by Guest » Sat Apr 04, 2009 09:44 pm
I recently faxed in a policy cancellation request for my auto insurance. Shortly after, I received a voicemail from my insurance agent stating that they did receive my cancellation request but wanted me to call them back before they cancel it to see if there is anything they can do to keep my business.
The request was faxed in a few days prior to the requested cancellation date. It is now a couple days after the requested cancellation date and from what I can tell, the policy is still active.
The request was faxed in a few days prior to the requested cancellation date. It is now a couple days after the requested cancellation date and from what I can tell, the policy is still active.
Posted: Wed Apr 08, 2009 07:26 am Post Subject:
Hi Insteacher,
It's an awesome explanation..but I'd like you to explain a few things over here-
The language cannot be altered by the agent or the applicant, and must be accepted by the applicant as issued.
Can you illustrate as to what type of verbiage is used in any contract which denotes that further negotiations are possible. It's really interesting.
You patiently explain to the customer that the only real option you have to keep him at the quoted premium amount is to lower the amount of coverage (bad idea) or change the premium payment mode.
What benefits would it serve the carrier if the payment mode is changed?
Roddick
Posted: Fri Apr 10, 2009 03:10 am Post Subject:
Roddick, great questions. Let me see what I can do.
Can you illustrate as to what type of verbiage is used in any contract which denotes that further negotiations are possible.
There is no contract language that allows negotiation other than language governing losses and associated disputes. Those are now commonly settled through arbitration instead of lawsuits per policy language. The idea of the unilateral contract and principle of "adhesion" go together salt on a cracker- they're basically "stuck" with eachother. If you'd like further clarification on those concepts, let me know and I'll pm ya.
As far as:
What benefits would it serve the carrier if the payment mode is changed?
OK, you're more than likely aware that most insurers will offer different payment options to a policyholder. Let's say we talk about life insurance for this example.
Say a carrier offers a number of different payment modes: monthly, quarterly, semi-annual, annual, and automatic account debit options.
Every time an insurer has to process a premium notice, it will cost them money. You know that the costs of operating ANY company are typically passed onto the consumer, and insurers are no different. The expenses of the insurer are normally passed on to the consumer in the form of "loads" attached to the contract. Front- and back-end loads accompany just about every insurance policy in existence.
Let's say that your client choosing a monthly billing option. That means the carrier will have 12 different costs that year associated with billing the customer. That means 12 "service charges" billed to the customer. Everyone has seen service charges. That's a fancy way of saying "you cost us money by making us bill you, and now YOU get to pay for those costs." Let's say the service charge is $5 per billing, which isn't uncommon. Now multiply that by 12 months, and you're paying $60/year in service charges. :cry:
Many policies also have additional administrative fees that are based on "service" levels and these are added to your bills, usually on a quarterly basis, even if you pay monthly. These fees, normally associated with high-end P&C and pension/group/life stuff, can run into the $100s per year, and will incur an additional service charge per billing just to inform you that you owe them more money. :roll:
Now, consider the client who decides to pay annually instead of monthly. He only gets one bill a year, therefore incurring only one service charge of $5. Already we have a savings of $55/yr. Add in the admin. service fees and that's another $15/yr and we're at $70. Multiply that by 40-50 years for some life policies, and we're talking thousands of dollars of difference in premium just because of service charges!
Now, in a lot of cases, this is a gross over-exaggeration, but in others, it's an under-estimation. I have seen carriers literally charge $15.00/mo. for service fees on universal life insurance policies! Don't even get me started on the securities side of things...!!! :evil:
Way more to it than we're babbling about here, and anyone can pm me for more if you're that insurance geeky. Sad part is...I am. :wink:
InsTeacher 8)
Posted: Fri Apr 10, 2009 04:37 am Post Subject:
Hey INS this is really a nice illustration given by you about the payment mode but what i personally believe and also suggest to those who are employed to go for monthly mode/quarterly mode.
i will explain why is it so!!
suppose one client is paying $ 300 monthly premium rate and $ 10 load every month thus his load comes to $ 120 per year.
Now his annual premium comes to $ 3600.With the most of the Americans either they pay it through credit card because nobody (most of the ) guys do not plan for a yearly payment of insurance premium. and thus end up taking the Credit card loan or money from friends or personal loan which again ends up in more cost in terms of interest which is surely higher than the administrative cost of $ 10 per month.Interest for $3600 amount with 0.5 % minimum interest rate monthly will turn to $18 per month.(Nobody offers a personal loan with 0.5 % monthly rate, i have just used this to show that even if somebody offers such a low rate still it is not economical to go for a yearly mode.
But again i need to remind that those who get annual bonuses from their employer can go for annual mode.
But for those who are not having any kind of bonuses at the end of the year should lessen their burden by paying the insurance premium with direct debit from their salary option which i suppose is the best option. :wink:
Posted: Fri Apr 10, 2009 05:28 am Post Subject:
Sorry Amit, I have to poke some holes in your theory.
First of all, the annual premium charged by carriers is not derived by multiplying the monthly premium x 12. Carriers offer a substantial discount to those paying annually as opposed to monthly. If the monthly premium is your $300 example, if you were to pay annually, you'd likely pay around $3200-$3300 as a one-time annual payment.
Next, your math on the interest rate charged to the card is all wrong. You said:
Interest for $3600 amount with 0.5 % minimum interest rate monthly will turn to $18 per month.(Nobody offers a personal loan with 0.5 % monthly rate, i have just used this to show that even if somebody offers such a low rate still it is not economical to go for a yearly mode.
You're stating a 6.0% APR on the debt (0.5% monthly rate). You also said that "nobody offers a personal loan with 0.5% monthly rate." I have a personal line of credit at 5.99, completely unsecured. That's technically .49916%/month! :wink:
Your math of $18 a month in interest is also based on simple-interest calculations. Credit card interest is compounded. There will be interest on interest. Also, don't forget that you're making (hopefully) payments on the debt, which will reduce the interest charged as the balance lessens. Throw in the $300 annual payment savingsas mentioned above, and if you pay off the card in the first year, you'd still be ahead of the game, monetarily speaking. I'm not going to do the math, but trust me- it would work.
Lastly, I rarely had people use credit cards except for monthly debits, and I would always suggest to the client to try to pay cash with a debit card withdrawal instead. I hated seeing clients pay interest on insurance premiums. The only exception to that was premium financing companies, and they were pretty much used only for commercial P&C risks. We had the vast majority of our customers who would write checks for the annual premium without blinking an eye. We used to insure high-end buy-sell and business continuation contracts with monthly premiums that would exceed $20,000, and they would save $50,000 by paying annually. They'd write us a check for $200k and not even breathe hard. Nice. :D
Would you look at the way this thread has wandered?? :?
InsTeacher 8)
Posted: Fri Apr 10, 2009 05:46 am Post Subject:
INS i thank you for the elaborated answer on this.
I do agree that insurance companies do offer big (may be 10%) discounts if one is ready to pay it once for all. ( i mean once for a year)
But again i was talking about those middle class clients who have just started their jobs, young chaps, enthusiastic about shopping through credit card, do not have good credit score or haven't got the chance to build a good score ( which can offer 5.99, completely unsecured. That's technically .49916%/month! loan)
So for these guys who have just started their life, who are in their first job, do you think they will get a loan at about .49916 % per month interest rate..
I have purposely done the math with a simple interest only because i know it will further a big hole if i use it through compound interest.
Those guys who are having enough savings should go for the annual premium option but what about those who are yet to stabilize in their financial life and still paying their educational loan bill every month.Do you have some nice solution for these guys? if you have please let us know.
Thanks for correcting me and i have taken it in a positive way.i swear.
Because its opinion board, rather because of this discussions only so many points come up in front of the community member and thus the answers for them......... :wink:
Posted: Fri Apr 10, 2009 06:54 am Post Subject:
Hi InsTeacher,
This is certainly a great thread with great explanations. I had little doubt that those who're not strong on resources shouldn't opt for the yearly mode, but things have become clearer now.
It's truly helpful for many to know the difference that could be brought in by the service charges associated with their premium mode. I'd just like to know if there are other areas that might invite such major differences in the worth of premiums.
Roddick
Posted: Tue Jun 01, 2010 06:51 am Post Subject: freelook cancellation
applied for freelook cancellation. company continued offering temptations. I was adamant to cancel the policies. company blocked the refund amounts ? what to do ?
company has failed to perform and execute the freelook cancellation applications. what are the rights, liabilities and responsibilities of the insured and insurer in such freelook cases, when insurance company intentionally withholds freelook amounts, without reasonable cause ?
Posted: Tue Jun 01, 2010 04:52 pm Post Subject:
Sk, what state and what kind of policy specifically?
InsTeacher 8)
Posted: Thu Jun 03, 2010 04:26 am Post Subject: freelook cancellationnotice not acted upon by insurance co
health policy issued outside USA, but I am in USA presently .....Sk
Posted: Sun Aug 22, 2010 08:40 pm Post Subject: good expe i can solve complain against insurance company
if any body is having any problem against insurance companies pls call me asap 9555098782
amit khanna
9555098782
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