Smaller cars cost more to insure

By G. CHAMBERS WILLIAMS III
San Antonio Express-News

In the rush by consumers to find more fuel-efficient vehicles, one aspect of switching to a small car from a pickup or SUV easily can be overlooked: It generally costs more to insure the smaller vehicle.

A new study released recently by the auto insurance consumer Web site insure.com shows that the difference between premiums for a large pickup or SUV versus a small car can be large enough to help pay the extra cost of gasoline for that bigger vehicle, even with fuel at $4 a gallon or more.

“Small cars tend to increase insurance costs because they get into more crashes,” Russ Rader, spokesman for the Insurance Institute for Highway Safety, said in an insure.com news release detailing results of the study. “There’s a myth that a smaller car is more nimble and helps you avoid crashes, but smaller cars tend to have more collision losses.

For the past three months, the compact, fuel-efficient Honda Civic has been the nation’s best-selling vehicle, replacing the Ford F-series pickup, which had held the top spot since the early ’90s. F-series sales are off more than 40 percent this year (through June) compared with 2007, although the vehicle still ranks quite high — it’s the fourth-best-selling vehicle now.

But the average national premium to insure an F-series pickup is $1,194, compared with $1,670 for the Civic, the study showed.

Even the popular Toyota Prius gasoline-electric hybrid, with the best fuel-economy ratings of any new car on the market (48 miles per gallon city/45 highway), costs more to insure than the F-series pickup: an average of $1,382 a year.

Premiums for the Toyota Camry, the third-best-selling vehicle so far this year, average $1,302 a year. But two other popular larger vehicles that offer fuel economy that’s much better than that of most pickups also had insurance premiums much lower than those of many small cars: the Toyota Sienna minivan, at $1,266 a year, and the Honda CR-V compact SUV, at $1,258.

The difference is in the vehicle’s bulk. The Sienna and CR-V are heavier and sturdier than cars such as the Civic and Prius, offering better protection to their occupants in a collision. But they are lighter than big pickups and SUVs, thereby using less fuel.

While the overall differences in premiums between small cars and larger vehicles might not be enough to justify sticking with a big vehicle and its higher fuel costs, this study does provide more evidence that switching to a smaller vehicle as a knee-jerk reaction to the high gasoline prices might not make financial sense to many consumers.

Because resale values of bigger vehicles — particularly full-size pickups and traditional truck-based SUVs — have dropped dramatically since fuel prices began their record climb in the spring, many owners of these vehicles owe much more on them than they’re now worth.

That alone can make it financially infeasible to trade. That’s because even if you could fold several thousand dollars of negative equity into the loan for a new, smaller car, the resulting monthly payment for the new vehicle, coupled with such expenses as the higher insurance premium, could end up costing you more than the extra you would pay at the pump if you just kept your current vehicle.

The auto consumer Web site Edmunds.com offers a “Gas Guzzler Trade-In Calculator” that can help you decide whether buying a more fuel-efficient vehicle makes sense for you.

Buying a used small car — with a price well under $10,000 — makes a lot of sense, particularly if you can pay cash for it and not have to worry about a monthly payment. The problem with this strategy now, though, is that as prices of used pickups and SUVs have dropped, the prices of small cars have gone up.

A small used car that you could buy for $5,000 six months ago might cost $8,000 or more today, a function of the law of supply and demand.

Want to see your insurance bills reduced? Report Insurance Fraud in South Carolina

Piedmont Area leads state in number of fraud cases


Columbia, S.C. – Wednesday, July 11, 2007 – Governor Mark Sanford has proclaimed July 15-21 as Insurance Fraud Awareness Week in South Carolina. Insurance fraud is a felony in South Carolina and can result in jail time.

Insurance fraud costs nearly $120 billion a year, with healthcare fraud at $85 billion a year and property and casualty insurance fraud at $30 billion a year, according to the Insurance Information Institute. Each year consumers spend about $300 per household just in additional insurance premiums, according to the National Insurance Crime Bureau. While there are organized fraud rings throughout South Carolina, other people you wouldn't suspect, such as a next-door neighbor, co-worker or close acquaintance, are also the causes of insurance fraud and increased insurance premiums.

The South Carolina Insurance Fraud Investigators, Attorney General Henry McMaster, and the South Carolina Insurance News Service are continuing their on-going initiative to fight insurance fraud and increase public awareness of insurance fraud and public participation in fraud prevention efforts.

Officials hope increased awareness of insurance fraud will encourage consumers to use the South Carolina Insurance Fraud Hotline to report cases to the Attorney General's Insurance Fraud Division.The South Carolina Insurance Fraud Hotline (1-888-95-FRAUD) is available toll-free, 24 hours a day, 7 days a week. "People tolerate insurance fraud thinking that insurance companies have a lot of money, but that money is money paid into them in premiums from consumers. Reporting insurance fraud is the key to reducing this crime and saving money," says Allison Dean Love, Executive Director of the South Carolina Insurance News Service.

As of June 30, 2007, there have been 41 criminal convictions and 38 civil remedies in South Carolina as a result of insurance fraud charges, according to the Insurance Fraud Division of the Office of the Attorney General. According to the Attorney General’s 2006 report:

▪ There were 722 complaints of insurance fraud reported in South Carolina in 2006 – a 27% increase over 2005 with 569 cases.

▪ There were 49 civil remedies compared with 39 in 2005. There were 82 criminal convictions compared with 102 in 2005.

▪ The total amount of fraud reported in 2006 was $15.4 million – nearly triple the amount of 2005. (One liability fraud complaint of $10 million was reported)

▪ The amount of restitution ordered in 2006 was $318,125 – a 40% increase over 2005 with $191,416 in restitution.

The cases have come from all over the state of South Carolina and break down by region as follows:

▪ Piedmont - 31% (120)
▪ Low Country - 23% (89)
▪ Midlands - 27% (106)
▪ Pee Dee - 19% (74)

The greatest number of complaints were due to automobile insurance fraud (45%), followed by personal/commercial property fraud (14%) and workers' compensation fraud (13%). Fraud may be committed at different points in the insurance transaction by different parties: applicants for insurance, policyholders, third-party claimants and professionals who provide services to claimants.

Insurance fraud can be “hard” or “soft.” Hard fraud occurs when someone deliberately fakes an accident, injury, theft, arson or other loss to collect insurance money illegally. Soft fraud occurs when someone inflates a claim or underestimates the number of miles driven on an insurance application. Generally, the most prevalent types of insurance fraud are:

▪ Misrepresentation of the number of miles on an auto insurance application.

▪ Failure to report an accurate medical history when applying for health insurance.

▪ Fake or exaggerated injury claims to avoid work and draw workers’ compensation pay outs.

▪ Falsification or overstatement of injuries in auto accident to obtain a large settlement or damages award.

▪ Staged auto accidents that result in clams for non-existent or exaggerated injuries.

▪ Fabrication of relationships to obtain life insurance benefits.

▪ Exaggeration of the amount and value of items stolen from a home, business or automobile.

In addition to denial of their claims and voiding of their insurance, people who commit insurance fraud risk criminal prosecution. As fraud increases, insurance companies have to cover these losses by increasing insurance rates. Insurance companies have special investigative units which are dedicated to reducing insurance fraud.

"Insurance fraud in South Carolina is causing honest people to pay far too much for insurance coverage," said Attorney General Henry McMaster. "We have a strong team that is vigorously prosecuting these crimes in our state, but citizens need to be alert and contact local law enforcement if they see evidence of insurance fraud. Criminals should not be allowed to make us all pay the bill for their crimes."

"We need the general public to fight fraud in our state and not tolerate it," said Brandolyn Pinkston, Administrator of the South Carolina Department of Consumer Affairs. "The message is a simple yet powerful one: We all pay for insurance fraud - it's time to fight back."

In recognition of Insurance Fraud Awareness Week, the South Carolina Insurance Fraud Investigators will be holding an Insurance Fraud Expo on Saturday, July 21 from 10:00 a.m. until 2:00 p.m. at the Kroger in Sparkleberry Square at the intersection of Two Notch Road and Sparkleberry Lane, Columbia. The expo will host a variety of booths available to help educate South Carolinians about the impact of insurance fraud in our state. Experts will be available to etch vehicle identification numbers on cars and explain auto theft prevention. “Governor Sanford’s proclamation clearly sends the message to the citizens of our state that insurance fraud is not only alive and well, but thriving - resulting in increased premiums and the cost of services provided by insurance companies who do business in South Carolina.” said Alan Wyche, President, South Carolina Insurance Fraud Investigators.

Other resources for information on insurance fraud are:

South Carolina Insurance News Service – www.scinsnews.com
National Insurance Crime Bureau – www.nicb.org
Coalition Against Insurance Fraud – www.insurancefraud.org
Insurance Fraud Division’s web site at -www.scattorneygeneral.org
South Carolina Insurance Fraud Investigators - www.sc-ifi.org

Report Insurance Fraud to the South Carolina Insurance Fraud Hotline

1-888-95-FRAUD- All reports remain confidential.

For more information on insurance fraud in South Carolina or for an interview call 803-252-3455 or e-mail alove@scinsnews.com

For over 30 years, the South Carolina Insurance News Service, a nonprofit organization, has been providing free insurance information to consumers and the media about property and casualty insurance issues. The News Service is funded by insurance companies doing business in South Carolina.

The Top 7 Most Outrageous Insurance Fraud Cases of 2007 (so far):

Obsession Over Repossession On 07/24/06, Edward Pinckney claimed that his truck, valued at $15,000, was stolen from his home driveway. Investigation revealed that the truck was not stolen but repossessed by the State Credit Union. Before the repossession Mr. Pinckney was notified of the repossession by certified mail. On the day of the alleged theft, Mr. Pinckney had a three-way telephone conversation with Deputy Ballenger from the Greenville County Sheriff's office and Eric McIwain from the South Carolina Credit Union at which time he was made aware that the truck was not stolen, but was repossessed. On July 31, 2006, Mr. Pinckney completed and submitted a theft affidavit to State Farm Insurance Company, which indicated that his truck was stolen and not recovered and that he was unaware of its whereabouts. On 03/14/07, Mr. Pinckney pled guilty to Presenting a False Claim for Payment over $5,000. He was sentenced to 5 years suspended to 20 months probation.

Hail, No Hail! - On August 7, 2006, Joyce Davis submitted a witnessed statement to Hartford insurance company stating that her vehicle had been damaged by hail on May 20, 2006. Weather reports indicate there were no hailstorms or any rainstorms in the area on that date. Pictures of the vehicle in question show scratches in a swirl pattern as well as damages that appear to have come from a metal object that gouged the paint down to the metal. There was no damage to the top of the vehicle, only the hood, trunk, bumper, and sides. Ms. Davis claimed hail damage in the amount of $1,206.80. Her claim was denied and there was no restitution. Ms. Davis pled guilty to Presenting a False Claim for Payment, less than $1,000. She was sentenced to 30 days incarceration suspended to 6 months probation and a $200 fine.

3 Stooges and A Home Computer - On May 21, 2003, Linda Thompson was in a motor vehicle accident with her husband Matthew Barnes and her 17 year old daughter. Ms. Thompson did present to Cambridge Integrated Insurance Company forged medical billings for herself and her daughter totaling $4,452.00. The medical bills had the appearance of being typed on a home computer. Investigation found that one of the alleged medical facilities was actually a residential trailer park. Ms. Thompson also submitted billings from actual medical facilities; however, these medical facilities informed investigators that they never treated Ms. Thompson. The Insurance Company denied the claim. There was no restitution. On 01/30/07, she pled guilty to Presenting False Claims for payment. She was sentenced to 5 years in prison.

Grooms and Bride - On August 24, 2002 in Richland County, a rental car driven by Phyllis Harden allegedly rear-ended another vehicle containing the passenger Joseph Grooms. Mr. Grooms submitted to bodily injury claim to Cambridge Integrated Services, the insurance carrier for the rental car company. Mr. Grooms and Ms. Harden denied knowing each other when questioned by police and the insurance company. However, it was revealed that Mr. Grooms and Ms. Harden were in fact married. An expert in accident reconstruction examined the vehicles and determined that the damage to the vehicles was completely inconsistent with the accident scenario related to law enforcement and the insurance company. On 03/19/07, Ms. Harden pled guilty to Presenting False Claim for payment over $1,000. She was sentenced to one year in prison suspended to time served. There was $1,225.31 due in restitution to the victim in the case. The restitution was converted into a civil fine.

The “Buck” Stops Here – Quit Pulling Our Leg - Wyndell Buckmon defrauded an insurance company by claiming he was driving his car when the vehicle was involved in an accident and had lost his leg as a result. However, several witnesses who were involved in the accident indicated Buckmon was not in either car at the time of impact. In fact, the responding police officer drove up the road to the car wash where Buckmon was working at the time and brought him to the accident scene after-the-fact. The investigation further revealed that Buckmon had already lost his leg years prior to this incident. The insurance company denied his bodily injury claim. Buckmon pled guilty to presenting a false claim for payment and received a sentence of 18 months suspended to 18 months probation.

The Fake-out - Brion Smith defrauded an insurance company by submitting forms allegedly from two physicians indicating that he was disabled and unable to work. During this three-year period, Smith collected over $16,000 in disability payments. However, investigation revealed that neither physician had completed these forms. Smith pled guilty to two counts of making a false statement or misrepresentation and was sentenced to three years concurrent, suspended to four years probation, on each count. As part of his sentence, Smith also made full restitution of $16,549.

KARMA – Enough Said - Jimmy Mizzell, Sr., Kerry Mizzell, and George Reeves are family members who defrauded an insurance company by staging an automobile wreck. In fact, the setup went awry resulting in a more-serious wreck and injuries than they had intended. These defendants each pled guilty to presenting false claims for payment and received three years imprisonment, suspended to probation. In addition, the three were ordered to pay a total of over $23,000 in restitution.

Source: Insurance Fraud Division, Office of Attorney General Henry McMaster

To view Governor Mark Sanford’s Proclamation of Insurance Fraud Awareness Week, please link to: Governor's Proclamation

Are HSA's for everyone?

HSA plans are not for everyone. There are two components central to an HSA.

• High Deductible Health Insurance Plan
• HSA (Health Savings Account)

You have to have the high deductible health insurance plan to deposit money in an HSA. And not just any high deductible plan. You have to make certain that the plan is "HSA qualified". HSA qualified plans have some basic characteristics.

• These plans don't have a copay for doctor's office visits. If you want a plan where you can pay a $25 or $35 copay when you visit the doctor for an illness or injury then you don't want this type of plan.
  
• These plans don't have a copay for outpatient prescriptions. The prescriptions will usually be covered but the cost will be subject to the plan deductible.
  
• The cost of an HSA qualified plan will be less than a traditional copay plan.

HSA plans are attractive to people who want a tax shelter for money that they can squirrel away for out of pocket medical expenses. So, are HSA plans for everyone. No. They're pretty much a plan for people with higher incomes, higher net worths and a higher tax liability.

Why does it have to be complicated?

Like it or not insurance is system based on "contracts". Contracts are legal documents and as such lawyers and our entire legal system is fully involved. I wish it was a simple system whereby a company granted you "protection" with no strings attached. It doesn't work that way. One of the most important areas to evaluate in any policy of insurance are the exclusions. Always check your policy's exclusions to see first and foremost what is excluded. That still doesn't mean there are not other exclusions hidden in the policy or even attached by "riders" to the policy. It probably would be a good idea to get a law degree so you can manage your insurance!

As agents, we try to serve our clients by interpreting insurance policies. Major items like a "suicide clause" in a life insurance policy is easy to explain. If Elvis Presley or Heath Ledger (Batman) were proven to be suicides ( I am not sure that is the case) and they had a life insurance policy that was less than 2 years old, the policy wouldn't pay the death benefit to the beneficiaries. Worse yet, if the death is a "possible" suicide or even remotely considered by the insurance company as a suicide, then can you imagine how long the proceeds would be held up in a legal battle between the beneficiaries and the insurance company? Yikes. So even the simple aspects of policies can get rather complicated.

I hate to say buyer beware but that's really the case with insurance. Read your policy and ask your agent if you have questions

James Island Wind Insurance

Many homeowners on James Island are being surprised by notices from their insurance company that they now need to buy a "windstorm" policy. Their company is no longer providing coverage for wind damage. Why? Because most of James Island is now eligible for the "Wind Pool" offered by the SC Wind Association. Sounds great! Not really. By now being eligible, this gives your insurance company an opportunity to exclude wind coverage and pass along this exposure to the Wind Pool. Worst of all is that the cost of buying the new wind policy is expensive. Apparently James Island has nobody fighting for what's best for James Island. This gave the Governor an opportunity to "sell out" James Island to appease insurance companies doing business on our coast. Sorry, James Island.

Time to get serious about your property insurance

With hurricane season in high gear, its time to get serious. Check your homeowners, flood and all property policies to make certain you have the correct amount of coverage. Do you have a flood insurance policy? If not, then why not. Most property located on the coast is in flood zones even if your mortgage company didn't require that you buy it.

Property issues on the coast

Nationwide and Travelers are now backing a plan to have a national windstorm reinsurance fund. This makes so much sense. Maybe the talking heads in DC can do something proactive and support this idea.