Insurers Find Religion, and Profit
1/7/2006
Wall Street Journal, The

By LAVONNE KUYKENDALL

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.

Since the company launched FaithGuard in March, it has sold 26,000 of the policies, says Jim Wallace, GuideOne's president and chief executive. The plan now accounts for two-thirds of all its new auto and homeowners policy sales.

Mr. Savage has made several presentations at area churches recently to pitch the program. "Pastors I have insured have had me present to Wednesday-night prayer services or Sunday-night services," he says.

Although certain customers, particularly professionals and members of large organizations, have received insurance discounts for years, insurers have been stepping up their slicing and dicing of potential customer lists in search of individuals who pose less risk in order to help maximize profits. Some of these discount programs are heavily marketed, yet insurers often don't advertise the fact that they are giving some people lower rates than others based on factors as obscure as whether a customer drives a station wagon or calls herself a "homemaker."

Insuring many groups, such as the religious, members of the military, teachers, and AARP members, can be profitable even at a discount, because they tend to make outstanding insurance risks.

In October, the Farmers Insurance Group of Cos., a unit of Zurich Financial Services AG, began offering a 5% auto-insurance discount to California residents who drive a hybrid vehicle. Competitor St. Paul Travelers Cos. Inc. quickly followed with its own 10% discount for its hybrid-car owners nationwide, calling such drivers less risky than the general population.

Firefighters, although they have dangerous jobs, are generally considered to be good drivers because they are safety-conscious. "They have enormous stability and often stay with the same employer their entire career," which is another trait insurers prize, says Robert J. Maloney, vice president of national affinity sales with Liberty Mutual Group, a Boston property casualty insurer.

Other risk factors are harder to market. Though some criticize the practice of scoring potential customers by their credit-worthiness, those with high credit scores tend to be better insurance risks, and are especially desirable if they also meet other criteria.

"If you can find a list of people who own station wagons, then run them through credit screening and take only those with [a high credit score], I would expect 25% lower cost, and if I give a 10% discount, I'll still come out ahead," says Daniel Finnegan, founder and chief executive of insurance researcher Quality Planning Corp. He estimates most insurers average around a 3% profit on premiums.

Liberty Mutual has entered into more than 7,800 arrangements to offer discounted auto and homeowners insurance through a variety of employers, professional associations and other groups that their research indicates will be good insurance risks. Professionals, BMW drivers, and employees of companies with low turnover and a highly educated work force are all good risks, says Mr. Maloney. Some 75% of the new policies the company wrote in 2004 were a result of its affinity and employer group business, up from around 62% in 2002.

The company usually offers these groups a discount of between 5% and 10% off regular prices, though some state insurance regulators restrict the size of the discount.

Discounts on auto-insurance rates tend to lead to lower homeowners-policy prices, too. "If a group has good driving habits and is very conscientious and takes good care of their vehicles, chances are the same applies to diligence in their home," Mr. Maloney says.

Insurers also look for negative factors, such as consumers who frequently change insurers. Drivers with red cars may pay also pay a bit more. "People who buy hot-rod magazines might not be a group you'd want to market to," Mr. Finnegan says.

Drivers shopping for a new policy should be sure to check and see if their alumni or professional association or employer participates in a group plan. That can be one way to get credit for living a low-risk lifestyle. But some discounts, like those that come from having a stellar credit score, are probably already included in the quoted price, as insurers size up a customer individually before offering a policy, no matter their group.

Insurers sometimes avoid overt marketing because some risk factors are too easy to fake. Mr. Finnegan says that only around 65 professions license their members, and insurers generally must take applicants' word for it if they apply for a policy based on religious attendance, for example.

Write to Lavonne Kuykendall at lavonne.kuykendall@dowjones.com