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Trend watch: Buying life insurance at retail
Your trip to the store may soon include buying life insurance along with your gas and groceries if insurance companies embrace the new trend of using retail outlets to reach potential customers and boost stagnant sales.
Nearly one in five consumers (17 percent) would be willing to buy life insurance from a store, according to findings from the 2013 Insurance Barometer Study. It was conducted by the LIFE Foundation, a non-profit public education group funded by insurers, and LIMRA, a global research and consulting firm that tracks the life insurance industry.
Here is the breakdown by retail type, according to the percentage of consumers who said they'd buy life coverage in a store:
- Warehouse club stores – 11 percent
- Superstore – 7 percent
- Drug stores – 5 percent
- Supermarkets – 3 percent
- Convenience stores – 1 percent
Those consumers who were willing to purchase at a superstore cited perceptions such as "reasonable cost" (63 percent), "simple process" (44 percent), "convenient" (43 percent) and "no pressure to buy" (42) as reasons for their interest.
"Although the percentage of consumers is not large, it may not need to be so in order to be a viable niche market for companies to pursue," says the report. "The growth of distribution-related strategic alliances between insurance companies and nontraditional industry participants will be a growing trend."
Insurers already sell health plans at warehouse club stores such as Costco, and pilots are in place for life insurance sales at select Wal-Mart stores.
Life insurance sales remain flat
Despite the burgeoning retail trend, purchasing life insurance in-person from a financial professional is still the most preferred way to buy for over half of consumers (53 percent), according to the report. The problem is that most people are not buying life insurance at all -- in-person or at stores -- even though they are aware of the need for it.
Consumers continue to acknowledge the need for life insurance, yet 95 million don't have coverage and just one-third of Americans have individually-owned life policies -- the lowest level in 50 years, according to the report.
"Life insurance has never been as inexpensive or easy to buy -- especially with the anticipated growth of online and nontraditional purchasing channels – yet millions of consumers continue to put off the decision," Marvin H. Feldman, president and CEO of the LIFE Foundation, said in a written statement.
The reasons for not buying life insurance haven’t changed over the past three years of studies — perceived expense, other financial priorities, being unsure of the type or amount to buy, and simple procrastination all still top the list of barriers to purchasing coverage.
LIMRA data show that consumers often estimate the average yearly price of insurance to be double that of actual costs.
Life insurance research and purchase tips
For those who are in the market for life insurance, the Internet plays a prominent role both in research and purchasing. Over 8 in 10 consumers would use the Internet to conduct research about purchasing life insurance. Nearly 1 in 4 would prefer to purchase online as well, if given the option.
If you are unsure about how to buy life insurance, follow these tips:
- Analyze the financial needs of dependents that would be left behind. Consider income for your surviving family members, mortgage, auto and credit card debts and college tuition expenses that would need to be paid, in addition to funeral costs.
- Decide which type of policy best suits your needs. There are two basic types of life insurance policies -- term and permanent. Term life provides a death benefit without any investment or "cash value" component, is typically the least expensive and expires after the term -- typically 10, 20 or 30 years -- is over. Permanent life insurance does not have a set end-date, is more expensive and comes with a "cash value" account that typically involves a return-on-investment component that is not guaranteed.
- Gather life insurance quotes to compare rates as price can differ significantly for identical coverage offered by different insurance companies.
- Research the company's solvency by checking its financial stability rating with a ratings company such as A.M. Best. The rating indicates the insurer's ability to pay claims.
How the 'Swoop and Squat' and 'Drive Down' hike auto insurance rates
Car accidents are supposed to be that – unplanned collisions. But some scammers stage accidents to get the claims money paid out by carriers, which is causing an increase in suspicious claims, driving up everyone's auto insurance rates.
Two examples are the "Swoop and Squat" and the "Drive Down."
"For us on the West Coast, we are seeing a tremendous number of new techniques to pull off staged accidents," says attorney Frank Darras, of DarrasLaw in Ontario, Calif. "There are various kinds, like a driver swooping in front of another driver and jamming on the brakes (the Swoop and Squat). Another is when a driver waves another into a merging lane before speeding in and colliding with the first car (the Drive Down)."
Although statistics show that such accidents are rare -- in 2012 questionable claims totaled 116,268 out of an overall claims population of 705 million -- that number gives a false impression of the prevalence of such incidents, says Frank Scafidi of the National Insurance Crime Bureau (NICB). Questionable claims are those that insurance companies flag as suspicious and refer to the bureau for investigation.
"They are really a minor component of claims but they are very underrepresented," says Scafidi of staged accidents. "That's important to understand. Not all of our member insurance companies elect to send us questionable claims."
One reason is that it's difficult for insurers to pinpoint indicators of staged accidents in some claims. Scafidi says it is a "very subjective process" for insurance companies.
Suspect auto insurance claims keep increasing
But even so, suspicious auto claim rates are climbing. Questionable claims were up 20 percent in the first half of 2012 over the same period the year before, according to the NICB. The hike is more dramatic between 2008 and 2011 – 34 percent.
Based on NICB data, these states are among those experiencing some of the highest increases from 2010 to 2012 in questionable claims:
- New Jersey: 63 percent
- Massachusetts: 57 percent
- Texas: 38 percent
- New York: 29 percent
- California: 28 percent
- Florida: 23 percent
Steven Smith, a captain in the South Florida Major Medical Fraud Task Force, says that typically there are at least a dozen people involved in staged accidents. A ring often involves a mastermind, those that stage and participate in the accidents, and those who file medical claims for such accidents.
"We took down one ring for staging 10 accidents over six months. We arrested 40 people. After the arrest, they told us they actually did more than 200 accidents. It is worse now than it has ever been," says Smith. "I am sure a lot of it is caused by a bad economy but that's not really what drives these. What drives these is greed. The more accidents [criminals stage] the more money they make. And most [of those who stage accidents] think 'We are stealing from the insurance company. What is the big deal?' They don't understand that those accidents raise everyone's rates."
Fraud means everyone pays higher insurance rates
Even if you don't commit insurance fraud, you pay for it. "We all know that fraud, any dishonest claim against insurers, whether it be staged accidents, faked injuries, arson, frivolous litigation, exaggerated claims, theft and so on, costs the property and casualty insurance industry billions of dollars every year, and that translates to several hundred dollars in increased premiums consumers pay every year," says Gary Stephenson, a State Farm spokesman.
The total cost of insurance fraud, with the exception of health insurance fraud, is estimated by the Federal Bureau of Investigation (FBI) to be more than $40 billion per year. That means insurance fraud costs the average family between $400 and $700 per year in the form of increased premiums, according to the FBI.
Am I covered if my abandoned car is hit, towed or stolen?
Rescue efforts are underway today in six southern states after 2 to 3 inches of snow and ice coated the region, stranding motorists and school children in Alabama and Georgia overnight on roadways paralyzed by gridlock.
Several hundred Atlanta students from nine public schools spent the night in classrooms, as administrators opted not to release them due to the traffic jams, while others were stuck on school buses overnight, according to CNN. Drivers in the Atlanta area who did make it home told news reporters that commutes that typically take 10 minutes took five hours.
Conditions weren't much better for Georgia's neighbors: The governors of Alabama, Louisiana, Mississippi, North Carolina and South Carolina declared states of emergency.
In Atlanta, workers and students were both released mid-day, which instantly clogged the highways with vehicles. The gridlock, in addition to hundreds of accidents, made it difficult for public transportation crews to treat the roads.
Many drivers spent the night in their cars, while others abandoned their vehicles to find shelter elsewhere or to try to carpool out of the traffic jam.
Stranded drivers sought refuge at strangers' homes, schools, churches, fire stations, retail stores -- 26 Home Depot stores in Alabama and Georgia were opened to travelers for overnight stays, according to CNN.
My abandoned car was damaged, stolen, towed: Am I covered?
Here is the role auto insurance plays should you abandon your car on the road, and return to find it damaged, or discover it's not where you left it – it's been towed or stolen:
- Your car has been hit: Collision coverage would be required for you to file a claim. "If the driver who hit your car was nice enough to leave a note with their information, you can make a property damage liability claim. If you have uninsured motorist property damage coverage, it doesn't apply in this case because hit-and-runs or unidentified vehicles hitting your car isn’t covered," says Penny Gusner, consumer analyst for CarInsurance.com.
- Your car has been towed: You will likely have a hard time getting reimbursed for recovery costs, unless you have roadside assistance coverage in your auto policy. Even if you do, there are exceptions, says Gusner. "You should check your roadside assistance coverage because some insurers only pay if you call to have your vehicle towed. It's a possibility you won't be covered if the car is towed without you calling for it," she says. "Also, some policies limit coverage and only pay when a claim has been issued against your physical damage coverage after a covered accident. So if you were just stuck and the car wasn’t damaged, your towing coverage under your car insurance policy may not pay."
- Your car has been stolen: Only comprehensive coverage covers theft, so you would be required to have it to file a claim.
Emergency car supplies: Road flares, yes. Inflatable sheep, no
Toss out the junk in your trunk -- including that gorilla suit and the frayed wedding dress -- and replace it with stuff that can protect you in a roadside emergency.
That's the advice from State Farm, which surveyed 1,000 people across the country and found that motorists aren't prepared enough, especially during the winter when highways can be more challenging than the breezy days of spring and summer. The warning seems timely when the polar vortex recently smashed temperatures through much of the country, causing unusual driving dangers in many communities, especially in the Midwest.
After peering into our trunks, State Farm and KRC Research discovered that:
Only 5 percent of respondents said they carried all the recommended emergency equipment, including jumper cables, spare tire, road flares, first aid kit and non-perishable food, among other items. On the plus side, 96 percent said they had at least one emergency item in their vehicle, such as a spare tire or jumper cables.
What took up room in the trunk? Sixty-seven percent confessed to "junk," which ranged from shoes to toys to used food and drink containers. Among the more idiosyncratic items were a blow-up sheep, a gorilla costume and an old wedding dress.
Amusing, sure, but not good, says John Nepomuceno, State Farm's safety research administrator. "Even on a relatively short trip, you can find yourself stranded for several hours," he points out. "Whether it's because of a flat tire, an empty fuel tank or treacherous conditions like ice or fog, it's important to be prepared."
Other report findings include:
Men are more likely than women to have packed at least one of the necessary supplies. Jumper cables (64 percent of men vs. 53 percent of women had them in their trunks); flashlight (62 percent of men vs. 48 percent of women); and a first aid kit (47 percent of men vs. 40 percent of women). Men are also more likely (81 percent to 53 percent of women) to routinely check their vehicle's emergency items.
Parents (77 percent), younger (79 percent) and middle aged (73 percent) drivers were more likely to be carrying non-essential junk than non-parents (62 percent) and older drivers (58 percent), respectively.
Thirty-eight percent of motorists with preparedness supplies in their trunks said they check to see if they're working properly at least twice a year or more, which is recommended. Thirty-one percent said they only check once a year. But 32 percent admitted they never test equipment.
"Drivers are putting themselves at risk by failing to regularly check their equipment," says Nepomuceno. "The only thing worse than getting a flat tire is finding out that your spare is also flat."
How junky is your trunky?
Take a look and consider replacing stuff with all these items, as recommended by highway safety experts:
Hazard triangle (with reflectors) or road flares
First aid kit
Windshield scraper and brush
Blankets and extra warm clothing
Cell phone and charger
High-calorie, non-perishable food
Road salt or cat litter to help with tire traction
Brightly colored distress sign or "Help" or "Call Police" flag
Candle/matches, lighter and/or flashlight
Tarp for sitting or kneeling in the snow for working outside, like changing a tire
Stranded? Start by staying calm
Here are steps to take if you're stuck by the side of the road during a winter storm:
If possible, turn on your hazard lights. Light flares and hang a distress flag from an antenna or window.
Call 911 if you have a phone and describe your location as precisely as possible.
Remain in your vehicle; let help find you.
Run your vehicle's engine and heater about 10 minutes each hour to keep warm. Open a downwind window slightly for ventilation and clear snow from the exhaust pipe to prevent carbon monoxide poisoning.
Exercise a little to maintain body heat, but avoid overexertion and sweating.
Avoid dehydration by drinking fluids.
Conserve your vehicle's battery by sparingly using lights, heat and the radio.
At night, turn on an inside light when you run the engine so help can see you.
Sharpen motoring skills
Driving carefully is also an obvious way to lower risks when it's bad outside. To that end, you might consider taking a state-approved defensive driving course. Although the emphasis is improving skills during normal conditions, these classes usually go into motoring techniques when it's more dangerous.
You may also qualify for a car insurance discount of as much as 2 to 15 percent after earning a course certificate. But check with your insurer since the premium benefits are often only available to mature drivers, usually 55 and older.
Michelle Megna has worked as a reporter and editor for many daily newspapers, magazines and websites covering government, education, technology and lifestyles during her 20 years as a journalist. She joined Insurance.com as managing editor in October 2011.