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Who sets insurance pricing agent and/or insurance co ?
Old 06-21-2011, 06:25 PM   #1
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Who sets insurance pricing agent and/or insurance co ?

Friend of my was with a major insurance company for 15+ years - rate increases were close to inflation.

His agent retired and someone bought that business. Friends policy gets transferred to new agent. For the last 3 years, rates on all have been going up 10+%.

Agent says the insurance company sets the rates and agent has nothing to do with it.

Is that true ? I doubt it. I'll bet the agent has some discretion and incentive on a price increase range to pass through to the customer. If the agent gets a higher increase accepted - I'll bet he gets to keep more commission.

If you have any experience here - would be interested.
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Old 06-21-2011, 07:00 PM   #2
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I'm assuming you're talking about health insurance. If so, the agent is right, they have nothing to do with the rates. They are filed with the Department of Insurance for the state and can't be changed by the agent. That doesn't mean the agent can't re-write the policy to try and get a lower rate if the guy is still healthy.
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Old 06-21-2011, 07:02 PM   #3
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The insurer sets the pricing, not the agent, and there is oversight from the state insurance department.
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Old 06-21-2011, 08:45 PM   #4
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The insurer sets the pricing, not the agent, and there is oversight from the state insurance department.
The rates have to be filed with the DOI. Most states require refiling of rate increases too. In any case, the agent doesn't set the prices as you noted.
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Old 06-22-2011, 02:25 AM   #5
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Depending on the contractual relationship between the agent and the insurance company and the extent to which the particular type of insurance has its costs regulated by the state, there can be situations where the insurer gives the agent the ability to set rates. However, that isn't typical and I doubt that the type of insurance you are talking about falls within that category. With that exception, it really isn't something that the agent sets.
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Old 06-22-2011, 04:33 AM   #6
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In addition to what brewer said about controls and permission from regulators... the actuaries (and often the rate setting committees) that work for the insurance companies establish their targets. This is a specialty skill that requires quite a bit of professional knowledge.

But even if the industry was not at that level of maturity... No insurance company would let any agent make any corporate decision. Aside from the fact that they do not have the knowledge or competence to do it... Now days many of them are not actually employees that work directly for the insurance company... they are often a general agent and just sell the product for a commission (general agency or some other means of legal separation).
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Old 06-22-2011, 06:12 AM   #7
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Sorry - I was talking about auto/home/umbrella.

So the agent has no influence on price or increase ? State farm through all agents is the same price (for the exact same set of assumptions -people, cars, age, etc) ?

Just seems weird that when new agent was assigned, the increases went up like crazy.
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Old 06-22-2011, 06:24 AM   #8
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Originally Posted by Delawaredave5 View Post
Sorry - I was talking about auto/home/umbrella.

So the agent has no influence on price or increase ? State farm through all agents is the same price (for the exact same set of assumptions -people, cars, age, etc) ?

Just seems weird that when new agent was assigned, the increases went up like crazy.
You might check to see if they did an automatic bump in your coverage... some insurance companies do that... assuming the house is now worth more. Read your coverage statement and compare it to last year.

Don't know where you live... assume it is delaware. They may have experienced losses and/or be making risk adjusted increases based on other experience.

P&C policies represent coverage for a number of types of losses. Do you know what coverage increased?

I had the same insurance company for about 30 years and the cost kept creeping up a little at a time. Finally I shopped my policy with some other (highly rated companies) and moved to a different company. I reduced the cost quite a bit.

If you decide to compare rates, look for experienced agents that are trustworthy. Look on the state insurance commissioner's site for complaints against prospective companies (that will provide some insight). I would stick with highly rated companies (i.e., AMBest, S&P, etc).
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Old 06-22-2011, 07:40 AM   #9
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Some types of insurance allow the agent to give up part of their commission to get the person a slightly lower rate, but that's really a minimal amount, usually 5% or less. Frankly, someone that would ask me to forgo 5% of my commission is not someone I'd want to do business with unless it was a very large case and I couldn't otherwise beat the rate of another company. Some might call it price shopping, I'd call that penny pinching.
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Old 06-22-2011, 07:55 AM   #10
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Quote:
Originally Posted by Delawaredave5 View Post
Sorry - I was talking about auto/home/umbrella.

So the agent has no influence on price or increase ? State farm through all agents is the same price (for the exact same set of assumptions -people, cars, age, etc) ?

Just seems weird that when new agent was assigned, the increases went up like crazy.
It could be that the new agent revisited the coverage level and realized that the coverage level for many people in this particular book was low.

Or it could be coincidence. Since 2006 big homeowners insurers have been trying to re-underwrite their existing books. They all (almost without exception) have too much exposure to hurricane risk along the Gulf and East Coast. They either need to reduce the risk or charge more for it, but some companies have been quicker than others to do so. My homeowners insurer was asleep at the switch until 2009, when they slapped me with a 50% increase plus a bigger windstorm deductible. I shopped the policy and did better than what they wanted, but it was still a big increase over what I had before. I suspect this sort of thing is at work in your case.
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