" accidents.  So, if one knows that one is a bad risk and value insurance, then one will buy a premium policy.  Thus, insurers are able to get their premium increases up front without experiencing a claim or inducing consumer dissatisfaction.  Normally premiums go up after an accident and this may cause the policy holder to search for lower priced coverage.  Now, the company can charge ahead of time and make people think they are getting a good deal."

Posted by Angie on May 05, 2005 | 0 Comments

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