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Saturday, January 07, 2006

Insurers Find Religion (from the WSJ)

Here's an interesting tidbit (from the Wall Street Journal Online edition):
If you attend religious services regularly -- or work as a firefighter, or drive a station wagon -- your insurer might want to cut you a break.

In an effort to cherry-pick more-profitable customers, insurers are rolling out new programs targeted to specific groups they believe pose less risk. One of the most recent entrants: GuideOne Mutual Insurance Co. of Des Moines, Iowa, last year began offering FaithGuard, an auto and homeowners policy that waives insurance deductibles for accidents that occur on the way to a religious service, and provides extra coverage for stolen religious materials.

The most popular feature of the policy, though, may be the company's promise to replace tithing donations if a covered driver is disabled in an auto accident. The program has struck a chord with Independence, Mo., insurance agent Derek Savage's customers. Around 75% of his 300 or so auto and homeowners policyholders have signed up for the no-extra-fee coverage.

Click here for the whole thing (subscription required).

I think it's an interesting story for a couple of reasons. First, because I think it's a good example of how increased computing power (and better models) have made it possible for companies to identify profitable niches. Today's average notebook computer is probably more powerful than the average mainframe ten years ago. As a result, financial services companies have become much better at data mining to identify underserved and potentially profitable markets.

However, there's also a part of me that cringes at the idea of people probably being sold insurance on the basis of benefits that really aren't that valuable (like waiving deductibles for accidents on the way to/from church or replacing tithing payments). It reminds me of how life insurance agents used to tout the accidental death benefit. They'd say, "if you die in an accident, your coverage doubles. And that's for only pennies a month". So, instead of buying the coverage they need, prospects would end up buying a much lower standard amount amd depending on the ADD coverage. But, there was a reason it was cheap - chance of an accidental death was pretty low.

Maybe the boys at RiskProf have some thoughts on the matter - insurance is much more their bailiwick than mine.

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