Chapter II: Report Proper

2.0 Report proper:

2.1 Introduction to Automobile Insurance:

Automobile insurance protects against damage to a policyholder’s car and most
liabilities that could arise from operating that car. In most countries it allows drivers to
satisfy their financial responsibility for the costs of auto accidents by obtaining insurance
in three categories of liability coverage: (1) for injury to any one person, (2) for injury to
two or more people, and (3) for damage to another person’s property. Especially in USA,
an increasing number of states are requiring drivers to obtain auto insurance by law.
Most U.S. states require that drivers who purchase auto insurance buy no less than
a specified minimum of coverage, such as $25,000 toward the injury of another
individual, $50,000 toward the injury of multiple persons, and $10,000 toward the
damage of another person’s property. This minimum requirement is generally listed on
policies as 25/50/10. Most Canadian provinces require $200,000 of liability coverage for
covering the combined costs of bodily injury and property damage claims. In some
provinces, such as British Columbia and Saskatchewan, the government operates
compulsory programs of auto insurance in which all drivers must participate.
Most drivers also purchase medical payments coverage, which pays for treatment
of injuries they or their passengers may sustain in an accident, and collision protection,
which pays for damages to their own cars. Another optional form of auto insurance,
called comprehensive, covers a person’s car against theft or many types of non accident
damages. In addition, drivers may purchase insurance against injuries to themselves or
their passengers from accidents with drivers who have little or no insurance. With
underinsured motorist and uninsured motorist coverage, a person’s own insurance policy
provides damage and injury compensation that would normally come from another
person’s auto liability insurance. Another type of coverage, called personal injury
protection or no-fault, is required in some states in USA in addition to or instead of
liability insurance. This coverage compensates drivers from their own policies for
damages from accidents without determining responsibility for the accident.
What about the situation in Bangladesh? Specially when customers claims? That’s
why we have done this survey research, to know what the problems that claimants face in
our country are.

2.1.1 Deductibles:
A deductible payment, also known as an excess, is the fixed contribution that
anyone must pay each time his/her car is repaired through one’s car insurance policy.
Normally the payment is made directly to the accident repair garage when anyone collects
the car. If the car is declared to be a write off, the insurance company will deduct the
deductible agreed on the policy from the settlement payment it makes to the insured.
If the accident was the other driver's fault, and this is accepted by the third party's
insurer, claimant will be able to reclaim the deductible from the other person's insurance
company. If the other driver is uninsured, a policy's minimum limits include coverage for
the uninsured/underinsured motorist at fault. Deductibles can be of two types. They are
described below.

9
 Chapter II: Report Proper

2.1.1.a Compulsory Deductible:

A compulsory deductible is the minimum deductible payment that insurer will
accept on the insurance policy. Minimum deductibles vary according to one’s personal
details, driving record and insurance company.

2.1.1.b Voluntary Deductible:

In order to reduce insurance premium, one may offer to pay a higher deductible
than the compulsory deductible demanded by the insurance company. One’s voluntary
deductible is the extra amount over and above the compulsory deductible that he/she
agrees to pay in the event of a claim on the policy. As a bigger deductible reduces the
financial risk carried by the insurer, insurer is able to offer a significantly lower premium.

2.1.2 Basis of Premium Charges:

Depending on the jurisdiction, the insurance premium can be either mandated by
the government or determined by the insurance company in accordance to a framework of
regulations set by the government. Often, the insurer will have more freedom to set the
price on physical damage coverages than on mandatory liability coverages.
When the premium is not mandated by the government, it is usually derived from
the calculations of an actuary based on statistical data. The premium can vary depending
on many factors that are believed to have an impact on the expected cost of future claims.
Those factors can include the car characteristics, coverage selected, profile of the driver
and usage of the car. Here are the factors that affect the premium charges.

2.1.2a Gender:
Men average more miles driven per year than women do, and have a
proportionally higher accident involvement at all ages. Insurance companies cite women's
lower accident involvement in keeping the youth surcharge lower for young women
drivers than for their male counterparts, but adult rates are generally unisex.

2.1.2b Age:
Teenage drivers who have no driving record will have higher car insurance
premiums. However young drivers are often offered discounts if they undertake further
driver training on recognized courses, such as the Pass Plus scheme in the UK. In the U.S.
many insurers offer a good grade discount to students with a good academic record and
resident student discounts to those who live away from home. Generally insurance
premiums tend to become lower at the age of 25. Senior drivers are often eligible for
retirement discounts reflecting lower average miles driven by this age group.

2.1.2c Distance:
Some car insurance plans do not differentiate in regard to how much the car is
used. However, methods of differentiation would include:

10
 Chapter II: Report Proper

2.1.2c (i) Reasonable estimation:

Several car insurance plans rely on a reasonable estimation of the average annual
distance expected to be driven which is provided by the insured. This discount benefits
drivers who drive their cars infrequently but has no actuarial value since it is unverified.

2.1.2c (ii) Odometer-based systems:

Cents per mile now advocates classified odometer-mile rates. After the company's
risk factors have been applied and the customer has accepted the per-mile rate offered,
customers buy prepaid miles of insurance protection as needed. Insurance automatically
ends when the odometer limit is reached unless more miles are bought. Customers keep
track of miles on their own odometer to know when to buy more. The company does no
after-the-fact billing of the customer, and the customer doesn't have to estimate a "future
annual mileage" figure for the company to obtain a discount. In the event of a traffic stop,
an officer could easily verify that the insurance is current by comparing the figure on the
insurance card to that on the odometer.
Critics point out the possibility of cheating the system by odometer tampering.
Although the newer electronic odometers are difficult to roll back, they can still be
defeated by disconnecting the odometer wires and reconnecting them later. For example,
in order to steal 20,000 miles of continuous protection while paying for only the 2,000
miles from 35,000 miles to 37,000 miles on the odometer, the resetting would have to be
done at least nine times to keep the odometer reading within the narrow 2,000-mile
covered range. There are also powerful legal deterrents to this way of stealing insurance
protection. Odometer tampering if detected during claim processing, voids the insurance
and, under US law, is punishable by heavy fines and jail.
Under the cents-per-mile system, rewards for driving less are delivered
automatically without need for administratively cumbersome and costly GPS technology.
Uniform per-mile exposure measurement for the first time provides the basis for
statistically valid rate classes. Insurer premium income automatically keeps pace with
increases or decreases in driving activity, cutting back on resulting insurer demand for
rate increases and preventing today's windfalls to insurers when decreased driving activity
lowers costs but not premiums.

2.1.2c (iii) GPS-based system:

In 1998, an insurance company named “Progressive Insurance” started a pilot
program in Texas in which volunteers installed a GPS-based technology called Autograph
in exchange for a discount. The device tracked their driving behavior and reported the
results via cellular phone to the company. Policyholders were reportedly more upset
about having to pay for the expensive device than they were over privacy concerns.
In 1996, Progressive filed for and obtained a US patent on their process.
Progressive has also filed corresponding patent applications in Europe and Japan. UK
auto insurer, Norwich Union, has obtained an exclusive license to Progressive's European
patent application. They have recently completed a successful pilot test of the technology
and it is now available commercially under the trade name "Pay As You Drive™".

11
 Chapter II: Report Proper

Recent theoretical economic research on the social welfare effects of Progressive's

telematics technology business process patents have questioned whether the business
process patents are efficient for society. Preliminary results suggest that they are not, but
more work is needed.

2.1.2c (iv) OBDII-based system:

In 2004, Progressive launched another pilot program to allow policyholders to
earn a discount on their premiums by consenting to use its TripSense device. TripSense
connects to a car's OnBoard Diagnostic(OBD-II) port, which exists in all cars built after
1996. The discount is forfeited if the device is disconnected for a significant amount of
time.

2.1.3 Typical Automobile Insurance Coverage:

The consumer may be protected with different coverage types depending on what
coverage the insured purchases. In the United States, liability insurance covers claims
against the policy holder and generally, any other operator of the insured vehicles
provided, do not live at the same address as the policy holder, and are not specifically
excluded on the policy. In the case of those living at the same address, they must
specifically be covered on the policy. When someone drives a vehicle owned by another
party, he is covered under that party’s policy.
Generally, liability coverage extends when someone rents a car. Comprehensive
policies usually also apply to the rental vehicle, although this should be verified
beforehand. Full coverage premiums are based on, among other factors, the value of the
insured’s vehicle. This coverage, however, cannot apply to rental cars because the
insurance company does not want to assume responsibility for a claim greater than the
value of the insured’s vehicle, assuming that a rental car may be worth more than the
insured’s vehicle. Most rental car companies offer insurance to cover damage to the rental
vehicle.

2.1.3a Liability:
Liability coverage provides a fixed amount of coverage for damages that an
insured driver becomes legally liable to pay due to an accident or other negligence.
Liability coverage is available either as a combined single limit policy, or as a split limit
policy.

2.1.3a (i) Combined Single Limit:

A combined single limit combines property damage liability coverage and bodily
injury coverage under one single combined limit. For example, an insured driver with a
combine single liability limit strikes another vehicle and injures the driver and the
passenger. Payments for the damages to the other driver's car, as well as payments for
injury claims for the driver and passenger, would be paid out under this same coverage.

12
 Chapter II: Report Proper

2.1.3a (ii) Split Limits:

A split limit liability coverage policy splits the coverages into property damage
coverage and bodily injury coverage. In the example given above, payments for the other
driver's vehicle would be paid out under property damage coverage, and payments for the
injuries would be paid out under bodily injury coverage.

2.1.3b Collision:
Collision coverage provides coverage for an insured's vehicle that is involved in
an accident, subject to a deductible. This coverage is designed to provide payments to
repair the damaged vehicle, or payment of the cash value of the vehicle if it is not
repairable. Collision coverage is optional. Collision Damage Waiver (CDW) is the term
used by rental car companies for collision coverage.

2.1.3c Comprehensive:
Comprehensive coverage other than collision, provides coverage subject to a
deductible, for an insured's vehicle that is damaged by incidents that are not considered
Collisions. For example, fire, theft or attempted theft, vandalism, weather, or impacts
with animals are just some types of Comprehensive losses.

2.1.3d Uninsured/Underinsured Coverage:

Underinsured coverage, also known as UM/UIM, provides coverage if another at-
fault party either does not have insurance, or does not have enough insurance. In effect,
your insurance company acts as at fault party's insurance company. In the United States,
the definition of an uninsured/underinsured motorist, and corresponding coverages, are
set by state laws.

2.1.3e Loss of Use:

Loss of Use coverage, also known as rental coverage, provides reimbursement for
rental expenses associated with having an insured vehicle repaired due to a covered loss.

2.1.3f Car Towing Insurance:

Car towing coverage is also known as Roadside Assistance coverage.
Traditionally, automobile insurance companies have agreed to only pay for the cost of a
tow that is related to an accident that is covered under the automobile policy of insurance.
This had left a gap in coverage for tows that are related to mechanical breakdowns, flat
tires and fuel outages. To fill that void, insurance companies started to offer the Car
Towing coverage, which pays for non-accident related tows.

13
 Chapter II: Report Proper

2.2 Methodology:
For this report we followed these steps.

2.2.1 Research Design:

Our research is explorative, because we are trying to find out information that is
still unknown. So we planned for a survey. The research is primarily based on this survey.

2.2.2 Collecting Data:

The survey was a simple questionnaire survey. A questionnaire with some
questions related to the problems claimants face, was made for this survey. There was not
sufficient time to fill up personal information about the respondents. Because we
conducted the survey in Saturday and Sunday nights, as our respondents are not busy only
in these times. So we took only the questions needed for our research. The questionnaire
contained 11 questions. A sample Questionnaire is attached in the appendix section of this
report.

2.2.3 Interpretation and Evaluation of the Questionnaire:

In this questionnaire there are three parts. First part is based on the customers’
knowledge about the insurance companies. Second part is on the problems they faced in
claiming of a loss. Last part is on their intention about automobile insurance in near
future. If we arranged the questions according to these segments, respondents might get
biased. So we rearranged the questions in random orders. There is a special question for
finding out some special situations customers faced and it’s the last question of that
questionnaire.

2.2.4 Measurement Scale:

Not all the questions in the questionnaire can be analyzed by a measurement scale.
Some questions are analyzed only by two extreme values, positive or negative. But there
are some questions with five points scale. All questions are analyzed by percentage
values.

2.3 Analysis and Findings:

We gathered data & arranged them as our topic. So first we analyzed data and
make a representation of those values into graphical format. Here is the analysis &
findings of our research.

2.3.1 Attitude of the Company:

Question number one was based on the insurers’ intention when customers
claimed for their losses. Here are the findings,

14
 Chapter II: Report Proper

Positive Intention
No. of Respondent
Yes 5
Somewhat Yes 6
Undecided 3
Somewhat No 19
No 17
Total 50

Table 1: Attitude of the company.

Positive Attitude by the Insurer

Yes
10%
Somew hat
No Yes
34% 12%

Undecided
6%

Somew hat
No
38%

Figure 1: Positive Attitude by the Insurers.

From the analysis it is clear that most of the times, insurers show negative attitude
to the customers, when they claim for a loss. It means they are not co-operating all the
times. Some to the respondents said that they got positive attitude from their insurers. But
these are less of the times. So we can say that, insurers are not co-operating to the
customers in case of claims for losses or after any accident.

2.3.2 Compensation after the Loss:

Many of our respondents told us that they didn’t get the compensation after the
losses they suffered. Here is the exact scenario of the compensation,

Customers who got compensation

Yes 19
No 31
Total 50
Table 2: Compensation after the loss.

15
 Chapter II: Report Proper

Compensation after the loss

Yes
23%

No
77%

Figure 2: Compensation after the loss.

From the analysis it is clear that most of the customers didn’t get any
compensation after their losses. But when we carried out the survey we also found some
other facts that affected the result. Most of the times it dependant on the insurers. But
some problems came from the customers also. We found that some customers didn’t go
through the claiming process at the end. Some abandoned it in the middle of the process.
There are some reasons behind this scenario also. Those reasons are explained in the later
parts.

2.3.3 Compensation Amount:

The customers who got compensations, not necessarily got the exact amount they
claimed. Here are the findings about the compensation amount,
Customers who got the full claimed amount
Yes 5
No 14
Total 19
Table 3: Compensation amount.
Compensation in full am ount

Yes
26%

No
74%

Figure 3: Compensation amount.

16
 Chapter II: Report Proper

The customers, who got any compensation, later reported that most of the times
they didn’t get the total amount they claimed. Insurer paid them less. Some interesting
facts we discovered in this part. Sometimes insurers pay the amount and lay off some
processing charges, investigation costs etc. We don’t know its legal or not, as we are
unsure about the law, regarding these type of things.

2.3.4 Claiming Process:

This analysis is based on the claiming process that insured passed through. Here is
our finding,

The process was complex and lengthy

No. of Respondent
Yes 21
Somewhat Yes 17
Undecided 2
Somewhat No 7
No 3
Total 50
Table 4: Complex claiming process.

Complex and Lengthy Claiming Process

No
Somew hat 6%
No
14%

Yes
Undecided
42%
4%

Somew hat
Yes
34%

Figure 4: Complex and Lengthy Claiming Process.

As it comes to the claiming process, most of the customers stated that they found
the process is so much complex and time consuming. That’s why some customers
abandon their claims in the middle of the road. It’s very much problematic for the
customers for whom time is very important.

17
 Chapter II: Report Proper

Vague Rules
No. of Respondent
Yes 23
Somewhat Yes 11
Undecided 7
Somewhat No 5
No 4
Total 50
Table 5: Vague rules.
Vague Rules
No
Somew hat 8%
No
10%

Yes
Undecided 46%
14%

Somew hat
Yes
22%

Figure 5: Vague rules.

Many of our respondent stated that they found that the rules were vague. They
also stated that when they claimed, some rules emerged from no where! But later they
seen that these rules were written in the contract paper, but in a manner that they never
understood the meaning and sometimes it’s written in small fonts and made them difficult
to read. This problem indicates the same situation that BRAC banks customers faced
recently, when their valuable jewelry was looted from bank’s vault. We don’t know why
most of the organizations follow these manners, but these things should be stopped for the
betterment of the customers.

2.3.5 Indifference Attitude by the Insurer:

This analysis is based on the insurer’s attitude to insured at different situations.
Here are our findings on this topic,
Indifference attitude of the insurer
No. of Respondent
Yes 5
Somewhat Yes 7
Undecided 2
Somewhat No 14
No 22
Total 50
Table 6: Indifference attitude of the insurer.

18
 Chapter II: Report Proper

Indifference Attitude of the Insurers

Yes
10%

Somew hat
No Yes
44% 14%
Undecided
4%

Somew hat
No
28%

Figure 6: Indifference attitude of the insurer.

This finding indicates that customers are god until they buy the policy and after
that they are forsaken. Most of the times insurers show very much positive attitude to the
customers when they pursue them, but when insured face a loss and claim, insurer attitude
become different. It’s also indicating the problems that most of the customers face in our
country.

2.3.6 Future Estimations:

This part is based on the customers’ estimation about the future. Here are our
findings,

Extension of the Current Policy

No. of Respondent
Yes 3
Somewhat Yes 7
Undecided 7
Somewhat No 11
No 22
Total 50
Table 7: Extension of the current policy.

19
 Chapter II: Report Proper

Extension of the current policy

Yes
6%
Somew hat
Yes
14%
No
44%
Undecided
14%

Somew hat
No
22%

Figure 7: Extension of the current policy.

Most of the respondents stated that they will not extend their automobile insurance
policy. It’s indicating a negative intention of the customer toward automobile insurance
policy. We think insurers need to care for the customers, or else they will suffer badly
form customer shortfall in future.

Buy from same insurer

No. of Respondent
Yes 1
Somewhat Yes 5
Undecided 9
Somewhat No 15
No 20
Total 50
Table 8: Buy from same insurer.
Buy from sam e insurer
Yes
Somew hat
2%
Yes
10%

No Undecided
40% 18%

Somew hat
No
30%

Figure 8: Buy from same insurer.

20
 Chapter II: Report Proper

The respondent were asked, if all of them extend the policy will they but from the
same insurer or not and most of the times we got negative responses. That means they
will not but the policy form same insurer again. Most of the cases they will close the
policy when it expires and will buy from other companies.

Buy policy for new car

No. of Respondent
Yes 2
Somewhat Yes 1
Undecided 11
Somewhat No 7
No 29
Total 50
Table 9: Buy policy for new car.

Buy policy for new car

Yes Somew hat
4% Yes
2%

Undecided
22%

No
58% Somew hat
No
14%

Figure 9: Buy policy for new car.

We asked our respondents that if there are no legal obligations, will they buy any
policy for a new vehicle or not. Most of the respondents stated that they will not buy a
policy for the new vehicle. It shows that, if there is no factors that are influencing the
situation, most of the automobile buyers will not buy any policy for their vehicle.

Buy new policy from same insurer

No. of Respondent
Yes 1
Somewhat Yes 1
Undecided 4
Somewhat No 16
No 28
Total 50
Table 10: Buy new policy from same insurer.

21
 Chapter II: Report Proper

Buy new policy from same insurer

Somew hat
Yes Yes
2% 2%
Undecided
8%

Somew hat
No
32%
No
56%

Figure 10: Buy new policy from same insurer.

We also asked our respondents that if they are forced to buy a policy for their new
vehicle will they buy from the same company or not. Most of the times we get a negative
answer. Which means they will not buy from the same company again.

2.3.7 Some Facts from the Past Experiences:

These analysis are based on the special question on the various situation insured
faced in past. Here are our findings about those situations,

Situations Claimants’ Answers

Yes No Total
Insurer told claimants that they shouldn’t move the vehicle 49 1 50
after the accident
Insurer asked for eyewitnesses from the insured 33 17 50
Insurer sent their inspection team immediately after the 18 32 50
accident
Insurer made the claiming process complex and lengthy 37 13 50
Insurer show negative response and neglected the case 12 38 50
Insurer closed the file and didn’t make any compensation 5 45 50
Table 11: Some facts that claimants faced.
These questions were asked to extend our knowledge about the situations that
customers faced. According to the respondents experience we found this facts,
 98% of the cases, insurer companies asked the claimants that they should not
move the vehicle after the accident, without making any judgment to the situation.
 66% of the cases, insurer asked claimants to present any eyewitness of the
accident, without analyzing the situation.
 36% of the cases, insurer companies sent their inspection team immediately after
the incidents.
 74% of the cases, insurer companies made the claiming process more complex

22
 Chapter II: Report Proper

and time consuming.

 24% of the cases, insurer companies shown negative response and neglected the
case totally.
 10% of the cases, insurer companies closed the file without doing anything.

This scenario is actually representing that customers are still neglected by the companies.
We are still many decades behind customer oriented marketing. This situation is also
present in other service organizations in Bangladesh. We need to avoid these things, or
else we will be called the third world country for centuries.

2.4 Summary of Findings:

Based on the findings and the analysis we made on them, here is the summary.

2.4.1 Insurers Attitude:

Most of the cases, insurer companies show highly positive attitude to the
customers when they are perusing them. Until they become the customer of their
company, they show very caring attitude to them. But after they buy their policy and
become their customers, insurers’ attitude is changed. It’s very much noticeable when
their customers claim for their losses. That time their attitude is negative to the claimants.

2.4.2 Customers Intention:

Customers do not want to buy an automobile insurance, if there are no legal
obligations. Especially for those customers who don’t buy high priced vehicles.
Customers who have shown positive intention to buy automobile insurance policy, are
mainly customer of luxurious and high priced vehicles.

2.4.3 Some Facts:

This Part is done on the basis of the last question we asked to our respondents.
Simply analyzing the data we created this fact sheet. Now assume that you are a claimant.
So if you claim to your insurer company after an accident,
 There is a 98% of chance that your insurer company will blame you, if you have
moved your car after the accident.
 There is a 74% of chance that your insurer company will make the claiming
process more complex and time consuming.
 There is a 66% of chance that your insurer company will ask you to present any
eyewitness of that accident.
 There is a 64% of chance that your insurer company will not send their inspection
team immediately after the incident.
 There is a 24% of chance that your insurer company will negatively response and
neglect your case.

23
 Chapter II: Report Proper

 There is a 10% of chance that your insurer company will close the file without
doing anything.
2.5 Recommendations:
Our study indicates that we are far away in insurance service comparing other
countries. Though we found most of the times insurer is not co-operating, but some
problems came from insured also. Insurer need to pay close attention to their customers
and customers should maintain relation with the insurer. Both parties must co-operate to
handle the claiming process. Other wise the facts we discovered in our study, may
remain unchanged. But it’s not desirable for a better service industry. Insurer companies
can do these to maintain their customers,
 They should pay close attention to the customers all the time, not only when
they are pursuing them.
 They should co-operate with the customers when they claims.
 They can educate their customers about their claiming rules.
 They should try to maintain a good relationship with the customers.

For the insured, these can help to become a good customer,

 They should not abandon the claiming process
 They should co-operate with the insurer when they ask for any information.
 They should not deliberately cause any accident.
 They should read the instruction of the insurance agreement very carefully.
 In case, they should ask the company to explain certain rules.

2.6 Conclusion:
From this research we learned many things that will help us in future.
Especially for some of our group members who wants to join insurance service related
jobs. It was an explorative research so we tried to find out something that is unknown to
us. We explored and tried to find out information related to our research. We found that
most of the customers think that insurers are creating problems in the claiming process.
As our survey was conducted on the customers only, so we didn’t find out what insurers
are saying regarding this topic. We tried and used our best efforts to make the report
unbiased, but as we are inexperienced of survey research there may be some faults in the
analysis. We apologize for that. We hope that our works on this report will bring us
benefits in future also.

24