Canceling a Policy

Posted: Sun Mar 08, 2009 07:13 pm Post Subject:

An additional note, I thought auto insurance companies required proof that you have a new policy in effect before they will cancel, otherwise they will report you and have your license suspended and such?

Posted: Sun Mar 08, 2009 07:44 pm Post Subject:

Your current carrier can't cancel the policy just because they want to... you have a contract with them. It sounds like the person you were speaking to did not know much about this process. Do you not have a local agent? If you did, I'd go in person and see if they can furnish paperwork showing when the policy will be cancelled. If your agent is not local, doing what you mentioned sounds good. I'd also follow up with them on 4/3 to make sure it is set up to cancel.

Posted: Sun Mar 08, 2009 08:24 pm Post Subject:

>> Your current carrier can't cancel the policy just because they want to... you have a contract with them

I beg to differ. Safeco told me that they were not allowed to cancel my policy without my writen permission and/or request and then they canceled it 1 month into the policy with neither my permission nor at my request. I switched my home, auto and motorcycle policies to them in February and now that they have canceled one, we suspect they will cancel the others or at the least charge us a rate hike because we had discounts based on multiple policies and we now only have 2 with them.

Posted: Sun Mar 08, 2009 08:37 pm Post Subject:

>> Your current carrier can't cancel the policy just because they want to... you have a contract with them

I beg to differ. Safeco told me that they were not allowed to cancel my policy without my writen permission and/or request and then they canceled it 1 month into the policy with neither my permission nor at my request. I switched my home, auto and motorcycle policies to them in February and now that they have canceled one, we suspect they will cancel the others or at the least charge us a rate hike because we had discounts based on multiple policies and we now only have 2 with them.

Posted: Sun Mar 08, 2009 10:39 pm Post Subject:

Thanks. Do I need to provide my current insurance company with the new insurance company's details when I submit the cancellation request? I recall reading that the insurance company will report you immediately if you are no longer covered, is this a non-issue since the state can just verify that I have new coverage?

Posted: Sun Mar 08, 2009 10:55 pm Post Subject:

>>The company has 60 days to review a new policy and underwrite it, in most states. During that "free look" period, the company can cancel for any reason

What is this "free look" period? They wrote policies, gave me paperwork and cards and then canceled one. When I questioned it, they said that they had the right to cancel at any time for any reason.

Posted: Sun Mar 08, 2009 11:16 pm Post Subject:

Motor,

In most cases itis not necessary to show your new policy to your old company. If you are in a state where they have to report the cancellation, then your new company will report the new policy. As long as the dates are the same, then there is no problem.

Posted: Sun Mar 08, 2009 11:39 pm Post Subject:

Lauri,

The "free look" period is the underwriting review period, the company's chance to underwrite the policies and make sure that it meets their underwriting guidelines. It is sixty days in most states. During that period, the company can cancel for any reason. They are required to give you some advance notice, but it is usually 10 to 15 days, depending on the state.

Let me try to explain the process briefly. In the old days (before everyone had a computer on their desk), when everything was done manually, you would go to your agent's office and apply for insurance. He would ask you about your driving record, look in a book of rate pages (my first job in insurance was creating those rate pages), fill out an applicaiton by hand, have you sign it, attach a check, and mail it to the company. The policy was effective immediately, even though the company had not verified your driving record through the DMV, had not double-checked the rates, and in fact did not even know that you existed. If you had an accident on the way home, however, your claim would be covered. (It was not unusual for a company to get a claim report before they received the application.)

But the company's underwriters needed a chance to review and verify it and make sure that it fit the company's guidelines. If an applicant told his agent that he had a clean driving record, for example, but the underwriter wrote off for the motor vehicle report and a few days later received a report showing three accidents, then the underwriter could cancel the policy with advance written notice. That is the purpose of the underwriting review period. It gives the underwriter an opportunity to review the policy and be sure it is acceptable and rated correctly, while still allowing you to have coverage immediately.

If they did NOT have this underwriting review period, then they would have to do home and auto policies like like they do life policies: You could submit an application, but you would not have coverage until some time later, after the underwriter had reviewed it. If you bought your first car and did not have coverage, you would have to wait until the policy was reviewed by an underwriter before you could drive your new car. It is the underwriting review period that makes it possible to get instant coverage, even before an underwriter has reviewed it.

It is less of a problem in the days of modern computers, however, because in most states we can get instant motor vehicle records from the DMV, and underwriting is moving toward a rules-based system instead of individual underwriter review. I am online with my company, rate everything through a web application connected to the company's processing system, get real-time MVRs and other records, and have it underwritten instantly. More companies are going to real-time systems like this, but not everyone is quite there yet.

Still, just to be safe, I advise my policyholders to submit everything a few days in advance and do not cancel their old policies until ours have been through underwriting and issued to them. "No surprises" is our mantra. Surprises are bad in this business.

Posted: Mon Mar 09, 2009 06:16 am Post Subject:

Just be cautious if you're in an accident during the 60-day free look period. If you get in an accident during that time period, you could expect to see limited benefit amounts if your policy eventually doesn't get issued. In some states, companies issue Binders, which 'bind' the coverage until the approval of the policy (can't speak for all states, I just know many do). But if you have to file a claim under the binded coverage before your policy is ultimately declined, you could see a percent reduction in the payout of the claim.

A simple rule to follow is this: Always be careful as a driver, but when you change companies, be 'the most' careful until the policy is issued.

Posted: Tue Mar 10, 2009 09:12 am Post Subject:

When I questioned it, they said that they had the right to cancel at any time for any reason.