Shop Around for Your Insurance
This year, when it comes time to renew your auto and homeowners insurance policies, it’s more important than ever to shop around.
Thirty-eight percent of insurance buyers have never done any research on insurance before purchasing a policy, and another 40% aren’t confident or are only somewhat confident that they have the right coverage for their needs, suggesting they haven’t done much, if any, research either, according to Robert Rusbuldt, president and chief executive officer of the Independent Insurance Agents and Brokers of America.
This can lead to costly mistakes. Among the most common: not taking advantage of all the policy discounts available to you. “Consumers are leaving money on the table, there’s no doubt about that,” Mr. Rusbuldt says.
Insurance companies are increasingly mining their databases, segmenting customers into more categories, and fine-tuning rates accordingly. In the process, many are rolling out specific, regional and at times “quirky” discounts that policyholders may not be aware of, Mr. Rusbuldt says. Among them: discounts for living in a gated community, for updating your roof and/or wiring, and for carpooling.
Driving many of the newest discounts is technology. Some auto insurers will give you a discount if you agree to put a device on your car that monitors your driving habits, such as how many miles a day you drive, how often you drive after midnight, and how often you brake hard.
Homeowners-insurance companies have long offered discounts to policyholders with home security systems, “but there are new variations that can get you even more discounts,” says Mr. Rusbuldt.
I learned this firsthand after we upgraded our home security system to include gasleak detection and coldtemperature monitoring. A call to our insurer revealed that the new security features qualified us for an annual $30 discount. That’s on top of the $50 a year we save for having a fire and burglar alarm. Add in a water-leak detection system or a hard-wired backup generator and the annual discounts would go up another $30 and $50, respectively.
At the same time, insurers are beginning to use more subjective measures to price their policies. Already, companies sometimes temper rate increases on existing policyholders to prevent them from bolting to competitors. But what if a particular policyholder or group of policyholders is considered unlikely to shop around? Could their premiums get nudged to the high end of the pricing spectrum?
Such a move would at least test the boundaries of the law in most states, where insurance is a regulated business and prices aren’t supposed to be discriminatory, says Richard Piazza, a regulator from Louisiana and chairman of an insurance-industry task force on actuarial matters.
Yet that’s what J. Robert Hunter, director of insurance for the Consumer Federation of America, thinks happened to him. Earlier this month, Mr. Hunter learned he had to pay $600 to renew the autoinsurance policy on his two cars—up $50 from last year. Since he hadn’t shopped the policy in about five years, and his premium had crept up some 25% over that time, he decided to look around.
Within days, Mr. Hunter secured a $500 quote from a competitor and circled back to his insurance company, which promptly lowered its quote to $390. “It’s really important to show your insurance company that you’re actually awake,” says Mr. Hunter, himself an actuary and former insurance commissioner of Texas. “You have to shop, now more than ever.”
To start, see if your state insurance department publishes an insurance buyer’s guide. Many list the insurance companies doing business in the state, along with sample rates. Pick a half-dozen companies. Then narrow the list to the three or four companies with the lowest “complaint ratios,” or the fewest consumer complaints for a given volume of business. Call them and compare quotes.
You also can have an insurance agent shop for you. Just be aware that even “independent” agents might deal only with a handful of companies, and those who earn commissions based on a percentage of your premium might be tempted to sell you the highestpriced policy. So call at least two agents and inform them you’re playing the field. “If they know they are competing for your business,” Mr. Hunter says, “they’ll shop for you.”