Megg Mueller - Last updated: July 9, 2010
Loyalty is a prized characteristic, but is there a good time to be disloyal? The answer is definitely. when it can save you money on insurance.
Shopping around for the best car insurance rates and home insurance prices seems like a no-brainer, but a recent study reveals that most people aren't taking advantage of possible savings.
Only one in four auto insurance policyholders shopped around for better car insurance rates in the last year, according to the Auto Insurance Consumer Dynamics Survey released by Acxiom, a provider of marketing services with clients in the insurance industry. Of those who did “shop around,” 36.2 percent got a car insurance quote from just one company. 24.6 percent got quotes from only two companies and 22.7 percent got quotes from three insurers.
Not surprisingly, young people facing financial challenges are the most likely to comparison shop, notes Tim Prunk, managing director of Acxiom.
"There were surprises, however," Prunk says, adding that consumers perceive very little difference between the value provided by local agents from State Farm or Allstate versus online quoters such as Geico or Progressive. While the days of loyalty to a "trusted local agent" might be waning, the real motive comes down to price: The “low cost insurance” messages of the online insurance quoters have gotten through to consumers.
"When it comes to switching carriers, it’s all about the cost," Prunk says.
Leaving free money on the table
While Acxiom’s survey shows that many people are willing to change insurance companies for annual savings of less than $300, the question remains: Why do so few people actually search for better home insurance or car insurance rates? Alex Hageli, director of personal lines for Property Casualty Insurers Association of America, has an idea, and it's not a very flattering one.
"People are lazy. It's ridiculous. I don't know why [insurance] should be treated differently -- it's comparable to a bank or credit card," Hageli says. "I have no problem shopping around for a better rate."
His observation about insurance buyers is echoed by Linda Sherry, a spokesperson for Consumer Action, a national nonprofit education and advocacy organization for financial literacy: "They can be remarkably apathetic."
Saving money: Can’t be bothered?
With the current economic realities, most of us jump at
the chance to keep a little more money in our wallets. But Hageli believes insurance is a different animal, and most people just don't want to bother.
"It's inertia," says Hageli. He says that policyholders assume "'I've been here five, six, seven years; I must be getting some kind of discount,' but it doesn't work that way. I think people view the length of an insurance contract more positively than the company does. Length of time doesn't necessary work in your favor."
“You should cheat on your insurance agent,” advises Hageli.
The Acxiom survey confirms that people who have been with the same insurance company for five years or more are less likely to switch insurance companies, but Hageli believes that's even more reason to shop around. Many people, he believes, don't realize that your insurance rates are based in part on your credit history, and that your insurance risk score has likely changed in the last five years.
"If you don't shop around after five years, that initial underwriting could still be impacting you," Hageli says.
Even if you don't want to switch carriers, Hageli says many states have a law that requires insurance companies to re-score you if you ask for it. If your state doesn't require that, he advises that you make it known to your agent that you might start shopping for a better price, and chances are they'll reevaluate your rate.
"A lot of consumers are not particularly educated about insurance," Sherry adds. "Plus there are a number of things you need to get a quote, and who understands what ‘comprehensive’ and ‘collision’ are? It's really hard to remember what all that terminology is," so consumers are rarely inspired to check up on homeowners and car insurance rates every six months.
Make home and car insurance part of an annual financial tune-up
Consumer Action advises that once year you revisit all your financial relationships: your bank, credit cards, insurance and investments.
Hageli believes it's critical that people get copies of their credit reports each year, which are available for free under federal law through annualcreditreport.com. He also suggests that you get a copy of your CLUE report, which insurance companies use to assess your loss history and set your rates. It should be monitored for accuracy, just like your credit reports.