When to consider switching auto insurance
The auto insurance market, like the rest of the economy, is dealing with the aftermath of a global pandemic and soaring inflation.
“Insurers went from record profits in 2020 to record unprofitability,” says Adam Pichon, general manager of auto insurance at LexisNexis, a data analytics firm. “Many insurers were caught flat-footed and are raising rates to get profitable again.”
But drivers are not taking these rate increases sitting down. Pichon says recent steep rate increases have motivated drivers to shop for lower-price policies again.
“It should be a good market for consumers for a while. Rates are going up broadly, and eventually all carriers will get to the rate that they need,” he says. “But if you shop around now, there are still deals.”
If you’d like to test the market, make sure to do so before your existing policy’s renewal date. Insurers can typically put together auto insurance price quotes within minutes. You just need to give them a few pieces of information about yourself, the people living with you and your vehicle.
You also need to decide on the type of coverage you want. Most states require a minimum amount of liability coverage before you can drive. You can collect these quotes online by working with an independent agent or by contacting an insurance company directly.
Reshopping can lead to considerable savings, says Laura Longero, executive editor for CarInsurance.com, an auto insurance information and quote website. “The typical customer who switches saves $658 a year on their auto insurance,” she says. For this reason, she recommends getting quotes from other insurers whenever your policy comes up for renewal — every six months to a year.
Because collecting insurance rates is an errand that most people don’t love, Josh Bagby, president of Providence Insurance Advisors in Athens, Georgia, thinks drivers can wait a little longer between shopping expeditions. “Three to five years is the sweet spot. If you’ve been with a carrier for more than five years, rates can start to creep up,” he says. Bagby adds that loyalty discounts are not nearly as generous as they were years ago.
Insurers might also base their rates on how likely they think you are to shop around, a practice known as price optimization.
As you go through life, your risk profile for insurers changes, and that can affect which company is the right fit for you. For this reason, Bagby recommends shopping every time you go through a major life event. “When you get married, buy a house, have a kid, your kid starts driving, this is the right time to recalibrate. If you move, your zip code matters, too,” he says. Buying a new car can be a good time to compare rates.
You should also consider your past driving record. Tickets and accidents stay on your record and affect your rates for three to five years, depending on your state. If one is about to fall off your record, that could be another good time to shop.