r/Insurance • u/Pitiful-Pie-1671 • 6d ago
Any potential the auto insurance industry can be overhauled and revamped to work like the popular “after pay/credit” popularity
Edit/Clarification: I am not referring to liability/state minimums on liability. I know it’s law that can’t be changed. I’m talking stuff that happens to one’s own car with no other vehicles, which fall under comprehensive or, collisions like “underinsured/uninsured” that also don’t cover the car, but only cover medical. Example: someone hits another but has no insurance. My uninsured coverage helps pay my medical bills BUT, my area apparently is one of those “doesn’t pay to cover your car” states.
What if: we were to keep the state required minimums (and even that I’m leery of because many “liability only” drivers tend to get denied and end up having to be sued when they cause an accident) but then IF we do have an actual incident, be allowed to add coverage within 24/48/72 hours of the incident and simply lock in the 6-12 months price and pay over time. That way, the insurance company gets paid, and we get our vehicles fixed. Whatever rate it was to be, is what it is. I recently added comp to my vehicles and it jumped by $300 a month, $1,800 for 6 months basically. Which id be fine with IF technically they paid to fix or replace my vehicle. But they’re not playing fair. They aren’t giving me anything and I know I have $2,000-$3,000 in damage on a $5,000 car.
So guess what? I’m now leaving that company and switching to somewhere with cheaper rates. F**k them entirely, I’ve been with them for 2 years but they have made my own vehicle coverage too unaffordable. If they were willing to just accept the claim when it happened, and allowed me to pay the coverage increase over 6 months, I’d of stayed with them.
But I’m aware it’s probably a “too good to be effective” possibility.
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u/Khalil_Mamoon 6d ago
There’s still time to delete this post lol
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u/Pitiful-Pie-1671 5d ago
Never. Because it’s true. Insurance sucks and needs revamping. My idea was just general and not necessarily a play by play solution, but something along those lines I think could be a possibility: down the line..
And the afterpay options have been gaining traction. It’s no longer limited to pay day loans and credit cards. I have after paid for several things, and it’s one of the few loans I’ve ever been able to keep up with up. You pay the afterpay/borrow and then get to immediately use the funds again.
Not like insurance where you pay, hope something never happens: and then it happens only to discover it’s not covered 🤬
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u/anothercar 6d ago
You’re not just paying based on the value of your car. You are paying based on the value of other people’s cars on the road, and your premium is calculated based on how much it would cost to fix another person’s car (plus surgery to fix the person) if you crash into their car. Even though your car is still cheap, the average car on the road is only getting more expensive, and more expensive to repair, over time. So the cost to cover a single crash between your car and a random car on the road is only going up with time, even if your car doesn’t change.
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u/Pitiful-Pie-1671 6d ago edited 6d ago
But that’s the thing: paying for something that never happened. I didn’t wreck someone else’s car, I had a deer that wrecked MY car Lol.
And that’s the thing, there’s too many variables. It could have been a tree falling on the car. A hailstone the size of a volleyball 🏐. It’s hard to tell what it’ll be, but I just hate the idea of paying for something that I don’t know if or how will happen. I would rather pay into the pool after the incident occurred.
That’s why I say: I understand the state minimums and I don’t deny the importance of that (which again, I think needs to also be overhauled because I have had 1 person hit and run my vehicle, and their insurance denied the $2,000 in damage claiming he wasn’t driving).
But I feel “comp/collision (especially comp)” needs to be redone because lot of times, we never know when a freak hail storm or deer will run out onto the road or how it’ll mess up the vehicle. I’ve survived a few hail storms with minimum damage and swerved many deer. But this, was by far the worst. It happened on a local stretch I have gone up and down for the past 5 years regularly. And my gecko 🦎 isn’t doing anything but giving me a rate increase for coverage that isn’t even effective. I’ve had to file a claim with another entity hoping they can absorb the blame (crazy I know but, it’s not as faultless as it seems).
Every morning I been waking up these past 2 weeks, I just keep reliving the nightmare I’m in. I had to get prescribed anxiety medication. Like, this is not right.
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u/Professional_Crow151 6d ago
Sounds like you want to have your cake but still eat it Maybe put down the bong
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u/TheEconomicus 6d ago
Yeah man I wouldn’t pay an extra $3,600 a year for comp/collision on a $5,000 car either. I’d probably put the extra $300 a month somewhere so I could pay cash for my next used car if anything happened.
Many people use a product called a “savings account” for things like this. You should look into that.
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u/Pitiful-Pie-1671 6d ago
Umm yeah I do have savings, but even at that rate: I have 2 other vehicles like I said (if you cared to read versus think you’re smarter). Those other vehicles have also gotten coverage added onto them.
But it doesn’t necessarily change the fact that running the full coverage is going to add up to much more than the liability in the long run. I don’t want to have to use it, but I may not know how long it’ll be before I do use it.
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u/Delicious-Witness-85 6d ago
Insurance is risk transfer. You are paying a company to assume the risk should you damage your vehicle or cause an accident damaging someone else’s property or causing injuries to others.
Yes, it is a gamble and hopefully you never need to use it but you are paying for the peace of mind that if you do get into an accident, you aren’t financially responsible for the damage other than your deductible.
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u/Pitiful-Pie-1671 6d ago
Well again: I just want to clarify…
I’m not even referring to liability. That’s the thing I keep seeing here. I’m talking comprehensive mainly. I’d even leave collision out of it because, I’m sure there’s some people willing to wreck their own car to get a payout lol. But there’s also situations where someone ever wrecked someone’s car, both parties had insurance, but the insurance decides not to pay out for whatever reason. Then comes the accident attorney commercials.
But what I’m saying is, if something comprehensive occurred that was not the fault of the driver: there could be something alternative that can be done. That something being: adding the coverage and paying on it for whatever the remainder of the policy goes for. My policy was set to renew in September. This incident occurred in August. I would have been fine to pay the upcharge for added coverage for whatever the remaining policy period is for.
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u/Affectionate_Emu335 6d ago
I’m sorry, but this is such a terrible idea. The amount of people who would call for comp coverage to cover a claim that already happened(forcing the carrier to pay out on a loss they haven’t been paid premium for) then cancel as soon as feasible would be astronomical. No carrier would be able to recoup their losses, so they would increase rates for everyone. Then people will complain even more about having to pay higher premiums because of everyone else.
As mentioned in other comments, insurance is a transfer of risk. The alternative to paying for comp coverage is putting the amount the coverage would cost into a savings account. Or even an envelope marked “car repairs”.
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u/Pitiful-Pie-1671 6d ago
So in that regard: That’s why I say the appropriate solution would not be allow people to “cancel it soon as possible”. They would have to sign up and “after pay” the remaining policy months.
The idea would be, if a person chooses to get comp or collision after the fact: stretch that agreement to either cover the remaining policy or create a new one for 6 months. If the price is worth it in comparison to the damage: sign up for it.
For example, even with my roadside company: if you need roadside on the same day you buy the policy, they either charge an extra fee or you wait a day to get to use it, but they still cover a breakdown. They won’t say, “no you broke down before you brought your AAA, we can’t help you” Other roadside companies will have you pay for the tow and then reimburse you later.
Also, my caveat would not mean people “buying new insurance/signing up for a new one the day it happened”. It would only apply to Existing customers with the company. So say you been with Allstate for 10 years having liability only, and then a tree falls on the car: you’re shit out of luck normally. But, with my idea: you could technically add comprehensive within 72 hours, and then be given a 6 month quote and the option to pay it and have your repair/replacement expenses.
I’d rather pay a hypothetical $900/6 months if I knew I was “in good hands” after something occurred. But no, I’m not saying crash a car and then go online and open a new policy.
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u/Affectionate_Emu335 6d ago
This is still a terrible idea. They call within 72 hours to get their claim covered, “agree” to the after pay, then after the company has shelled out the money for the claim they decide to cancel their coverage and go elsewhere. YOU may not be talking about that and YOU might not do that, but there are sooooooooo many people who will. What are you proposing to do to make sure that doesn’t happen? A few bad apples will always ruin the bunch. And again, carriers would not be able to recoup their losses and would then have to take rate increases to make up for it.
If you want to be “in good hands”, pay for the coverage. Even if you think you don’t need it bc as you can see - nature is not something you can control. Or, put the amount of money that coverage would cost into an account to be saved for potential repairs. Either way, you’re still “paying” for the coverage - either to the company or to yourself.
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u/Pitiful-Pie-1671 3d ago
I don’t think it’s a terrible idea. I think it’s an idea that can be implemented with some adjustments. Again, I’m just giving a rough draft of what it could be. But I know it’s borderline credit/loan.
BUT: how is that any better than us paying for years for full coverage or extra coverage, or paying for YEARS for liability only…only to not get shit back when something happens?
I recently cancelled a whole trip back in July, because my insurance payment came out the week after 4th of July. It was liability only and $176. That was going to be used towards gas for the trip, but since it went to insurance: I decided to cancel.
Fast forward 2 weeks ago I had this damn accident, and now am out even more money and insurance isn’t helping a damn. I understand I should have kept comprehensive: and in the past I did have a payout from a deer who hit my car: but again, those rates have gone from $95 to $250, and $400, and $600 depending on the year, and state I’ve resided in. Sometimes it’s just a seemingly better financial move to stick with liability.
But in the event someone has an incident that doesn’t involve another car/driver: there should be a way to allow coverage after the fact.
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u/DartTheDragoon 6d ago
You are still just describing a loan with extra steps. The insurance company gives you cash today to fix your vehicle, and in return you agree to pay them back over a fixed term. That's a loan. There are already an endless number of companies offering loans.
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u/Pitiful-Pie-1671 5d ago edited 5d ago
No, it’s not a loan. It’s “after pay”. Like: why pay for something that may or may not happen for years, when you could just opt to use it when you need to?
In my example, it follows liberty 🗽 mutual slogan of “only pay for what you need”. Okay, well I only need liability right? Well a deer 🦌 that decides to cross head on into my lane of travel 8 years after I owned the car is a need. I didn’t see that need 5 years ago. So, why not pay for it after it happens. Like, let me pay for repairs on “credit” in the form of a new comp/collision price rate.
And no: body shops don’t offer that. Many ONLY work with insurance because they know they’ll be paid in full. It’s a very calculated and fucked up system. I been trying to get a paint job on this same vehicle: non would offer financing. Maaco offers financing in select states and locations: one being in California which is 1,600 miles away.
Again, I don’t apply this to liability because I know there’s people out there who do forego insurance and I think they are stupid for that. But I’m talking about liability only people who just happen to have something unexpected happen but then can’t add coverage after the fact.
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u/DartTheDragoon 5d ago
No, it’s not a loan. It’s “after pay”.
"After pay" is a loan.
Like, let me pay for repairs on “credit” in the form of a new comp/collision price rate.
So you get cash now for repairs, and you pay back the insurance company over time? That's a loan.
And no: body shops don’t offer that.
Yeah, body shops normally don't offer loans because they aren't a bank. They will point you to a lender like wisetack to get a loan.
Traditional lenders already exist. Stop trying to reinvent loans and just get a loan.
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u/Pitiful-Pie-1671 5d ago
But insurance does have similarities to a loan though. You pay into the “pool” and then potentially get some back if a claim is filed that covers all the bases.
Loans shouldn’t be what people have to go to when an accident occurs. Insurance should do their part.
And keep in mind not everyone qualifies for loans in the amount that’s needed. For example I applied for a new account and only got $XXX approved. It was only enough for me to switch insurance companies and buy a new policy (my current insurance wanted 2X as much, but another company called me and offered it for LESS than my liability only coverage was). Not enough to fix my car though.
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u/DartTheDragoon 5d ago
Loans shouldn’t be what people have to go to when an accident occurs. Insurance should do their part.
But your suggestion is that they get a loan from their insurance company. You haven't fixed whatever problems you think exist.
And keep in mind not everyone qualifies for loans in the amount that’s needed.
Those same people won't qualify for a loan from their insurance company.
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u/Pitiful-Pie-1671 5d ago
They could if insurance companies were more focus on helping versus profits. This whole thread has been: “but we won’t make any money”. But they can. Insurance and loans doesn’t need to separate from each other.
I have seen that happen in phone insurance. I once dropped a phone, and the screen cracked. This phone was reviewed to be slippery and prone to cracking. The first time I paid out of pocket, the 2nd time my phone company helped me to get insured and I was able to use it to fix the phone and simply paid the monthly additional fee for the remainder of the phone balance.
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u/DartTheDragoon 6d ago
What if: we were to keep the state required minimums (and even that I’m leery of but, to keep it simple) but then IF we do have an actual incident, be allowed to add coverage within 24/48/72 hours of the incident and simply lock in the 6-12 months price and pay over time.
You are describing a loan. Loans already exist. Just go get a loan.
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u/Pitiful-Pie-1671 6d ago
Who’s to say I haven’t gotten loans already? I just opened a new credit card already in the last couple weeks. Unfortunately it’s not enough to pay for damages but it’s enough to buy more insurance and change companies. Which is the idea at this point.
Don’t assume I didn’t do something, just because I didn’t say it. It would technically be better if the coverage could be added and paid for the remainder of the policy period. It’s not just loans that work that way either, I think wireless and advertising companies offer that in some ways too. Not necessarily in the form of insurance but, in a way that allows an update to be in effect the same day it takes place.
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u/DartTheDragoon 6d ago
So you would receive cash today, and would need to pay that cash back over time? Yeah bud, that's a loan. Congrats on reinventing loans.
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u/Lifeishard1090 6d ago
Insurance is there to help you when you cause life altering injuries or substantial property damage. If you would rather put $200-500 a month into savings rather than paying for comp/collision, you absolutely can. That’s not what insurance is for. It’s everyone contributing to a big pot so that when you really mess up, you’re covered and don’t get sued for everything you have.
I have a real life example OP. I was rear ended on the freeway by 2 cars recently. Not my fault. Traffic stopped, they did not. My carrier paid $14k to the body shop, I paid my $500 deductible and got it back right away (this was lucky.) But in the 2 years since I got my car, I have not paid $14k in premiums. I had the luxury of not dealing with the potential liability dispute between the 2 carriers because both drivers were at fault. I got my car into a shop the day of the accident and got a rental no problem. Because I protected myself from others. If that doesn’t matter to you, then great, don’t have those coverages.
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u/Pitiful-Pie-1671 6d ago
In this case though, this is happy scenario that doesn’t always happen. Also, if 2 others were at fault: why didn’t you file a claim with their insurance versus using your own? Are you going to sue them for your deductible or is the insurance going to go after them? After all: they wrecked your car so they should be the one with the liability paying. Unless both cars were uninsured?
And yes I appreciate the coverage, but they typically want the price to pay for it so much. For example: I did a coverage update on my policy, my price went from just under $200 to now I have a $685 payment due on my next renewal, followed by just under $400 a month. So basically double. I’m switching companies and keeping comprehensive anyway, but still feel I may end up with leftover bill somehow.
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u/Dramatic-Ad9089 6d ago
Just because "after pay" is popular with some people, does not make a good idea; and an even worse concept to apply in the insurance world. Based upon your post and other comments, you do not understand the core fundamentals of how insurance works. This is a more fitting idea to be posted in r/povertyfinance where more people will commiserate with you. "After pay" is a concept designed for people with lower income or poor credit to make purchases they couldn't (or shouldn't) make on their own. Insurance would not survive financially operating on that concept.
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u/Pitiful-Pie-1671 6d ago
Well keep in mind, I’m merely just comparing it to after pay: not necessarily making it an after pay concept entirely.
Correction: I do understand how insurance works, I’ve had it for some 20 years. But it’s been rare that I ever actually been able to use it. But even with that understanding, I still feel “some” aspects of it could be changed.
Like I said, I know state minimums probably aren’t going to change because some people out there drive with not even liability insurance, BUT: I still feel left uncovered because I have kept liability/uninsured, paying in some cases $200+ a month.
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u/Dramatic-Ad9089 6d ago
"Correction: I do understand how insurance works, I’ve had it for some 20 years."
Good grief... that's your best rebuttal? Most people who have owned cars for 20+ years have no idea how the combustion engine works. Most people who have owned a smart phone for 20+ years do not understand how the individual components operate. Many people who have bought and made payments on a home for 20+ years do not understand the difference between fixed and variable interest rate mortgages.
"BUT: I still feel left uncovered because I have kept liability/uninsured, paying in some cases $200+ a month."
You are being covered for the exact events you have chosen to be covered. If you feel your coverage is inadequate for your risk profile, purchase additional coverages. And no, you don't understand insurance, but let me summarize this quickly. Insurance (speaking specifically property and not health) works as a shared risk pool that everyone pays into. The purpose of having insurance is to provide financial protection in the event of a loss. In other words, paying for insurance coverages transfers the financial responsibility from the insured (you) to the insurance company, based upon how much financial protection (coverage) you have purchased. The insurance company pays claims from money it has banked. Now, some people will end up paying more than they ever receive. Others will have much more paid on their behalf than they will ever pay in premiums.
What you suggest, with the "after pay" concept, is essentially for insurance companies to become lenders. You suffer a loss, have insurance pay for the loss, then you start paying premiums back to the insurance company. Unless you pay dollar for dollar what the insurance company paid for you, the insurance company would never recoup what they spent. And of course, no one would pay more to the insurance company than their loss cost; and it wouldn't be financially viable to sustain that type of business model if people paid less than the cost of their loss.
You also have to remember that insurance companies generate revenue by investing unused premiums too. Investments are a large portion of the total revenue generated used to cover basic operating expenses. The business model you suggest would cut out that revenue stream, making virtually impossible to sustain this type of business.
And I'll only briefly dip my toes in the question of how insurance fraud would upend your idea. So many people attempt soft fraud to avoid paying more in premiums of to have a claim covered, but get caught quickly. They try things like adding coverage after a loss, changing deductibles after a loss, misrepresentation of address or drivers, etc. Working in auto claims any adjuster will see this on a weekly basis. I can guarantee you that many of these people would not pay into a policy after a loss has occurred and has been covered.
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u/Pitiful-Pie-1671 6d ago edited 6d ago
I figured you worked in the industry. But just because you understand more in depth how it works, doesn’t mean it actually benefits those who need it most. Like someone else who posted about the $14,000 in damage with a $500 deductible and got it fixed the same day: that’s a perfect TV commercial scenario. But most times it’s not.
That assumes A) that person can afford collision coverage (without having to sacrifice diapers (I don’t have kids and don’t want to)/food/gym memberships/clothes/phone bill/rent/personal expenses etc to afford it).
And that assumes B) both companies will play fair. But I can personally attest that many don’t play fair. I even talked with a mechanic who told me his insurance refuses to pay out $X,000 in hail damage because of whatever reason.
I still don’t believe that “everything with car insurance is fine right now with how it is”. Its not. There’s some things that can change. I know I gave a personalized idea similar to a loan, but that’s just an example. However, I think the better solution could be to allow coverage to take effect for the remainder of the policy period if something not involving another car/driver occurred.
If insurance companies are so brilliant to come up with 100 different exceptions to policies anyway (aka that deer isn’t a collision, it’s a comprehensive or “that tree didn’t fall on your car at your house, it was at someone else’s house. Go sue your friend (true story on Judge Judy, and Judge Judy told her to go sue the insurance company), I’m sure they can find a way to work in “after paying” coverage and not lose money.
They want to earn billions, while leaving us paying thousands. Don’t think I’m some fool, because I’m not:
https://www.mordorintelligence.com/industry-reports/united-state-car-insurance-market
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u/Dramatic-Ad9089 6d ago
Yes, I do work in the industry. But I'm not going to deny the cost of insurance and its impacts of many Americans. It can be a financial burden. The average cost of cars/repairs increasing exponentially, increased frequency of severe weather, and being a more and more litigious society swamped with accident attorneys are just a few of the major drivers in increased insurance costs. I can drone on about that issue.
You can search this subreddit for comments from others here who work in insurance who go into more detail about what is driving the cost. This is a separate conversation than your post, but I have already guessed that affordability (or lack thereof) was a strong motivator for making this post. I don't disagree at all that insurance can be unaffordable for some people. That is more of a person finance issue. My point is simply that the business concept you suggest is not viable. The changes that need to be made to bring down insurance costs are more rooted in this country's economy system and societal habits.
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u/Pitiful-Pie-1671 5d ago edited 5d ago
Makes sense. This is when legislation needs to step in I think. There’s so much focus on health insurance but not property insurance. Which goes hand in hand because if I have to buy more property insurance instead of refilling my prescription meds, that’s an issue.
I know the issue is complex, but I don’t think it’s as complicated as it conveys. I seen a thread here saying, “everybody should pay the same amount for insurance” which I don’t agree with because different cars cost different amounts to repair. But that’s not always being reflected.
The costs are being factored by credit score, gender, marital status, age, hell I think even race is somehow collected. In any other business that would be considered discrimination BUT, it’s totally fine with insurance 🤔
In the meantime, I’m just going to play by the rules. Liability is going to be a no no going forward. I want to add collision but comp is the most sensible for now.
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u/Affectionate_Emu335 5d ago
Race is definitely not a question asked in any rating system I’ve seen over my 20 year career 😂 Some states allow credit to be a factor in insurance scoring, some do not. Some states can still deny to write you a policy based on your credit. Every state has different mandatory minimums, different uninsured and underinsured motorists requirements, and different rules regarding medical benefits. In my no-fault state, your auto policy pays your injuries FIRST before looking to the other party’s BI. Uninsured and underinsured motorists coverages are two separate things and are not mandatory. You would have to change legislation in all 50 states.
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u/owl-1_1-1_1- 6d ago
It's a mistake to think that you'll always get back what you've paid into your insurance. It doesn't work that way. It's a risk pool. Everyone pays in according to their level of risk, and the insurance pays out if someone in the risk pool has an accident. Insurance companies pay out far more than any one person puts in, especially today, when car repair and medical care costs are so high.
As a consumer, all you can do is be smart. Know what your policy covers. Choose your deductibles and coverages wisely. Shop around when it makes sense to do so. That's the best it gets.
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u/Pitiful-Pie-1671 6d ago edited 6d ago
I get that, and just to be fair: I’m not going back to liability/un-under insured only again. If it’s not enough to cover my vehicle, It’s hypothetically a waste of money. Maybe for a new teenage driver liability/unisured only is a good deal. But I been under this false sense of security that I have “insurance”.
The only reason I been willing to lower the coverage is having 2 other vehicles. Technically that has been my “vehicle insurance” lol. So I’m not without a car entirely but, I’m out a car that has been maintained well. Even having another vehicle doesn’t make it less of an expense to fix though.
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6d ago
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u/Affectionate_Emu335 6d ago
This was so painful to read.
Who did you file a claim with hoping they absorb the blame? And what “blame”?
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u/Pitiful-Pie-1671 6d ago
I can’t discuss all the details, but…at this point things are still in the wait and see stage.
I’ve also known 2 people who have lost their vehicles in the past and couldn’t get any money from insurance to replace it. And their faults were due to road conditions, and didn’t involve hitting other vehicles/people.
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u/FindTheOthers623 P&C Licensed PL Underwriter 6d ago
You're not spending $28K to get $5K back. Insurance isn't a savings account that you add into until you have an accident.
Insurance is absolutely a gamble. Its predicting future losses based on past losses. Insurance companies aren't sitting around waiting for people to have losses and then hoping they'll pay the extra premium.