Car Insurance – It’s a Seller’s Market

When was the last time you shopped for new auto insurance?

This is a question I often ask my clients, and the answer is typically “I don’t remember”.  That makes perfect sense to me.  Car insurance is rarely something that we have a reason to think about.  The first time I asked this question, though, my retired client decided it was time to look around.  Using an independent broker, we strengthened his homeowners and auto coverage.  What’s more, the annual bill decreased by more than $600!

Saving $600 per year on your property and casualty insurance is an ambitious goal.  Knowing you have the best value for your dollar is not.  More often than not, when my clients decide to shop around, they save a few hundred bucks.  They are not alone.  In a recent issue of Kiplinger’s Personal Finance, a former Texas insurance commissioner considers failure to shop to be the biggest mistake consumers make with regard to their car insurance.  He cites a case where he gave 25 consumers a buyer’s guide and a phone, and asked them to report back in an hour.  On average, those consumers were able to save $125 within an hour.

How do I know if the insurance company is any good?

Not all insurance companies are created equal, and I’m certainly not suggesting that you simply purchase the cheapest insurance available.  Because you may never make a claim or otherwise need the service that is being sold in this case, you may not have a lot of basis on which to evaluate the quality of the company.  There are resources that can help, though.

• Consumer Reports provides ratings for car insurance.
• At MSN Money, you can find a more superficial overview of how satisfied customers are with their insurer.  You’ll also be able to review the financial strength of the companies, as judged by A.M Best.
• Another important step is to vet your insurer with your state’s Insurance Commissioner.  You can find contact information for your state at the National Association of Insurance Commissioners. You will then be able to review the complaints your prospective insurance carrier has received in your state.

Is it ever a bad idea to shop for new insurance?

When I discuss this with my clients, I sometimes hear that they’ve had a positive claims experience and they’re reluctant to make a change.  In that case, they are receiving good value and a change may not improve their situation.  In one case, a client had multiple claims with the same insurer.  They are long-time customers and their premiums have not been significantly affected.  In other words, they’re very happy with their insurance situation.  That’s a good reason to stick with the status quo.

More commonly, people are neutral.  They don’t have a lot of interaction with their insurance provider, and many view insurance coverage as a commodity.  If that’s your situation, it pays to shop.  If you have a long, claim-free history with the same insurance provider, you may already have the best deal available.  Perhaps you’re being rewarded for your loyalty and clean driving record. You likely won’t know that until you shop, though.  That’s the point.  Shopping around doesn’t mean you have to make a change, but it will help ensure you’re getting the most value for your money.