Posts Tagged ‘rates’
Recently in this blog, I mentioned I was in the market for an auto insurance product that features a ”pay as you drive” premium rating factor. With the buzz circulating in California around “pay as your drive” auto insurance, I thought that this would be an easy task…I thought wrong. It turns out that paying for insurance based on driving usage and habits is fairly new to the marketplace and is only available in a handful of states by a handful of insurance providers.
On Thursday 12/02/10, State Farm was approved for pay as you drive auto coverage in California. Other companies are expected to launch verified mileage based insurance programs throughout the state within the next 12 months. One minor detail is that I don’t live in Cali or plan on moving to the west coast anytime in the near future. It is nice to see that insurance companies are willing to assess the risk of such programs in a state as large as California, but for the short term this doesn’t help my situation.
Upon further digging, outside of the state of California, only GMAC, Progressive, and a new insurance company called MileMeter provide discounts and/or coverage based on mileage driven and driving habits. So I called all three companies to inquire further.
Progressive offers a coverage called Snapshot, which obtains information on your driving habits through an on-board telemetric device (small device you plug into your car). Kind of weird that my insurance company would be able to see my every move, but if it can lower my insurance cost, I’d be willing to give it a try. Illinois does not have this program available, but it is currently available in Alabama, Colorado, Kentucky, Louisiana, Michigan, Minnesota, Maryland, New Jersey and Oregon. Strike One! See Lily’s blog for more information on Snapshot: http://www.comperemedia.com/blog/2011/01/take-a-drive-with-flo/
GMAC offers a program called Pay As You Go, which is an opt-in program available for OnStar subscribers that can save customers up to 54% on auto insurance. 54% off has a nice ring to it. Driving habits and scenarios are tracked via OnStar, but therein lies the problem…my Jeep is not equipped with OnStar. Strike Two!
Mile-Meter, launched in 2007, offers Pay-By-The-Mile auto insurance, but is only available in Texas. Strike Three!
Consumers ditching their cable providers for other options have become a real threat to cable companies. According to research firm SNL Kagen, Q3 2010 marked the second consecutive quarterly drop in U.S. TV cable subscribers. While there are many potential factors on a consumer’s decision to cut the cord, cable operators cannot avoid the obvious threat of advanced online video options. While some of these cord-cutters have turned to free over-the-air programming, many have moved entirely to online video options.
With advanced internet-based products being introduced, such as Google TV, Roku set-top and Apple TV, plus immediate online streaming of many television shows, consumers have many options when it comes to satisfying their TV fix. How can the cable providers keep their market share?
According to the Wall Street Journal, Comcast, the largest paid television operator, is testing a new service that will combine traditional television and the Internet. The service will combine Web video streaming, traditional cable and DVR capabilities in a set-top box. The test is being conducted in Augusta, GA and is known as “Spectrum” to participants. The service does not allow consumers to freely browse the internet and the company has not released information on what content will be available or the pricing structure.
Other top cable companies such as DIRECTV and Verizon, are embracing (a.k.a. forced to integrate) new technology by offering web-based capabilities through their boxes. But how do they measure up to online options in terms of pricing, capabilities and service?
Recently, I pondered cutting the cable cord myself. I have a like-hate (not love-hate) relationship with my cable provider. My box freezes frequently and channels are constantly unavailable. PLUS, it seems like the price of my service is always increasing! When I call customer service, it is difficult to get any real help. The standard line is “unplug your cable box for 30 seconds and plug it back in.” Generally, this solution is given before I even explain the problem!
Most TV shows I watch on a regular basis are available free on the web, so the only thing keeping me “plugged in” is my love for live sports. As Google TV and other internet-based options identify ways to broadcast live sports, or live events in general, I think more and more people are going to cut the cord.
On January 12th, the Federal Reserve Board approved a final rule amending Regulation Z (Truth in Lending) to “protect consumers who use credit cards from a number of costly practices.” The majority of the final rule, implementing the CARD Act of 2009, becomes effective February 22, 2010.
One provision of the rule prohibits credit card issuers from increasing rates on new charges and existing balances. However, variable rate cards are excluded from this rule which means the APR on variable rate cards, such as those linked to the Prime rate, will be permitted to increase when the Prime rate increases.
Some of the details regarding this exception for variable rate cards have been known for sometime and, as a result, the majority of direct mail offers for new credit cards now promote variable go-to purchase APRs tied to the Prime rate.
The final rule has surprised a number of issuers by adding a requirement that variable rate APRs must be allowed to decrease as well as increase. This impacts those issuers promoting variable rate plans with a “floor” or minimum rate whereby an APR can fluctuate, based on Prime, but can’t be reduced any lower than a specified rate.
Only a handful of issuers utilize a floor rate pricing strategy. Some of the larger proponents of floor rate pricing in 2009 included U.S. Bank, via its Elan Financial Services unit, HSBC, GE, USAA and Wells Fargo/Wachovia.
Each of these issuers promote a variable go-to purchase APR that varies with the Prime rate. In each case, the minimum rate matches the promoted go-to APR. The most frequently mailed offer in 2009 was for HSBC’s Platinum MasterCard promoting a “Variable Customary APR” that matched the “Minimum Customary APR.”
Issuers with floor rate strategies are likely to have their CARD Act compliance plans in place ahead of the February 22nd deadline. They will now have to adapt those plans to accommodate the new rule. The most likely outcome is that the change will drive further increases to go-to purchase APRs as issuers look cover any risk associated with dropping the minimum rate.