Erie Insurance’s “rate lock” approach to personal auto insurance policies, recently approved in its 11th market, constrains premium changes to three events: change of driver, change of vehicle or change of address.
PRODUCT: Erie Rate Lock
COMPANY: Erie Insurance
BEST RATING: A+ (Superior)
AVAILABILITY: Coverage is available through Erie-appointed independent agents.
FOCUS: The renewal notice is not a welcome sight for auto insurance customers. “Historically, insurance companies located all their price changes at the renewal of the policy,” says Cody Cook, auto product vice president at Erie. “For insurers, renewal is a big deal and we do a lot of processing around that renewal. To the customer, all it’s just a bill.”
Erie’s approach, recently approved in its 11th market in Maryland after its creation in 2009, is a “rate lock” to personal auto insurance policies. The feature constrains premium changes to three events: change of driver, change of vehicle or change of address—all “significant enough so consumers recognize that ‘the insurance company is going to have to change my price,’” Cook says.
Policy renewal can be a frustrating experience for customers since it often goes hand in hand with a premium increase. “To the consumer, nothing is different from the day before,” Cook says. There was no change in their exposure [except] the company needed to take a rate increase.”
The feature is popular with agents and brokers as a way to gain prospects’ attention and change the dialogue with existing customers. “Agents are leading with it, particularly on new business,” Cook says. When a policyholder changes a driver, vehicle or address, he adds.
“They’re in contact with an agent and are talking about this exposure change,” Cook explains. “So not only is there some understanding going in to the conversation from the consumer that there’s going to be a price change, but they also have the opportunity to talk about that price change with an agent—somebody who understands how this works. And that’s very different from a renewal packet, which is a one-way communication to the consumer.”
UNDERWRITING: The premium lock feature is available on newly issued coverage as well as in-force policies. Upon policy renewal, existing policyholders can select a policy with the feature. A customer must have at least one car with a model year of 1990 or newer, no more than one at-fault accident in the last three years and no major moving violations in the last three years. Insureds must meet applicable underwriting guidelines. Premium may change if policy coverages, deductibles or pay plan changes.
MINIMUM PREMIUM: Premium rates will vary by driver. The cost of an auto insurance policy with the Erie Rate Lock feature is based on a driver’s individual characteristics.
TARGET: Consumers who want to better manage their car insurance costs.
COVERAGE TERRITORY: DC, IL, IN, KY, MD, OH, PA, TN, VA, WV and WI.
CONTACT: Cody Cook, auto product vice president; Erie Insurance; 100 Erie Insurance Place, Erie, PA 16530; 814-870-2179.
Amy Skidmore is an IA contributor.
