Bedford man creates insurance rating system
BEDFORD — Dan Karr describes the accident that left him in intensive care with broken ribs, a collapsed lung and a fractured hip as his first nightmare.
Karr, a senior vice president of marketing and sales for a Silicon Valley company at the time of the accident, was struck by a car while commuting to work on his bicycle seven years ago.
“I had good insurance, I thought,” Karr said. “For me it was all about ‘I just have to get well.’”
His self-described second nightmare began after receiving more than $100,000 in medical bills that his auto and health insurance companies refused to pay.
Karr eventually settled his claim and wrote a book titled “Injured Money” to share his experience in the hope of helping others in the same situation. Despite positive feedback, Karr felt that the book only helped others when it was too late. People needed more information about insurance companies before they purchased a policy, he said.
He set out to create a rating system identifying which auto insurance companies are poor at paying claims and compensating clients for losses as well as those with good track records. The reports are based on the financial reporting of the insurance companies themselves.
Karr, who has degrees in mathematics and physics, began by trying to find the most precise method of measurement. Drawing on career experience that began with an engineer position and included CEO or vice president positions for high-tech companies, Karr realized that he needed a reliable method that was not subjective.
He took a quantitative approach unlike any used in consumer reporting, Karr said.
“With my years in industry there’s no way to measure quality without being quantitative,” Karr said.
In addition to being more reliable and concise, Karr said his system is not subjective. Much of the consumer reporting includes surveys, which don’t work in this market because the only reliable way to get the surveys to the proper people would be through the insurance companies, Karr said. Many consumer surveys accept advertising dollars from the companies involved, he said.
The Injured Money system looks at how much any given insurance company has paid in claims and loss compensation versus how much money the company collected from consumers. The software is currently used to rank only auto insurance but can be modified for other types of coverage, Karr said.
The data is presented graphically based on claims payment over the past three years. The goal is to provide transparency that should already exist, Karr said.“I really felt I’m not somebody who can make a judgment of what they should or should not do. My goal was to present information so consumers can be in a position to decide whether their insurance company provides claim payment service levels they expect and want,” Karr said.
For example, using data from the National Association of Insurance Commissioners, Karr looked at insurance filings for the top 25 companies in all 50 states in 2012. The software he developed analyzed how much of the money insurance companies collected from their customers was paid out in the form of claims payment or loss compensation. That analysis shows State Farm paid out about 66.85 cents for every dollar collected while Liberty Mutual paid out about 59.75 cents for every dollar collected.
The reports generated when Injured Money goes nationwide will use localized data and measure a company’s performance over multiple years. A second graphic provided will show how many formal complaints were filed against an insurance company with state insurance commissioners. Those two pieces of information provide consumers with the tools needed to make smart decisions when purchasing insurance, Karr said.
To move up higher in the rankings a company simply has to do better than the competition, Karr said.
He also discovered that claims and loss compensation varies significantly based on where the insured lives and the insurance company involved.
The information is provided in basic reports rating service quality or more detailed reports on claims payment and loss compensation.In an ideal world, Karr said the insurance companies would use the information to improve their services and their ratings. For now, it’s a powerful tool for consumers in the insurance marketplace.“It’s a resource that should have been available a long time ago,” Karr said.
Sally MacFadden, property/casualty actuary for the New Hampshire Insurance Department, said she applauds any efforts to help consumers choose the right insurance policy. A.M. Best company is the current industry standard for insurance statistics, McFadden said, but their focus is not on the consumer.
“They’re more about the financial stability of a company and how they pay claims than about customer service,” McFadden said.
It’s difficult to say what the best way to rate an insurance company is from a consumer viewpoint, she said, adding that it’s important to look at how responsive the company is when you make a claim and whether it pays valid claims in a timely manner. Premium /loss ratios are a more volatile measure because they can be affected by a year in which the company paid claims on a lot of severe accidents or didn’t charge enough to cover the risk of policies it wrote, she said.
Drawing a conclusion on any company is tough with the amount of data available, she said.
“There’s a lot of ways to rate an insurance company for financial stability, but there’s not a lot of statistics out there for customer service,” McFadden said.
When studying complaint data the consumer needs to keep in mind the size of the company and the number of policies it writes. Issues brought to the Insurance Department regarding premium or loss compensation may be resolved as a “consumer assist” before it reaching the level of a formal complaint, she said.
“I think a lot of people in this state don’t even realize they can call to complain to us,” McFadden said.
Karr is making his service available nationwide with the help of a recently-launched Kickstarter campaign. The $20,000 raised through the campaign will be used to collect the financial data necessary to complete an auto insurance rating service for the entire United States. Any amount over $20,000 will be used to create rating services for other types of insurance including health, home or life insurance. The Kickstarter website allows individuals to fund private projects.
Karr said he hopes consumer interest in the services offered by Injured Money will fuel the company’s expansion, enabling him to reach more consumers with information about how to buy insurance that effectively protects them.
“My technology experience was with several very high-growth companies,” Karr said. “I enjoy rapidly growing companies and hope to recreate this with Injured Money.”
In the long run making the information easily available nationwide will help create transparency and competitiveness benefiting the industry, customer and shareholder, Karr said.
“I want to help people,” Karr said. “I want people to know how to protect themselves and their loved ones.”
For more information visit www.injuredmoney.com or https://www.kickstarter.com/projects/264701438/injured-money-helping-every-american?ref=discovery.