It’s a major Red Flag when a policyholder is, or shows signs of being a potential high risk or unreliable driver. Drivers who are irresponsible and purposely get into frequent trouble are not suitable for your agency. Dangerous drivers come with all sorts of liability issues. It’s important to take proper action with high risk drivers before serious problems arise and cause your agency to be negatively affected. Below is a list of 7 “sins” to look out for as an auto insurance agent.
Sin #1 A Terrible Driving Record
Your agency can properly identify high-risk drivers by their driving record. It’s wise to deliver your customer high risk insurance if he/she has been convicted of dangerous driving. An example, would be multiple speeding tickets and driving under the influence. These types of infringements require high-risk auto insurance, otherwise your agency could suffer a high loss in revenue. This is especially true, if you make exceptions for every single customer with a terrible driving record.
Sin #2 Customers Who Don’t Pay Their Insurance Premium
Policyholders who fail to pay their insurance bill on time, should be put into the high-risk insurance category. Most insurance companies allow a 30-day grace period, if the bill is not paid on time. Though, if your agency has been dealing with the same customer, who consistently doesn’t pay, you should immediately terminate their policy. There is no value in keeping a bankrupt client. Your agency can identify these types of clients ahead of time, by paying close attention to whether the client has been canceled for non-payment premiums from their former insurer, driving history, and credit history.
Sin #3 Customers with Poor Credit Scores
Susan Ladika, writer from Insurance.com, claims, “Drivers with lower credit-based insurance tend to file more claims than those who have great credit scores”. A low credit score equates to more claims. More claims mean more costs for your agency. You can identify ahead of time, how reliable and stable your client is by their credit score.
Sin #4 Gender and age
As biased as it sounds, the gender and age of a client will truly determine the amount of risk your company faces. The younger a client is, the higher the risk to insure them. Research has shown that younger drivers, typically between the ages of 16-25, are more likely to be involved in car accidents, commit traffic violations and get traffic tickets. Furthermore, studies prove male drivers are more of a risk to insurance companies than female drivers. Women generate less accidents, speeding tickets and DUI’s according to the National Association of Insurance Commissioners. Age and gender are important factors when calculating risk. It’s important to be aware of age and gender, as they have a lot to do with the prices of your policies. Choosing lower prices for higher risk drivers will cause an increased liability cost on your end.
Sin #5 Reckless Drivers
High risk drivers who deliberately drive fast or dangerously on the road are unacceptable for your agency. It’s simple to point these fellas out because of their driving record. Give no mercy for reckless drivers, as they will only create liability and money problems for you and your company.
Sin #6 Frequent Use of a Vehicle
A common red flag, insurers tend to miss, are drivers with worn down, used and abused cars. Claims on these types of cars tend to be through the roof. Old, used cars can cost thousands of dollars to repair, which the owner may or may not be able to pay. This causes a plethora of problems, such as difficulty paying the insurer and other money casualties. This issue can be avoided by renewing new policyholders with no more than two claims in three years.
Sin #7 Long Distance Drivers
Long distance drivers are referring to the people who commute a great distance from their house to wherever, on a day to day basis. Serious risk is associated with drivers who drive a long distance every day. A driver is more likely to get in an accident traveling an hour away from home to work, than traveling 20 minutes away from home to the store. Have separate polices for customers who live 10, 20 or more miles away from work, as it will reduce risk exponentially. It’s essentially creating less liability.
Embrace the 7 virtues
Wipe away the bad and start anew! Below, is a list of 7 virtues for insurance agencies to remember so you can avoid coming in contact with the 7 deadly sins of auto insurance.
- Put customers with terrible driving records into the high-risk category.
- Be aware of clients who have been canceled for non-payment premiums.
- Bad credit scores mean increased claims.
- Pay close attention to gender and age when calculating the price of your polices.
- Don’t accept reckless drivers into your agency.
- Only renew new policyholders with no more than two claims in three years.
- Have separate polices for clients who live 10, 20 or more miles away from work.
“Change is the result of all true learning”, said by Leo Buscaglia. Learning information such as, what to look out for as an auto insurance agent, will bring your agency one step closer to becoming superior in this ever-growing auto insurance market. This advice is Agency Matrix’s gift to you, what you do with it is ultimately your decision. Here at Agency Matrix we care about our customers. We are determined to provide your insurance agency with the best guidance and information to help your book of business succeed.