Ouch! Why are auto insurance rates so high in Delaware?

W. Charles “Trey” Paradee

DOVER — Delaware had the ninth most expensive auto insurance rates in Insurance.com’s 2017 state by state review.

An average annual premium cost $1,526 in the First State, according to study findings.

Michigan had the highest average premium at $2,394 and Ohio was No. 50 with $919.

The national average premium was $1,318, according to the study.

Insurance.com pointed to some of the state’s reasons for high rates, including:

• Delaware has an estimated 11.5 percent of uninsured drivers. The cheapest state, Maine, has only 4.7 percent. When many drivers are uninsured, the drivers that are insured take on the burden of paying more for insurance since there are less drivers for the risk to be spread around.

• Delaware ranks sixth in population density. The more congested the state is, the more traffic on the roadways normally. This leads to auto accidents, which turn into claims that insurance companies pay out. For this reason car insurance is normally more expensive in highly population dense states.

• Also, CarMD found for 2016 that Delaware had the eighth highest costs of repairs in the nation. If car insurance companies are paying out more for repairs then consumers will have this cost passed on to them in the form of higher car insurance premiums.

More information is online at insure.com/car-insurance/car-insurance-rates.html

Championed by state Rep. Trey Paradee, D-Cheswold, legislation will move Delaware down the expensive list soon, he says.

At the last General Assembly session, lawmakers established a stricter process for companies setting rates establishing “permissible rating factors for insurance companies to use in the rating of automobile insurance.”

Also, House Substitute 1 for HB 80 “requires the offering of a good driver discount plan for qualified drivers.”

Insured drivers will be better protected from potentially unfair practices when the act takes effect on Jan. 1, 2018.

“There’s a feeling in the public that the insurance companies will use any little reason to extract more dollars out of their pocket,” Rep. Paradee said.
“The intent of the bill was to button up some of those reasons used against the consumer.”

Give and take

The new addition to Delaware Code came after spirited debate and some give and take compromise that often comes with lawmaking.

“It did not go as far as the original intent and didn’t have the same set of teeth but sometimes when you’re trying to get legislation passed there’s some give and take to make sure at least something gets done even if its not in the original form,” Rep. Paradee said.

“I don’t think anyone was happy with it completely and some insurance companies complained,”

Companies often pointed to rising rates due to life changes such as spousal death, divorce and other calamities, which didn’t seem to coincide with safety behind the wheel, sponsors maintained.

“These are terrible life events, but they don’t suddenly make you a bad driver,” Rep. Paradee said.

Motorists should be judged for their performance behind the wheel, then accessed accordingly, according to Insurance Commissioner Trinidad Navarro.

“Automobile insurance should be based off of how you drive, not who you are,” he said.

“That means insurance rates ought to reflect an insured’s at-fault claims history, driving record, miles driven annually and years of driving experience, as opposed to credit score, marital status, education, income, and other factors associated with socioeconomic status.

“HS 1 for HB 80 is a step forward in this direction because it restricts those non-predictive factors.”

Evaluating the rates

It’s incumbent for insurance seekers to consider many companies before committing, according to the DOI.

“The most important thing that any consumer can do is shop around for insurance,” Commissioner Navarro said.

Ongoing scrutiny is warranted, officials said.

“Upon taking office, I assembled a rate review team to thoroughly review and scrutinize each and every rate increase request filed with the Delaware Department of Insurance to ensure that rates are properly calculated and accurately reflect the level of risk being insured,” Commissioner Navarro said.

“However, there is still more work to be done to make rates more affordable for Delaware consumers, which we will be considering as we get closer to the beginning of legislative session in January.”

Commissioner Navarro and his staff provided input that ultimately benefited the state’s drivers.

“He’s very much a consumer focused commissioner and that’s what the office holder is supposed to be,” Rep. Paradee said. “Matt Denn was much the same way when he was Insurance Commissioner.

“In his time so far, Trini has lived up to what he promised in the election, which was to work on the side of the consumer to assure a fair system.”

Three more related bills have been introduced, focusing on valuations resulting from totaled cars in claims. According to officials, insurance providers currently enlist companies to determine how much a vehicle is worth and what to offer to a claimant.

“I’ve heard from many constituents and know of a lot of consumers who get a low ball offer and no choice to accept it and take the check because they have to get back to work the next day and handle everyday life,” Rep. Paradee said. “For a lot of working people it’s not a fair system.”

There’s nothing wrong with companies profiting from providing auto insurance, Rep. Paradee said, but more state oversight is needed.

“You have to have a robust, competitive market and you have to let insurance companies make money, which is why they are in business to begin with,” Rep. Paradee said.

“There has to be a balance that is struck with consumer interests as well, however.”

The legislation addressed rising rates of senior citizens, capping the age factor at 75. Rep. Paradee wanted to eliminate age-based rate setting, but ultimately relented in the spirit of gaining more broad legislative support.

“Older individuals depend heavily on their automobiles for transportation,” said AARP State Director Lucretia Young, when the proposed legislation was announced.

“The incidence of older driver crash death and fatal crash involvements have declined steadily during the decade from 1997 to 2008.

“For these reasons, AARP encourages policymakers to prohibit companies from refusing to insure people, raising premiums, or limiting coverage based on age alone or in an arbitrary or unfair manner.”

Earning a license

A list of all companies registered to sell insurance in Delaware is online at insurance.delaware.gov/divisions/berg/authorizedcompanies/.

To earn a license, companies must first file the Uniform Certificate of Authority Application and qualify through Delaware Insurance Code statutory requirements.

An admission review committee evaluates applications and forwards recommendations to the Commissioner, who makes a final decision on whether to approve.

When it comes to rate increase requests, a company is primarily evaluated by its “solvency, compliance with Delaware law and supporting evidence that the rates and/or increases are actuarially justified,” according to DOI Senior Advisor Vincent Ryan.

Financial instability is the most frequent cause of a company’s failed bid, Mr. Ryan said. Companies can avoid a formal denial by withdrawing the application beforehand, Mr. Ryan said.

Companies stress several factors in determining rates, Mr. Ryan said, including age of insured, age, make and vehicle model, mileage, claim history and absence and/or presence of discounts such as a defensive driver discount.

More information is detailed in Title 18 Chapter 25 of the Delaware Code.

Mr. Ryan described the substitute for HB 80 as an obvious “game changer.”

Details on current company rate approvals and their history are available through a Freedom of Information Act request.

“The DOI considers the impact on people’s lives when evaluating automobile insurance rates as a significant factor,” Mr. Ryan said.

“For instance, while rate increase requests for 5 percent and under were typically approved in prior years, under Commissioner Navarro’s leadership, all increase requests, regardless of the increase being sought by a company, are given the same strict scrutiny and thorough review so that the best decision for consumers can be reached.”

When in force, Mr. Ryan believes, HS 1 ”will make insurance fairer and more affordable for Delaware consumers by addressing unfair discriminatory practices used by insurance companies to increase premiums.”

According to the DOI, the new legislation will benefit Delawareans with several features, including:

• Insurance companies may not use an insurance credit score that uses income, gender, sexual orientation, gender identity, education, address, zip code, race, ethnic group, religion, marital status or nationality of the consumer as a factor.

• The company may not cancel or non-renew a policy based on credit information alone.

• They may not take action against a consumer because that person lacks a credit card or lacks credit information.

• Cannot utilize collection information using medical codes.

• Cannot utilize extraordinary life circumstances such as serious illness or injury, death of a spouse or loved one, divorce, involuntary loss of employment for three months or more.

• Continues Delaware’s prohibition on using credit in policy renewals, unless a review request results in lower premiums.

• An insurer cannot increase a renewal rate for a personal automobile policy based solely on an insured attaining the age of 75 or older.

• An insurer cannot increase rates based upon a change of marital status due to the death of a spouse.

The DOI is staffed with 87 full-time employees, seven casual seasonal and five temporary members. Twelve employees are assigned to the Division of Consumer Services and Market Conduct, which “triages incoming cases,” Mr. Ryan said.

“Those that can be answered by staff without having to write a carrier are designated ‘inquiries.’ Cases where written communication to the carrier is necessary are deemed ‘complaints.’ “

The DOI staff

While staffing is not slated to rise or fall, Mr. Ryan said, “we aggressively try to fill vacancies as quickly as possible.”

A vacancy regularly takes 8 to 10 weeks to fill, “taking into account the timelines for posting, evaluating, interview process, checking references, then making the offer, and typically a two to three week delay before the employee can start work due to giving notice if currently employed,: Mr. Ryan said.

“There have been times when we haven’t gotten enough qualified candidates, and have had to re-post and start over.”

If complaints such as company conduct ranging from calculation of a policyholder’s premiums to claims handling are covered in Title 18, “The DOI can address it,” Mr. Ryan said.

“The DOI’s charge is to ensure the relevant conduct falls within the four corners of the statute and that the terms of the contract (the policy) are adhered to.”

A company has 21 days to produce a preliminary response once it receives a DOI-prosecuted case.

Procedurally, prosecution of a complaint is prescribed by Title 18. Once in receipt of a complaint. The DOI will conduct a mediation if the issue is not remedied by the response. Matters going beyond 60 days can receive an administrative hearing, Mr. Ryan said, but is likely bound for arbitration at that point.

Since Commissioner Navarro took office, the DOI has engaged in ongoing examinations that Mr. Ryan “may not discuss at this time.” Officials are also reviewing automobile insurance studies that could aid in proposing future legislation and/or adopting regulations.

Consumers with questions or concerns directed to the DOI can go online at www.insurance.delaware.gov, or call the Division of Consumer Services at 674-7310. A live chat option on the DOI website can also assist for basic questions and issues.

Reach staff writer Craig Anderson at canderson@newszap.com

You are encouraged to leave relevant comments but engaging in personal attacks, threats, online bullying or commercial spam will not be allowed. All comments should remain within the bounds of fair play and civility. (You can disagree with others courteously, without being disagreeable.) Feel free to express yourself but keep an open mind toward finding value in what others say. To report abuse or spam, click the X in the upper right corner of the comment box.