Business Plans

It’s a tired way to start a modern article by referring to the speed with which the world has been revolutionized by the computer but, in this instance, it’s highly appropriate. When the first green shoots emerged in the late 1960′s and early 1970′s, computerization was all about automating in-house processes like the accounting system. The software to replace labor was still a few years ago. But, once it arrived, two things happened. The employers cut their costs and improved their profits by terminating the employment of tens of thousands. Second, by removing many of the people who used to deal with customers, the businesses began a slow decline in the quality of the services they provided. Today, corporations hide behind call centers and e-mail systems, rarely providing real people we can talk through our problems with.

Instead of using the Internet and automated systems as a smokescreen to suggest a reasonable quality of service, the new technology should be used to improve the customer experience. At some point, the quality of this aspect of service will come back into focus as a way of distinguishing between faceless corporations. Take the world of car insurance as an example of what can be done. If your vehicle is involved in an accident, what you want is a smooth system for handling your claim. This involves the minimum fuss in submitting the claim online, the identification of suitable bodyshops for performing the repairs, getting quotes with the least delay, and agreeing which bodyshop will actually do the repairs. All this administration needs to be fast because, if your vehicle is off the road, there are storage charges mounting up and rental charges for a substitute vehicle. Multiply this across all the policyholders and the cost to the insurers is higher than it needs to be. If this loss is controlled, premium rates can be stabilized if not reduced. It’s good for all.

That’s why it’s important to support a new website and mobile app for Android and the iPhone that will improve the current situation. They allow you to upload photographs of the damage using your cell phone or hand-held device with a camera, and circulate those pictures to bodyshops approved by your insurer near to where you live. The repair shops keep the site updated on whether they have spare capacity and offer an estimate of the cost of repairs within 24 hours. Because the site works with insurers to limit the list of repairshops to those preapproved by the insurers, there’s a minimum of delay in processing the claim and costs are kept to a minimum. At present, this is still at a beta stage with five insurance companies in a limited number of states. But, assuming the trial is a success, we could see this rolled out across the country. If it genuinely does reduce administrative delays and associated costs, we will see stable car insurance rates. It may not be the cheap car insurance we all want to see, but it’s a good step in the right direction. It should also act as a wake-up call to the other slumbering giants on both sides of the fence. There are creative software people and insurance companies who would benefit the customer by getting together.

If you listen to the commentators, they all sing the same song. We’ve now entered the internet age. This is supposed to convince us something new and wonderful has happened. It’s such a complete break with the past it heralds the beginning of a new information age in which, somehow, we can all get ahead and do things never possible before. This is, of course, pure rubbish. The only difference between the digital age and the hard-copy age that went before it is the ease of access. Having a PC or some other online device gives you access to a vast library with a search engine to help you find the pages you need more easily. But, when you have the right page on the screen in front of you, it’s the same words you could have found in a book or some other written material. All that’s changed is the way the words are presented to you.

So, if you go back in time, printed words have always been used to manipulate people. They sell ideas to you. This means real power lies in the power to control access the means of publication. If a group can control what gets printed and distributed, the words can always tell the same story. But if the means of publication is open to other voices, this can give a completely different view of the world. This is why reputations can be made or unmade depending on who has the power to publish.

The problem for modern companies is anyone today can start up a blog or website. Many internet services are free to use. Similarly, the networking sites like Facebook allow people to write their opinions and describe their experiences. In the past, we would never get to hear Anne from Denver bought a steam cleaner that sprayed boiling water over her hands. Now she can write it and thousands of people can tweet it. It makes it very difficult for manufacturers and service providers to protect their reputations. This explains, in part, why insurance companies very rarely allow interaction on their sites. Since they cannot control what sometimes angry customers may say, they try to deny them a voice. Except there are now some very high profile sites on which people can complain about bad products and services. This movement is not yet sufficient to damage the vast insurance industry, but individual companies are finding it more difficult to prevent their reputations from slowly washing away.

This makes the recent announcement of a new online forum all the more encouraging. The intention is to allow people from both sides of the insurance relationship a chance to ask questions and have their say. Instead of a blank screen on which insurers give you the news they think you should hear, you can now ask about how to get more affordable car insurance rates, what to do if a claims adjuster low-balls the fair market value offer, and so on. This does not mean everyone on the forum will be an “innocent” consumer. There will inevitably be anonymous industry experts giving balancing views and opinions. But this is a hopeful sign of change. You may even get cheap car insurance quotes because of pressure through forums like this.

Everyone accepts the basic principle of capitalism that, if a company is run on a for-profit basis, it’s entitled to run a business model that maximizes revenue and minimizes costs. After all, it’s only fair that whoever puts up the money to start a business should be entitled to a return on their investment. But there comes a point when we should ask how much profit is morally acceptable and whether there should be limits on the means a business can use to make that profit. In the movie Wall Street, Gordon Gekko answers the first by saying there’s no such thing as “enough”. All that happens in business is money gets transferred from the losers to the winner. Later he says greed is good. Looking around at the amount of bonuses paid to the bankers and senior officers of our largest corporations, it seems they’ve learned Gordon Gekko’s lessons well.

As an example, let’s take the insurance industry. For a few years, it offers cover against all the standard perils from wind and rain. That way, if a storm hits your home, you can claim regardless whether the wind huffs and puffs it down or floods wash it away. Except, the insurers noticed there were more floods coming along, so they stopped insuring. The result? The Federal government had to set up the National Flood Insurance Program to take on the risks the private corporations rejected. Then along came a series of hurricanes that did real damage through the combination of wind and water. People living near the coast discovered to their cost that insurers were excluding so-called storm surges. That’s where the wind whips up the water and drives it inland.

These days, insurers are very careful to define exactly what wind and water damage they cover. If there’s even the slightest doubt your damage falls within the scope of their definitions, your claim will be rejected and your only remedy will be to sue. As an example of the attitude shown by some insurers, let’s travel to Mississippi where the local Supreme Court is dealing with a case in which the same insurance company paid out for wind damage to the houses on both sides of the claimant, but refused a cent to the house in the middle. The problem follows from Hurricane Camille when this particular insurer lost a lot of money. So it inserted a new term in the policy which says that if water gets involved, all wind damage is excluded even if the wind contributed to the damage. The result is rather dramatic. Suppose your home is 95% destroyed by wind and then there’s a small flood that completes the destruction, the insurance company would deny all liability.

In a for-profit business model, there’s no general requirement for the home insurance company to be fair to the customer. If the clause is clearly set out in the policy and the customer accepts the policy, this is the customer’s choice and the insurer will deny liability. So, the next time you get those home insurance quotes, make a point of reading through the policies to see what exceptions and exclusions the insurers have written into the policies. If you live in an area where wind and water may combine, you could find your claims denied.

When it comes to insuring a car people often speculate about various things that may have an impact over the rates they are charged with by the insurance companies. Some state that even the color of the car has an importance and will advocate their point of view as being a correct one. Still, knowing what exactly may influence your insurance rates is quite important because it will be easier for you find a deal that would be adequate to your current situation. So what really influences insurance rates when insuring a car and why?

There are two sets of factors that insurance companies use to determine the risk associated with insuring a particular driver. One set of factors concerns all the important variables regarding the car in question such as car make and model, engine volume, top speed, safety features, repair costs, theft rates and other less important variables. These factors allow the company to determine how it is likely for this very car to cause a claim to be filed, and make up a good part of the final premium you will have to pay.

The second set of factors concerns the car owner and is used to determine the respective risk of this person to use the policy’s coverage. That’s why when quoting for auto insurance you are asked to indicate your marital status, place of residence, driving record, credit rating, education and other things. Although some of these factors may look quite strange from the perspective of auto insurance there’s nothing surprising for the insurance companies. They simply want to know how it is likely for a person to file an insurance claim and it turns out that these variables really help them determine the respective risk.

However, it is very important to understand that every company uses these factors in different ways. It’s not that all insurance providers have the same formula to calculate their rates – each provider has their own method of rate calculation and you will always get different results when getting quotes from different providers using the same data. That’s why auto insurance quotes are always different when you compare them. One provider may rely more on the car factors, while another may have a larger weight of credit rating in their formula. And seeing how many factors are involved you will certainly understand that the premiums you are charged with may fluctuate significantly depending on the provider you will choose to buy insurance from.

How knowing the factors influencing your rates may help you when buying insurance for your car? Although, all providers have different formulas for calculating rates they all share the same classification of the factors involved. For example, if you have a bad credit rating or driving record this will certainly reflect in higher rates no matter what company you choose to go with. And by knowing what factors are important you can take the steps in order to improve them and get cheaper auto insurance or look for companies that aren’t as concerned about a particular factor that you feel as unfavorable to your final rates.

It’s a broken record but true. Attorneys are dangerous to a consumer’s health! When you look at their ability to take ordinary English and make it complicated, there are few people on the planet to equal them. The moment a contract is drafted, the choice of words changes from everyday to jargon. The sentences get longer with more clauses. This is not the type of English ordinary people can read easily. Worse, it’s often difficult for people to get hold of the policy before they buy. This is particularly true for the health plans provided by employers. Naturally, in larger companies, there’s probably an in-house attorney who reads the small print and offers advice to the HR Department on whether the plan represents good value for money. But, all too often, none of the employees get to see this plan. The best most can hope for is a summary of the benefits produced by the HR Department – not necessarily the most reliable source of information about an insurance policy. More importantly, the HR Department rarely explains what the real costs are. Employees find out the hard way on the extent of the cover, the amount of any deductible and the extent of the co-payments required.

You will be pleased to know this is changing, thanks to the Affordable Care Act 2010. Yes, Obamacare really does have some good stuff in it. The rules will require insurance companies and the employers who buy their plans to give employees clear written guidance on those plans. This starts with a simple listing of both what is covered and what is not. In most plans, this information tends to be buried with headline benefits undercut by a later listing of exclusions. Now this should be a simple list. It’s the same with costs. The annual premium must be disclosed together with explanations of what you must pay, particularly if you want to go to consult a doctor not in the network. Perhaps even more importantly, the document must be written in clear English and, to help should you ever want to read the plan itself, there should also be a set of definitions where all the jargon words are explained.

We’ve all just seen what happens to property values when mortgage and other loan documents are not explained to borrowers. They get caught out by the language and many default. Foreclosures follow. Although the consequences to signing up to health plans are not quite so dramatic, you can end up with a poor value-for-money plan and big bills for topping up the care from your own pocket. The insurers are, of course, still complaining. They are even saying the premium rates may have to rise to cover the increased administrative costs to produce the explanatory materials.

All this is due to come into force early in 2012 so, if you are in an employer plan, you should get a better insight into the extent of the cover. If your employer offers a choice of plans, it should also help make a better choice. Whether individual or group, health insurance should not be made more difficult than it needs to be. Thanks to Obamacare, we have one less problem to confront the next time we’re asked to decide whether to join a health insurance plan.