Fewer consumers shopped for auto insurance in 2011 than at any point in the previous five years. Experts say that means you and many other drivers might be passing up a chance for savings.
J.D. Power and Associates' 2012 U.S. Insurance Shopping Study found that only one-fourth of consumers surveyed had shopped for car insurance in 2011. That’s partly because so-called serial shoppers -- who are spurred by ads that promise big savings -- found the best deals they could and then got tired of shopping, according to Jeremy Bowler, senior director of the insurance practice at market research company J.D. Power and Associates. In fact, the average savings per switch decreased from $412 in 2010 to $359 in 2011.
“Shopping for auto insurance isn’t glamorous, it’s not something people look forward to, so if you’re not going to make the savings, you’re not going to shop just for the heck of it,” Bowler says.
But many consumers, experts say, could greatly benefit from looking for a better deal.
Should you go shopping?
So,how do you know whether you should shop for auto insurance? Experts say consumers who haven’t shopped around in the past few years stand to gain the biggest savings.
“If you haven’t shopped in five or 10 years – and, sadly, many people have not – you would be considered a highly tenured customer by an insurer,” says Bowler, who notes that the retention rate for these longtime customers is about 90 percent. “All those people automatically renew – they never even think about it.”
But these are the consumers who realistically could expect to save a few hundred dollars – possibly $400 or more – by switching, according to Bowler. “It’s a buyer’s market, and you have not just dozens but literally 50 to 100 or more choices in any given state,” he says.
Also, innovations in auto insurance offerings over the past 10 years mean that anyone who hasn’t shopped for a long time might be missing out on a newer product that could be a good fit.
“The last decade has seen quite an evolution in the sophistication of the (auto insurance) product,” Bowler says.
Bowler cites Nationwide’s Vanishing Deductible program, which reduces your deductible over time; Progressive’s Pay As You Drive program; which involves installing a device on your car and offers discounts for less and safer driving; and Liberty Mutual’s New Car Replacement program, which pays enough for a brand-new vehicle when a car is totaled if it's less than a year old.
Bowler says: “If you haven’t assessed your choices in a decade, you’re giving up a big opportunity.”
In addition to customers who suffer from apathy, there’s another group that stands to gain: those who didn’t really shop the last time they bought a policy.
“Let’s say your parents were with Carrier X, so when it came time for you to get car insurance, you called up their agent and you got a quote and you bought it. You didn’t really shop,” Bowler says. “I would say in order to do a thorough job, you probably want to talk to five, six, maybe even seven insurance companies.”
Auto insurance shopping tips
So, if you do decide to shop for car insurance, what’s the best way to go about it? Here are five tips from the experts.
1. Set aside an hour.
Consumers tend to dread – and put off – shopping for auto insurance, but you can make it less intimidating by blocking off just an hour, says Robert Hunter, director of insurance at the nonprofit Consumer Federation of America. When Hunter was insurance commissioner for the state of Texas, he rounded up 25 consumers, told them to bring their auto insurance policy and gave them the state insurance buyer’s guide, a telephone and an hour to shop. “In an hour, the average person saved $125 per car for auto insurance,” Hunter says.
2. Do your homework.
Start by visiting the website of your state insurance commissioner to compare various companies’ rates for hypothetical insurance shoppers, Hunter recommends.
“I pick the situation most like mine – most like my car, most like my age, most like my driving record and so on,” Hunter says.
Choose the five to seven insurance companies with the lowest rates, then go to the website of the National Association of Insurance Commissioners and look at consumer complaint ratios for those companies, Hunter says.
“I drop out maybe two or three of those companies that have double, triple or quadruple the complaint ratios of the better companies, so I’m down to three or four companies,” Hunter says.
Then, you can obtain quotes from those insurers.
3. Don’t limit yourself to the Internet.
The J.D. Power shopping survey found that 32 percent of consumers surveyed said they got price quotes online only, and 34 percent of recent shoppers said they prefer to buy a policy online. But many insurers simply use their website as a sort of brochure that merely refers customers to local agents, Bowler says.
“(You might say) ‘I want to buy insurance this afternoon, and I’d rather do it during my lunch hour while I’m sitting at my desk,’” Bowler says. “But I do think there’s a possibility that by limiting your choices to the handful of companies that are really selling online, you could be excluding a carrier that actually represents the best option for you.”
4. Shop before going to an agent.
“A lot of buyers just go to an insurance agent and say, ‘Take me – I’m yours. Here’s what I think I need. Help.’ That’s not the way to shop,” Hunter says.
An independent agent might sell policies from only a handful of companies, while a "captive" agent – one who works with only one insurance company – will have even fewer policy choices, Hunter says. And some companies, such as GEICO and USAA, won’t be represented because they don’t sell through agents.
If you do consult an agent, Hunter recommends visiting at least two independent agents, letting them know you’re shopping around and you're planning to visit one other agent before buying. Once you've visited both agents, ask for their best quotes.
“Many (companies) have agents getting commissions anywhere from 6 to 15 percent,” Hunter says. “That’s why sometimes it’s better to use a no-agent company like GEICO or USAA, because they have a zero or a very small commission factor in their rates.”
But Jeff McCarthy, branch manager for Harrington Insurance Agency in Woburn, Mass., says using an agent can save consumers money and hassle in the long run, especially if they don’t want to take the time to learn about insurance.
“I’ve had people come to me after they had an accident and didn’t have the coverage they had thought they had because they didn’t know what they were doing,” McCarthy says.
5. Look for special discounts.
Some consumers will qualify for discounts based on their circumstances – such as being in the military, not driving much or even having a baby, says Carole Walker, executive director of the Rocky Mountain Insurance Information Association, a nonprofit group that provides education and information about insurance.
Bowler says his wife got a good deal on car insurance because she’s a teacher.
“It’s a good idea to really shop around and take advantage of any discounts that may be available to you,”Walker says.