Car Insurance Shopping
The Least Fun you are Ever Likely to Have
© Steve Duncan, 2007
Disclaimer: I’m not in the insurance business, so my conclusions may not be 100% factual. That doesn’t mean you won’t get some insights if you go ahead and read it though!
I love to shop. It doesn’t have to be expensive or elaborate, just some little thing that gives me pleasure or is unusual. When you get to a certain age, you’ve already got just about one of everything. So when you find something unique at a good, no, a great price, there is feeling of winning, you know, getting a deal.
But insurance shopping isn’t like that. For one thing, you are buying protection and peace of mind. Well I don’t know about you, but I don’t walk around thinking how glad I am I’m protected against car accidents or being sued. I drive carefully and keep wet leaves off the sidewalk instead.
So when I added my teenage son to my auto policy, I expected to be surprised, but not shocked. We dutifully put in 50 hours with him behind the wheel and shelled out almost $400.00 for state-approved driver training. It’s not part of your tax-paid high-school education anymore, you know. We are fortunate to have zero tickets, zero accidents and zero claims in the 14 years with our company. They even made my son fill out a “profile” in his own handwriting and enclose a copy of his driver’s ed certificate. For good measure, I included a hand written note about how I hoped they would rate him favorably. HA!
As I said, I love to shop, and I fancy myself a good, maybe even a great shopper. So when I found out what it would cost to insure my teenage son for liability only on a little economy car, I decided to see for myself if I could do better.
My wife and I were pretty much spoiled. No tickets or accidents, and we were insuring three cars for about $100 per month. Adding the boy bumped that to almost $250 per month!
This is the story of my insurance shopping experience. It deals with youthful drivers but could apply to tickets or accidents as well, since either makes you undesirable to the insurance companies.
Revelation # 1: You can spend a lot, or a lot less.
My first discovery was that there are companies out there that are happy to charge you between 1.5 and 2X what you have to pay. I will not attempt to tell you who these companies are, but as you will see in revelation #2, you can find out. Not to spoil the ending of this little story, but among the “bargains” there were few clear winners.
Revelation # 2: Insurance companies don’t publish their rates.
Unlike almost everything else you can buy in this world, auto insurance is quoted one policy at a time and is totally dependant on your situation. How could I know where to even start looking if I didn’t know who was competitive in the marketplace?
I started by going to the Oregon Insurance Commissioner’s web site. In a format defined by Consumer Reports, a variety of scenarios are simulated and rates generated for various companies. These scenarios vary the ages of the drivers, with and without minors, and whether tickets and accidents are in the picture. They also quote rates for the various metropolitan areas around the states. Go to this page and click on "Premium Comparison Survey"
Revelation # 3: Most discounts don’t amount to much
Expect a hefty discount because you have airbags, alarms, ABS, driver training, good grades, etc? Well, you may dream that enough discounts will reduce your premiums to almost zero, but in fact:
- Discounts don’t add up to much compared to your premiums, and
- You won’t really know because they don’t itemize the discounts anyway!
Try asking your agent how much you are saving. They type your particulars into the computer and out pops a premium. It is itemized for the various liability and property damage coverage amounts you choose, but the discounts are presumably spread around like ashes in the wind. You will be lucky if they are even listed on the quote at all, much less itemized.
What really does matter? It varies. One company wants to know where you park. Another wants to know about grades, but offers no credit for that $400 driver’s education class. Know why you will never get a break from your company? Because the rates they charge are pre-determined and on file with the insurance commisioner. Under law, they can only offer you what they offer Joe Blow.
Revelation # 4: Avoid misguided loyalty
When I started asking people about their insurance, I heard things like “We’ve been with our company for 20 years and they have always treated us right.” or “I don’t want to switch because if I have an accident they will treat me with kindness and compassion.”
Maybe, maybe not. Think you will get a break because of your tenure or valued customer status in the case of an accident? Well, you won’t know until that day arrives, and when it does you may have shelled out thousands of extra dollars in the meantime. You may be great friends with your agent, but the “underwriter” at the insurance company is the one who controls your destiny. There may be certain benefits available to people with no claims, good payment records, etc., but you have to weigh that against the difference in premiums you could be saving.
Revelation # 5: Insurance shopping is not easy.
Once I was sure I knew who the most competitive companies were, I used three methods to shop: Independent Agents, Direct Sales companies, and the Internet. Since I was looking for lowest cost, I decided to give all my business, home and auto to one company, which usually provides a “package” discount (see Revelation #3, above).
Get a copy of your current policy’s “declarations” page. Take the time to copy the coverage’s and premiums to a spreadsheet so you don’t have to look up and down the page to make comparisons. Some agents and companies will even ask for your social security number. Yes, insurance prices are sometimes a factor of your credit rating.
My time saving strategy here was to summarize all my coverage information in an e-mail, and send it unsolicited to several independent agents. Here’s what I learned:
Some agents will not respond at all.
Some will give you a partial quote, or not what you requested
Some will get part way through the process and disappear.
A few will actually give you an accurate quote.
Direct Sales Companies
These are 800 number-based telesales outfits. The one I tried was actually very thorough and even fairly competitive. The problem here is that they ask you a whole bunch of questions and each call can take 25-30 minutes. Remember what I said about insurance shopping not being fun?
These web sites propose to take your information once, and generate quotes from multiple companies. This process took about 20 minutes. I had heard that you might get phone calls afterwards, but the one company they said would call never did. You do get follow-up junk mail asking if you are still interested, etc, etc, but it quits soon after.
Summary and Conclusions
If you are a married couple over 30 with a clean driving record, you can take your pick of reasonably priced insurance from a number of reputable companies. In my experience, premiums for the individual autos might vary up and down by $50-$100 per year, but they all seem to be in the ballpark. But be careful – you can also pay way too much, even though you are a low-risk customer. It pays to check every year or two.
If you are in a higher risk category – young, tickets or accidents, maybe a fancy car; you are going to pay substantially more. Unfortunately, there is no one company that seems to be best for <your situation>. You just have to shop around. I would be remiss if I didn’t share some specifics with you, so here goes:
Best Price from an Agent: We selected Farmers Insurance. They were lowest by far for my son, coming in at $900 per year as opposed to the $1200-$1500 other companies wanted. They have a scoring system to evaluate a customers risk profile based on among other things, your credit score. We also had to agree to have the boy participate in a safe driving “class” where he will watch a video and answer some questions. Score!
Best Price from a Direct Sales Company: American Express Insurance, Costco Division. Yes, Costco again has the best deal. These folks came in at $1200/year for the boy, but were extremely competitive on all my other autos and home too. The only problem is you have to buy 12 policies at once and they go bad before you can use them up. HA!
Best Price from Internet Shopping: E-Kemper.com, which I found by trying insweb.com, Insweb.com is supposed to be the easiest comparison shopping site to use. Of the four quotes that it returned, two were astronomical, one was a “agent will call” (he never did), and the other was E-Kemper. Despite the low overall premium, Kemper insisted on putting my son on my wife’s car, probably a policy to rate the riskiest driver on the priciest car. Those kind of tactics make it hard to make good comparisons.
I approached this without a lot of knowledge about how insurance is sold and priced. I’m sure there is still a lot I don’t know, but I went into it with the attitude that I could find a better deal than the one I was being handed, and I did. I’ll bet you can too!