April 7, 2014 • An Advertising Supplement to the San Fernando Valley Business Journal

Insurance:

When Jacqueline Sharp opened Fort, avintage and reclaimed furniture busi-ness, in Los Angeles, she went through

all the steps she thought any entrepreneur wouldmake. She solidified a business model, recruitedtalent and built a customer-base.

Yet, Sharp realized something was missingwhen Fort opened.

“I was absolutely unaware of the day-to-dayrisks that were involved, and how to protect mybusiness,” she said.

Sharp then turned to a new program in LosAngeles, Small Business Risk Education (SBRE),which Travelers founded in 2012 as a way to pro-vide safety risk management education to minori-ty-and-women-owned small businesses in the met-ropolitan Los Angeles area. The program includesworkshops, one-on-one assistance focused on riskmanagement and business continuity planningand the ability to apply for a microloan through apartnership with the VEDC, a Los Angeles-basednon-profit economic corporation that specializesin supporting small and medium-sized businesses.

The two organizations partnered together shar-ing a common belief that small businesses createjobs, boost the economy and help to preserve theAmerican Dream. However, both Travelers andVEDC felt that many of these small businesses areinadequately prepared to handle potential road-blocks: according to recent information from theInstitute for Business and Home Safety (IBHS),more than 25 percent of businesses that are forcedto close after a catastrophe, never reopen.

The statistics for women-owned businesses areparticularly telling. In 2011, Travelers conducted asurvey of women-owned businesses in Los Angelesat the National Association of Women BusinessOwners conference. The survey found that only52 percent had a business continuity plan.

Travelers launched SBRE, a first-of-its-kind edu-cation program, to leverage their 160 years ofexperience in risk management as a property casu-alty insurer to help many of California’s nearly700,000 small business owners navigate risk byproviding hands-on, consultative training fromsafety risk professionals. Now in its third year ofoperation, SBRE is helping small businesses moreeasily identify and understand the safety risks thataccompany small business ownership. Microloansare granted to some business owners to supportcapital investments in risk management-relatedservices and products.

A critical component of the SBRE program is itspartnerships with community-based organizations

that provide small businesses with training andfinancial assistance. In Los Angeles, the VEDC isthe largest non-profit small business lender inCalifornia, and offers a unique expertise in help-ing female and minority-owned small businesses.

As a national small business lender, VEDC haslent $330 million in direct and guaranteed loansto more than 100,000 small businesses that havehelped create more than 18,000 jobs. VEDC has a37-year history of supporting small businessowners.

As partners, Travelers and VEDC have one maingoal in mind for SBRE: to encourage small busi-ness owners to pursue their dreams by fortifyingthese entrepreneurs with the knowledge to protectwhat is theirs.

SBRE has helped more than a hundred womenand/or minority-owned small businesses in theLos Angeles area since the program launched, andnearly $300,000 has been awarded in microloans.

Based on the success of the Los Angeles pro-gram, Travelers expanded SBRE to Chicago in2013. This year, it will add programs in Atlantaand New York City.

Tara N. Spain is Director of Operations, CommunityRelations, Travelers and Vice President of TravelersFoundation. Travelers is one of the nation’s largestinsurers of small businesses. Roberto Barragan isPresident and CEO of Los Angeles-based VEDC, thelargest small business lending organization inCalifornia.

Small Business Risk Education ProgramHelps Boost Local Economy

Travelers launched SBRE, a first-of-its-kind education program, to leverage their 160

years of experience in risk management as a property casualty insurer to help many

of California’s nearly 700,000 small business owners navigate risk by providing

hands-on, consultative training from safety risk professionals.

Trends & Tips for Business

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INSURANCE TRENDS

36 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL APRIL 7, 2014

By STEVEN DRISS

For owners of small to mid-sizebusinesses, dealing with the minu-tiae of running your business can

take up great deal of time. Chances areyou started your business because youhad a terrific service or product to offerothers. Alas, being an entrepreneurrequires much more than that. There ispayroll to think about, health insuranceto provide, retirement accounts to offer,workers compensation insurance thatmust be put in place, and so on. And ofcourse, all of those items come with aprice tag, some of which can be prettyhefty. So if you’re ever found yourselfwishing you could just delegate all ofthose time consuming details to someoneelse, you’re not alone. And the goodnews is that companies exist which doprovide precisely these types of service,all the while eliminating your liabilityand often saving you money.

Professional employer organizations(PEOs) have been around for many years,yet many small business owners remainin the dark about their existence. PEOsenable small to mid-sized businesses tooutsource the management of humanresources, including payroll, employeebenefits, and workers’ compensation.That obviously frees up your time to

focus on other aspects of your business. In a sense, PEOs act as co-employers

(but don’t worry, you’re not signing overeven a fraction of a percentage of yourbusiness). They merely assume the major-ity of responsibility and liability in areasincluding risk management, HR manage-ment, payroll and tax compliance. SomePEOs will even share employment lawcompliance responsibilities with you. Asthe owner of the business you are thenable to do what you do best, which isfocus on production, sales or service toyour clients.

For HR, PEOs offer a variety of servic-es, which may help you to increase em-ployee satisfaction (and therefore produc-tivity). Keep in mind that employeesexpect-at minimum-financial security,quality health insurance, a safe workingenvironment, and the ability to save forthe future. All of these needs must bemet by someone. If you don’t have a fulltime HR department, or if you need tostreamline your HR department, manyPEOs offer technologically based infra-structure and/or service platforms for anupfront cost.

In terms of providing benefits to youremployees, a PEO may be able to offersmall to mid-sized business owners withthe opportunity to provide benefits onpar with those that a talented employee

may be offered at a larger company.These can include a 401(k), life insur-ance, disability insurance, discount plans,a flexible spending plan and more.

But what may be even more attractiveabout working with a PEO is the oppor-tunity to save money. Indeed, for com-panies with as few as 20 employees (butup to several hundred) a PEO may offersubstantial savings on your health insur-ance plans, for example. This is due to acollective bargaining power that PEOshave with insurance companies. BecausePEOs work with many businesses, theyhandle health insurance for many, manyemployees. To put it another way, thePEO’s economy of scale may benefit your

bottom line (think shopping at Costcovs. other retailers). In many cases, thesavings are substantial enough that theyoffset the cost of initially partnering witha PEO.

For small and mid-sized businesses, itis worth taking a look at PEOs to see ifyour business may benefit from this typeof partnership. As with all services, thereis no one-size-fits-all model, so you’llneed to talk with a trusted insurance bro-ker to determine if working with a Pro-fessional Employer Organization makessense for your business. If working with aPEO doesn’t save you time and money,there is obviously no reason to make achange. But it’s definitely worth yourtime to investigate the opportunity. Feelfree to give Lifeline Employee Benefits acall, and ask to have us run the numbersfor your business.

Steven Driss is President of Lifeline EmployeeBenefits in Tarzana. Lifeline Employee Bene-fits was established in 1985 to help individu-als and small businesses identify and pur-chase affordable health insurance, life, dis-ability and other group insurance. Steven alsoserves as an insurance expert/ guest lecturerat UCLA and CSUN. For additional informa-tion visit www.health-quotes.net, contactSteven directly at (818) 774-1003 or viaemail at steve@health-quotes.net.

Ideas Worth Considering: Is a PEO Right for Your Business?

PEOs enable small to

mid-sized businesses to

outsource the management of

human resources, including

payroll, employee benefits, and

workers’ compensation. That

obviously frees up your time to

focus on other aspects of

your business.

Business Vehicle Insurance: An Overview

As a business owner, you need someof the same insurance coveragesfor the cars, trucks, vans or other

vehicles you use in your business as you dofor vehicles used for personal travel. YourBusinessowners Policy (BOP) does not pro-vide any coverage for vehicles, so you musthave a separate policy. Most states requireyou to purchase liability insurance for bod-ily injury and property damage that mayresult from a vehicle accident occurringwhile you or someone from your organiza-tion is driving on business. Although theform refers only to “autos,” autos aredefined to include cars, trucks, trailers,vans or other vehicles designed for use onpublic roads. Each vehicle you use in yourbusiness can be separately “scheduled,” orlisted on your policy along with correspon-ding coverages. In other words, you canchoose different coverages, for your variousvehicles, depending on the vehicle’s char-acteristics and the coverage you need for it.

Do I Need a Business Auto Policy?

Your insurance agent will ask in detailhow you use vehicles in your business;who will be driving them; whether youown, rent or lease; and whether you andyour employees are likely to be drivingtheir own cars for your business. Theanswers to these questions will indicate thetypes of coverage you need. ??In general,only a BACF can provide the level of liabil-ity protection — the recommended mini-mum is $500,000 — that even a smallbusiness needs to cover the potential dam-ages in a serious accident.

Will My Personal Auto Policy Cover Business Use?

Your personal auto policy provides

coverage for some business use of yourvehicle. Similarly, your employees’ per-sonal auto policies cover some businessuse of their vehicles too.

A personal auto policy is unlikely to pro-vide coverage, however, if the vehicle in ques-tion is used primarily in business. It will notprovide coverage for any vehicle owned by abusiness. The personal auto policy, whetheryours or your employee’s, may not haveenough coverage to protect your business.

For example, imagine you are drivingyour car to a business meeting while havingan intense conversation on your cell phonewith one of your sales reps. By the time younotice a van ahead of you has stopped tomake a left turn, it’s too late to avoid a colli-sion. The driver and five passengers are in-jured in the accident. They sue you andyour company. If you have only a personalauto policy, your insurer will probablydefend you personally and pay the claim —up to the policy limit. Your personal autopolicy insurer will not defend or pay dam-ages on behalf of your business, however.For a very serious accident or one with anumber of injured people, your personalauto policy may not be enough to cover thedamages. In that event, the injured partieswould likely sue to collect damages fromyour business. If you or your employees aredriving personal vehicles on business andrelying on your personal auto policies, besure you and they have sufficient liabilitycoverage to protect your business in theevent of a serious auto accident. Do notexpect to rely on a personal umbrella policyfor any claims that arise from business useof a vehicle. Typically, the personal umbrellaexcludes all claims occurring in the courseof a business endeavor.

What Vehicles Are Covered?

The scope of coverage in the business autopolicy can be either broad or narrow, depend-ing on your choice of options. It could, forexample, be written to apply only to one spe-cifically described auto. Or, as an example ofvery broad coverage, the policy could be writ-ten to apply to the named insured’s liabilityexposures arising out of the use of any auto.

In general, you have three options forwhich vehicles you choose to cover.• Autos your business owns• All autos your business owns, hires orleases• All autos used for the business, includ-ing those that your business does notown, hire or lease

Most businesses should buy the thirdtype, since that is the only coverage thatprotects the business from liability whenan employee or owner is driving a per-sonal vehicle on business.

Be Sure The Right Insured Is On The Policy

An insurance contract usually requiresthat the owner of a vehicle be named in thepolicy “Declarations” as the “principal in-sured.” If you drive any of the same vehiclesfor both business and pleasure, make sureyou tell your insurance agent who holds thevehicle’s title, you personally or your compa-ny. This will avoid problems if you need tofile a claim or a claim is filed against you.

Physical Damage Coverage

The three types of physical damagecoverage for motor vehicles are collision,comprehensive and specified perils.• Collision coverage is for losses that resultfrom the collision of a covered vehicle withany object or from the vehicle overturning.

• Comprehensive coverage is the broadestform of auto physical damage coverage, be-cause it provides for losses from any causeexcept collision and overturn (insuredunder collision coverage) and a few policyexclusions, such as wear and tear, mechan-ical breakdown and acts of war. Among thecauses of loss covered under comprehen-sive are flood, fire, theft, glass breakage,falling objects, explosion, earthquake orcolliding with a wild bird or animal.• Specified perils coverage covers many of thesame perils as comprehensive, but because itcovers only “named” perils—those specifical-ly named in the policy—it has a lower premi-um. It is sometimes referred to as “fire, theftand Combined Additional Coverage (CAC)”

If your businesses has a large fleet of vehi-cles, over time, it may be more costly to in-sure the fleet for physical damage than it isto retain the risk, that is, pay for any physicaldamage directly rather than by insurance.

Regardless of how many vehicles yourbusiness has, it may be cost effective tocarry physical damage coverage only onthe newer or more valuable vehicles.

What Will The Insurer Pay For Physical

Damage?

The amount an insurer will pay on anauto physical damage or theft claim dependson the market value, known as Actual CashValue (ACV), of the vehicle at the time ofthe loss. The most that will be paid is thelesser of the ACV or the cost to repair orreplace the vehicle with one of like kind andquality. In the event of a total loss, the ACVis adjusted for depreciation and the vehicle’sphysical condition. Thus, the older the vehi-

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APRIL 7, 2014 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL 37

As one of the nation’s largest insurers of small businesses, Travelers advocates foreconomic opportunity – one business and one community at a time. In addition todeveloping customized initiatives to protect small businesses, we are committedto working toward public policy solutions for small business owners and helpingthem prepare for the unknown through education and leveraging our expertisein risk mitigation. Travelers has undertaken these efforts because the companyunderstands that the health of small business is key to economic prosperity,competitiveness and the preservation of the American Opportunity.

travelers.com

© 2013 The Travelers Indemnity Company. All rights reserved. Travelers and the Travelers Umbrella logo are registered trademarks of The Travelers Indemnity Company in the U.S. and other countries.M-17011-2 New 6-13

It’s more than a business. It’s your livelihood.

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38 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL APRIL 7, 2014

We work to undertand you – Your business, your clients, your risks and your needs.

A leader in middle-market employee benefits, property casualty

and retirement planning consulting services, USI offers tremendous

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We rely on professional expertise and proprietary resources to

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Cooper Communications • Countdown Printables • The Daily NewsFMS Partners • Gaspar Insurance Services • Grapheex • Happy House

Kaiser Permanente • Keyes Motors • Kim & Scott KrivisNeiman Marcus • Providence Tarzana Medical Center

Southern California Gas Company • State Farm InsuranceGary M. Thomas • Ellen & Howard Wang • West Hills Hospital

Thank You forGoing the Extra Mile!Thank you to the following sponsors who

helped us raise over two miles of quarters at theBoys & Girls Club of the West Valley’s

Mile of Quarters fundraiser.

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INSURANCE TRENDS

cle and the worse its condition, the more itsvalue has depreciated and the less the insurerwill pay. The insurance company may payyou the value of the loss in money or, at itschoice, it may repair or replace the damagedor stolen vehicle. In case of a theft, it mayreturn the stolen vehicle to you with pay-ment for any damage caused by the theft.

Liability Coverage

The liability portion of the BACF obli-gates the insurer to pay all damages thebusiness is legally obligated to pay becauseof bodily injury or property damage causedby a covered vehicle, up to the policy limits.When there is an auto liability lawsuitagainst the insured business, where the lossis covered by the policy, the insurer is obli-gated to defend the business or settle thelawsuit. The decision whether to contest orsettle the case is entirely at the insurer's dis-cretion. The insurer's duty to defend or set-tle ends when the insurance policy limitsare exhausted. By way of example, imaginethat three people are injured in an accidentin which you or one of your employees is atfault. The policy limit is exhausted in judg-ments or settlements for the first twoclaimants. That leaves your business liableto pay the award directly, should there be ajudgment in favor of the third person.Punitive damages may be awarded in casesof gross negligence, such as drunk or reck-less driving. By law in a number of states, aBACF cannot cover any punitive damagesfor which you may be liable. Even in stateswhere coverage for punitive damages isallowed, your policy may exclude them.

How Much Liability Coverage

Does My Business Need?

Many insurers recommend a businessauto coverage limit of $1,000,000, with$500,000 as the minimum. The higherlimit does not add a great deal to the pre-mium, considering the amount of addi-tional protection it provides.

Does a Business Umbrella Cover Autos?

If you have a business umbrella policy, itwould provide protection for owned, hiredand non-owned autos, if the umbrellashows the auto liability policy as an under-lying policy for which it provides coverage.

You Are Liable If You Allow a

Bad Driver On The Road

You are legally liable when you allow some-one to drive one of your vehicles. If you fail totake reasonable steps to determine that the driv-er is qualified to drive or if you allow someone todrive whom you know has a poor driving recordand that person causes an accident, you couldbe liable for negligent entrustment. Any dam-ages awarded for negligent entrustment wouldbe on top of liability for the accident itself.

A case of negligent entrustment ariseswhen someone allows another person touse a vehicle knowing or having reason toknow that the use of the vehicle by thatperson creates a risk of harm to others.

Your organization is responsible forverifying a driver's qualifications beforeentrusting him or her with a vehicle. Donot entrust a bad driver with a vehicle-not even for a quick errand.

This article was provided by the InsuranceInformation Institute.

Use these steps to assess whattypes of insurance are best foryour business, and how to

secure coverage to provide adequateprotection and minimize risks.

1. Assess Your Risks.

Insurance companies determine thelevel of risk they’ll accept when issuingpolicies. This process is called under-writing. The insurance companyreviews your application and deter-mines whether it will provide all or aportion of the coverage being request-ed. Each underwritten policy carries apremium and a deductible. A premiumis the price you pay for insurance.Premiums vary widely among insurancecompanies, and depend on a number ofrisk factors, including your businesslocation, building type, local fire protec-tion services, and the amount of insur-ance you purchase. A deductible is theamount of money you agree to paywhen making a claim. Generally, thehigher deductible you agree to pay, thelower your premium will be. However,when you agree to take on a highdeductible you are taking on somefinancial risk. So, it’s important to assessyour own risks before you go shopping.

2. Shop Around.

The National Federation of Independ-

ent Businesses provides information forchoosing insurance to help you assessyour risks and to make sure you’veinsured every aspect of your business.The extent and costs of coverage varyfrom company to company. Some bro-kers specialize in insuring specific typesof business, while others can connectyou with policies specific to your busi-ness activities. For example, if you oper-ate a tow truck service, you’ll want tofind an agent that can help find policiesthat specifically cover automotive serv-ice businesses. Often specialist brokerscan get you the best coverage and thebest rates.

3. Consider a Business Owner’s Policy.

Insurance can be purchased separatelyor in a package called a business own-ers’ policy (BOP). Purchasing separatepolicies from different insurers canresult in higher total premiums. ABOP combines typical coverageoptions into a standard package, andis offered at a premium that is lessthan if each type of coverage was pur-chased separately. Typically, BOPs con-sist of covering property, general lia-bility, vehicles, business interruptionand other types of coverage commonto most types of businesses. BOPs sim-plify the insurance buying process andcan save you money. However, make

Five Tips for Buying Business Insurance

Continued from page 36

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APRIL 7, 2014 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL 39

INSURANCE TRENDS

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This year marks the 20th anniver-sary of the Northridge Earth-quake, a 6.9 magnitude earth-

quake that struck in Northridge, causing$19 billion in insured losses. The inci-dent is an important reminder for allCalifornians to prepare not just physi-cally, but financially for the next earth-quake which is sure to occur. Californiaresidents need to evaluate the risk earth-quakes pose to their homes and busi-nesses and consider purchasing earth-quake insurance, said the Association ofCalifornia Insurance Companies (ACIC).

“California is home to many amazingthings like Hollywood, Lake Tahoe,beautiful beaches, wine country andgiant Redwood trees, but the state is alsoknown as Earthquake Country,” saidMark Sektnan, ACIC president. “As Cali-fornians we know we face potentiallydeadly and devastating earthquakesevery day, but we don’t always preparefor it. With only 12 percent of Califor-nia homeowners purchasing earthquakeinsurance, California faces a silent eco-nomic threat that many homeownersand businesses will be caught financiallyunprepared if a large-scale earthquakewere to occur. The anniversary of theNorthridge Earthquake is a wake-up callthat we need to look at this very realrisk and take steps to prepare for it.”

While the Northridge Earthquake

caused significant damage, it alsobrought about positive developmentssuch as insurers, realtors, builders andpolicymakers joining forces to create theCalifornia Earthquake Authority. Califor-nia law also ensures consumers considerpurchasing earthquake insurance be-cause the standard homeowners policyexcludes coverage for earthquakes, floodsand landslides. The law requires thatevery two years insurers offer home-owners the opportunity to purchase aseparate earthquake insurance policy.However homeowners don’t have towait to be reminded, earthquake insur-ance is always available to be purchased.

“Given that California has not experi-

enced a major earthquake in nearly twodecades, many residents have gottencomplacent and forget the very realthreat earthquakes pose throughout thestate,” said Sektnan. “Many people don’tbuy coverage because they think the 15and 10 percent deductible is too expen-sive or they think the federal govern-ment is going to provide a bailout. Thereality is there is no federal program thatwill rebuild people’s houses after a majorearthquake. Californians should talk totheir insurer or agent about their needfor earthquake insurance coverage.”

The Association of California InsuranceCompanies (ACIC) is part of the PropertyCasualty Insurers Association of America(PCI) and represents property/casualtyinsurance companies doing business inCalifornia that write $20.2 billion in pre-mium. ACIC is PCI’s California Voice.ACIC member companies write 36.3 percentof the property/casualty insurance inCalifornia, including 43.5 percent of per-sonal auto insurance, 41.7 percent of com-mercial automobile insurance, 29.1 percentof homeowners insurance, 22.3 percent ofcommercial multi-peril insurance and 40.4percent of private workers compensationinsurance. PCI is composed of more than1,000 member companies, representing thebroadest cross-section of insurers of anynational trade association.

Two Decades After Northridge Quake, InsurersUrge Californians to Take Financial Precautions

With only 12 percent of

California homeowners

purchasing earthquake

insurance, California faces a

silent economic threat that

many homeowners and

businesses will be caught

financially unprepared if a

large-scale earthquake

were to occur.

sure you understand the extent of coverage in any BOP you are consider-ing. Not every type of insurance isincluded in a BOP. If your business hasunique risks, you may require addition-al coverage.

4. Find a Reputable, Licensed Agent.

Commercial insurance brokers can helpyou find policies that match your business needs. Brokers receive commis-sions from insurance companies whenthey sell policies, so it’s important youfind a broker that is reputable and isinterested in your needs as much as hisown. Make sure your broker under-stands all the risks associated with yourbusiness. Finding a good insuranceagent is as important as finding a goodlawyer or accountant. You shouldalways look for one that has a license.State governments regulate the insur-ance industry and license insurance bro-kers. Many states provide a directory oflicensed agents.

5. Assess Your Insurance Coverage on an

Annual Basis.

As your business grows, so do your liabili-ties. You don’t want to be caught under-insured should disaster strike. If you havepurchased or replaced equipment orexpanded operations, you should contactyour insurance broker to discuss changesin your business and how they affectyour coverage.

Information for this article was provided bythe US Small Business Administration.

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40 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL APRIL 7, 2014

INSURANCE TRENDS

Ahighly competitive auto insur-ance marketplace is making cov-erage more widely available and

affordable for all drivers, according to theInsurance Information Institute (I.I.I.),even though insurance is also a heavilyregulated industry.

The I.I.I. made the observations inresponse to a release issued today by theConsumer Federation of America (CFA),which asserted that insurance industryunderwriting and rating practices wereincreasing auto insurance prices for driv-ers lacking either certain academic cre-dentials or holding what is deemed to bea less responsible job.

“No matter their station in life, dozensof auto insurers are competing for the bus-iness of every driver who resides in thecities the CFA surveyed for its report,” stat-ed Dr. Robert Hartwig, president of the I.I.I.and an economist. “These market forceshave created a favorable situation for thenation’s drivers when considering whatthey’ve had to pay for other products andservices essential to their daily lives.”

Rather than looking at price quotes,the National Association of InsuranceCommissioners (NAIC) examined whatthe typical U.S. driver actually paid annu-ally in auto insurance premiums, deter-mining it was $786 in 2002 and $791 in2010. The I.I.I. projects the per annumexpenditure for auto insurance grew to

$819 in 2012, only 4.2 percent morethan that same driver paid in premiumsto their auto insurer in 2002.

In contrast, the Consumer Price Index(CPI) for the 10 years concluding at year-end 2012 cumulatively grew at a rate of27.6 percent, according to the U.S. LaborDepartment’s Bureau of Labor Statistics(BLS). Meanwhile, gasoline prices soared168.5 percent and medical care costs rose45.3 percent in the 10 years prior to year-end 2012, the BLS reported. Bodily injury(BI) expenses are a significant cost driverfor auto insurers.

“The most effective ways to lower theprice of auto insurance is to reduce thecost of medical care and auto repair whileat the same time aggressively combatinginsurance fraud, which levies a hiddentax on drivers,” Dr. Hartwig said.“Changing underwriting and rating fac-tors that have been shown to project aninsurer’s future claims payouts accuratelywill only distort prices and result in gooddrivers subsidizing riskier ones.”

Auto insurance policyholders alsohave a degree of control over the pricethey pay for insurance coverage becausethe premium is determined in part bytheir driving record, the type of car theydrive, and the type and amount of cover-age they purchase, Dr. Hartwig explained.Moreover, state insurance regulatorsreview and approve the rating criteria

(e.g., a driver’s age, gender, and milesdriven) auto insurers are allowed toemploy when pricing a prospective orcurrent policyholder’s policy.

“Car owners have a multitude ofchoices when it comes to buying cover-age as well as a variety of ways to obtainit: through an agent, over the phone or

online. Drivers should shop around ifthey feel as though their current autoinsurer is not meeting their needs, orcharging too high a price,” the I.I.I.’spresident concluded.

Information for this article was provided bythe Insurance Information Institute.

Competition in the U.S. Auto InsuranceMarket Benefits Millions of Drivers

‘Market forces have created a favorable situation for thenation’s drivers when considering what they’ve had to pay forother products and services essential to their daily lives.”

DR. ROBERT HARTWIG, Insurance Information Institute

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