Do you really understand how your car insurance works

One element of car insurance which many consumers cannot get their head around is the fact that you buy a car, you insure the car for the value at the time (with the premiums calculated on the situation then) but if you are involved in some kind of crash of accident and your car is written off you do not always receive the full value on the insurance documentation. So how does this work?

While we all know that it goes on, there has been very little comment about this element of the car insurance industry. The insurers will no doubt suggest that they cannot payout more than the value of your car prior to it being written off, but if that is the case why do they ask you for a rough value? Why do they even take the value into consideration?

Then you need to consider the fact that a portion of your premiums are actually used to refund the insurance industry for the cost of uninsured drivers. So are we really getting the best deal on car insurance in the UK? What are the real variables that the insurance companies use to arrive at the premium levels?

Insurance Overseer Supports a National Catastrophe Fund

Insurance commissioner doesn't sound like a high-profile job, but it can be in hurricane-prone Florida. Kevin McCarty holds that title as head of the state's Office of Insurance Regulation. And he has frequently been at odds with property insurers in the wake of last year's rate reforms, in which the state demanded carriers lower their rates in exchange for providing cheaper reinsurance through the Florida Hurricane Catastrophe Fund.

Since then the OIR has routinely denied requests for rate increases, and subsequent disputes have led to recent actions such as a $5 million fine against Allstate Floridian for failing to provide - and allegedly falsifying - documents to support an increase proposal.

Also, on Sept. 9, the OIR announced it will require State Farm Florida to pay a $1 million penalty and refund $120 million to policyholders for its lapses in implementing a discount program for residents who fortified their homes against hurricane damage.

McCarty, 49, is a University of Florida graduate and the state's first appointed insurance commissioner. We interviewed him Sept. 11 while he was in the area visiting state representatives.

Q. There seems to be an ongoing debate between the OIR and some insurers over what constitutes a sufficient rate to cover future damages, versus an excessive profit. How do you draw that line?

A. What we have seen in some cases is companies having profit margins of 25 percent or 30 percent. Well, nobody has profit margins of 25 or 30 percent in any industry. They are using (damage prediction) models that have not been approved by the Florida Commission on Hurricane Loss Prediction Methodology. They're going from a traditional 100-year model to a 5-year model that generates huge increases in losses. These haven't been approved, these haven't been vetted, they're not even scientifically sound. I don't want to paint everyone with the same brush, but there has been a group of companies that look for ways to gin up numbers so they can pocket the profits. We want you to have an opportunity to put your product in the commerce stream, but in doing so we want to make sure that it strikes a balance between business and consumer protection.

Q. Some industry officials and critics from within the Legislature, among them Rep. Dennis Ross, R-Lakeland, have claimed that the state has artificially lowered rates and tampered with the market, and in the process discouraged competition because of the increased role of Citizens Property Florida's state-run insurer of last resort, and currently the largest property insurer in Florida.

There's no question. You can talk to reinsurers, reinsurance brokers or the companies themselves. We went from 7 percent of your premium dollar going to reinsurance to 48 percent going to reinsurance. That's staggering. That's in the course of 2 1/2 years. If we replace that piece of reinsurance and that much less is being purchased in the private marketplace, it makes sense that companies should in turn reduce the cost of insurance to policyholders. Citizens was made competitive but the purpose was so that we could prevent people from being potentially charged excessive rates.