Auto insurance is one of those things you buy and then forget about. We have coverage, so we figure there’s no need to worry about it again. That could be a costly mistake.
“Shopping is very important because insurance company pricing is wildly different,” said Robert Hunter, director of insurance at the Consumer Federation of America (CFA). “We just finished some research on auto insurance and found that it’s very easy to have a quote of $700 from one company and up to $3,000 from another for the exact same risk.”
According to new survey from the price comparison website InsuranceQuotes.com, a lot of us are missing the chance to save money. Only 21 percent of the car owners said they shopped for auto insurance within the past 12 months to see if they could get a better deal. Of those who did check, 43 percent ended up switching companies.
“This suggests that many people who shopped around liked what they found,” said John Egan, managing editor of InsuranceQuotes.com. “If you’re not doing it, you may be leaving money on the table.”
A more detailed analysis of the insurance marketplace done by Deloitte Research last year found that nearly 24 percent of the respondents said they never shop around when their auto insurance policy is up for renewal, another 34 percent rarely do.
Why? Most said they are satisfied with both the price and the service they get from their insurance company.
Of course, there’s no way to know if you’re getting a good price if you don’t see what the competition can offer.
“I think people spend more time shopping for Christmas presents and trying to decide where to go out to eat then they do shopping for auto insurance,” Egan told me.
The editors at Consumer Reports point out that some insurance companies reward their loyal customers, especially those who don’t make many claims, with better rates.
But that may be changing.
The CFA’s Robert Hunter, a former insurance commissioner in Texas, told me some companies are moving to what’s called price optimization. Simply put, they figure out which customers are unlikely to switch carriers and then raise the rates on them.
“So not only do you miss good deals that might be out there by not shopping, but your own company may be jacking up your rate a little bit because they don’t think you’re going to leave them,” he noted.
Hunter recommends price shopping every couple of years, right away if you’re notified of a major price hike.
Where do you start?
Visit your state insurance department’s website and look for a comparison chart that lists the rates in your area for various hypothetical customers. It’s a good way to see how your insurance company stacks up to the competition and where you might want to go to get a quote. (Find a link to your state’s insurance department at: National Association of Insurance Commissioners.)
I went on the California Insurance Department’s website and looked at the prices for a married couple living in Long Beach who drives 9,000 to 16,000 miles a year. Both the husband and wife have one traffic ticket but no accidents.
Get this: The annual premium for this family ranged from $2,441 to $12,497. That’s a staggering difference!
You can get quotes from an independent agent who represents various companies or go online and do it yourself at sites such as InsuranceQuotes, InsWeb, NetQuote, InsuranceHotline or Answer Financial. Don’t expect an instant quote from these sites. In most cases, you’ll be contacted by agents looking for your business.
Remember: Saving money is good, but you also want a company with first-rate customer service. Consumer Reports says the insurance companies with the highest satisfaction scores (based on the experience of 28,000 subscribers who filed a claim between 2006 and 2009) are: NJM (New Jersey & Pennsylvania residents), USAA (military and veterans), Amica and Auto-Owners.
By the way, the same situation exists with home owners insurance. Few people price check to see if they can get a better deal after they buy it. Again, the only way to find out if you’re paying too much is to take the time to shop around every few years.
Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.