A look ahead: Insurance trends for 2012
December 27th, 2011
Gina Roberts-Grey
Be prepared to dig deeper into your pocket in 2012 to insure your car, your home and your health. Experts say that in some cases, Americans could see double-digit increases in insurance premiums.
Here’s a look at what’s in store for auto, home, health and life insurance in the new year.
Auto insurance
If history repeats itself, you’re going to fork over more for auto insurance in 2012 than you did in 2011. According to the Insurance Information Institute, auto insurance premiums jumped an estimated 10 percent between 2008 and 2010.
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| Premiums for several types of insurance could be on the rise in 2012. |
Ashley Hunter, an insurance risk specialist who is a former insurance agent, predicts an overall 7 percent to 10 percent hike in auto insurance premiums in 2012. Auto insurance fraud is one of the culprits. The nonprofit National Insurance Crime Bureau estimates auto insurance fraud tacks $ 200 to $ 300 a year onto your premiums.
“Fraud has dramatically impacted the premiums in areas like New York City, the larger metropolitan areas of Florida and in some other large population areas in the country. Like shoplifting for all consumers, insurance fraud causes the losses and payouts of insurers to rise, and that results in higher premiums for everyone,” says Fred Karlinsky, an insurance attorney at Fort Lauderdale law firm Colodny Fass Talenfeld Karlinsky & Abate.
Since auto insurance rates are regulated on a state-by-state basis, where you live determines how high or low your premiums are.
Home insurance
If your home insurance rates go up in 2012, you may be able to pin the blame on the 12 natural disasters in 2011 that each caused at least $ 1 billion in damage. Those calamities included tornadoes, floods, snowstorms, wildfires and drought.
Frank Cacchione, CEO of TNC Management Group, an insurance consulting firm in New Jersey, says home insurance rate hikes as high as 20 percent increases are on the horizon for some Americans.
Hunter says: “I would expect at least a 7 to 10 percent increase.”
As with auto insurance, home insurance rates are regulated by state insurance departments.
Health insurance
Merton Bernstein, a health insurance expert who is the Walter D. Coles Professor of Law Emeritus at Washington University in St. Louis, says Americans are on track to spend more on health care in 2012 than in 2011. He notes that premiums for employer-sponsored health insurance plans rose an average of 9 percent in 2011 and that this upward trend is expected to continue.
A survey by consulting giant Mercer indicates that employers’ health insurance costs will climb an estimated 5.7 percent in 2012. Because of the increasing cost of health care, some employers are passing along more of their health insurance expenses to their workers. About one-third of the employers that responded to the Mercer survey said they planned to boost health insurance deductibles or co-pays in 2012 as a way to manage expenses.
A survey by the nonprofit National Business Group on Health found that large U.S. employers expect to see their health care benefit costs rise an average of 7.2 percent in 2012. More than half of the surveyed employers plan to hike workers’ health insurance premiums in 2012.
“Employers continue to face countless challenges when it comes to offering health plans that effectively meet the needs of workers and their families, while also managing rising costs,” Helen Darling, president and CEO of the National Business Group on Health, says in a news release.
Despite rising health insurance premiums, you’ll pay less for some popular prescription drugs in 2012.
Michael Goodheim, a small business health insurance consultant in Seattle, says a number of widely used brand-name drugs will be losing their patents in 2012, paving the way for cheaper generic versions to hit the market. Among them are the anti-depressant Lexapro, which goes generic in March 2012; Plavix, which helps prevent strokes and heart attacks, May 2012; and asthma medication Singulair, August 2012.
For Medicare recipients, there’s also some good news. Monthly premiums for Medicare Part B will decrease by $ 22 in 2012, Medicare Advantage premiums will drop by 4 percent and premiums for Medicare’s prescription drug plans will stay about the same.
Life insurance
Fierce competition among life insurers is helping consumers.
In an economy that continues to be shaky, fewer people are buying life insurance, so life insurers have been slicing their rates, says Joe Perkins, a principal and employee benefits consultant at Indianapolis-based MJ Insurance. Just 22 percent of U.S. households did some serious shopping for life insurance in 2011, and only half of those households make purchases, according to life insurance trade group LIMRA.
Perkins has seen rates on life insurance fall an average of 10 percent in recent months, and he foresees the lower-cost trend continuing in 2012.
“Carriers have not been getting the same (investment) returns as in the past, so really they should be charging more in premiums, but that isn’t reflected in current premium costs,” Perkins says.
Neil Bartlett
Credit card companies, mortgage companies and banks routinely use your credit score to help determine whether you’d be a risk or a reward as a customer. In many states, insurers also rely on your credit history to determine how much you’ll pay for some types of insurance and whether you’ll get coverage in the first place.
In the not-too-distant future, though, insurers may be looking at another type of score when delving into your background — a social media score. Exactly what that score will look like remains to be seen.
Facebook to play role in pricing
Celent, a financial research and consulting firm, predicts that within the next three years, large insurance companies will start relying on information about you that’s gathered from social media sites to help set prices for your insurance coverage. That information also could come into play in settling insurance claims.
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| Your social media activity soon may help determine how much you pay for insurance. |
Information mined from social media sites will become part of the underwriting process, when insurers evaluate your risks and figure out how much you’ll pay for auto, home, health, life and other kinds of insurance, according to Celent. For instance, if you’re in the market for a life insurance policy, life insurance companies may poke around on your Facebook page and find postings that indicate you’re no longer a marathon runner — you’re now a certified couch potato. That nugget of information may jack up the cost of your life insurance policy.
Celent predicts that insurers will turn to outside companies to develop tools that enable them to capture, store and analyze social media data — developing what, in essence, is a social media score. It’s similar to credit card issuers depending on companies like FICO to compute credit scores for consumers.
Celent forecasts that consumer information pulled from social media sites will be paired with CLUE (Comprehensive Loss Underwriting Exchange) reports, which lay out your history of property insurance claims, along with your driving records and reports that assess your life and health insurance risks to enable “more accurate” policy pricing.
“As with the use of credit scores in general insurance, it will take some time to determine what the boundaries are in use of this data for underwriting,” the Celent report says. One of the factors that will be used in setting those boundaries: state laws and regulations.
Social media snooping
By the way, insurers already are digging up information on Facebook, Twitter, LinkedIn, YouTube and other social media sites to investigate potentially fraudulent claims.
One insurance claims investigator is quoted in the Celent study as saying: “Facebook is now the first place we check when we get a new case. We not only look at the claimant, but their family, friends, and the companies that they follow.”
Is social media a reliable yardstick?
Tena Friery, research director at the nonprofit Privacy Rights Clearinghouse consumer education and advocacy group, worries about the prospect of a social media score being adopted by insurers, since social media data can be unreliable and sometimes untrue. She’s also concerned that the elements that would make up a social media score would be kept secret and, unlike a credit score, this new brand of score would be unavailable to consumers.
Amy Bach, executive director of United Policyholders, a nonprofit that helps insurance consumers, says insurers already are making decisions about consumers based on photos and posts on social media sites.
“If you post photos of yourself drinking at parties that get viewed by your car insurance company when your policy comes up for renewal, don’t be surprised if your rate goes up, even if you haven’t filed any claims,” Bach says. “Things you post, if publicly available, can affect how much you pay for insurance. And it gives your insurer ammunition to deny a claim.”
The American Insurance Association, a trade group that represents auto and home insurance companies, declined to comment for this story.
Michael Packer, an attorney with Marshall Dennehey Warner Coleman & Goggin, a law firm that represents insurers, recently told DailyFinance.com that at least some insurance companies already use social media and the Internet as part of their underwriting and claims-handling processes.
Bach believes that what you post on a social media isn’t a reliable indicator of your insurance risk.
“Pricing decisions that insurers make should be related to the likelihood of losses — period,” Bach says. “We don’t want to see insurance companies blowing the significance of social media data out of proportion just because someone has figured out how to make a profit selling that data to them.”
In the meantime, Friery of the Privacy Rights Clearinghouse recommends exercising “extreme caution” in posting anything on social media sites.
“If you don’t want the world to know, don’t post it,” she advises.
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