Online quote comparison sites have existing for some time, and they’re experiencing a resurgence with a few, well-funded, new entrants to the market. I understand why, as a business model it’s attractive, simply render a rate for several insurance companies and let the consumer decide. What could be wrong with that?
Maybe I’m all wet, or I don’t fully understand the model, but I’m not sold this is the best way to sell auto insurance … or any insurance for that matter.
Why do I think this way? Because I think there are differences between insurance companies that don’t show up in the rate … and if the only piece of information the consumer has is the price, then bad decisions are bound to happen.
It’s easy to get an online auto insurance quote. Heck it’s easy to get an auto insurance quote if you call your local insurance agent. Auto insurance quotes are simply very easy regardless of how you elect to get one.
The important thing is the coverage that behind the price, and I’m not referring to the limits of liability or deductibles selected … that too only tells part of the story.
The assumption of the aggregator, or the online comparison sites, is that all insurance companies are created equal, and all auto insurance policies are designed to provide the same level of protection. That’s not true, it’s not true today, wasn’t true yesterday, and it likely will not be the case in the future.
Comparison auto insurance quotes are a vital part of the insurance shopping experience, that is true, but how do you determine which policy is best for you after you know the price for each?
It is tempting when you compare auto insurance quotes to base your decision on the lower total price, we’re all subject to this “bottom line” mentality. We want to leave the transition with the lowest amount of money out-of-pocket.
It’s this mentality and the reality that people don’t want to shop for auto insurance that makes the online comparison auto insurance sites attractive.
But when you think beyond the price, you begin to understand the real cost of the insurance you’re about to purchase. The price and the limits on the declarations or quote are just a starting point, you need to understand a few things to truly compare:
This are just a few questions, and this is just auto insurance. What isn't discussed in all this talk about price, is the true cost of your auto insurance coverage.
I know, for some it’s to be legal on the road. :-)
But that’s not true for all of us, we are transferring the financial risk of a loss to the insurance company for a premium. The amount of risk the insurance company is willing to accept is a combination of the limits of liability on your auto insurance declarations and the policy language provided in your contract.
It’s in the policy language where the insurance company will define all the terms, state the insuring agreement, provide the exclusions, and begin the process of reducing (or increasing) the amount of risk they are actually underwriting. This isn't bad, it is just the reality, and this is what make one insurance company a value brand vs. budget brand.
These differences in the policy language often show up in the price you see, and can often explain why one company appears to have a lower price. But when you have a claim and realize that there is no coverage, or coverage is being reduced, and you have to pay out-of-pocket for the loss … that’s, too frequently, when consumer learn the real cost of their auto insurance.
When you get comparison auto insurance quotes from an online comparison company, make sure you get all the details about the coverage you’re about to purchase. This is the same advice if you’re purchasing your policy from a local insurance agent as well.
Now that you know that there are differences between insurance companies, you need to get an apples-to-apples comparison of the limits and the coverage provided in the policy … you’ll likely find that the comparisons are less apples-to-apples and more apples-to-potatoes. If the online site doesn’t provide you a phone number to get these questions answered, then you should reconsider using their site.
If you’re not completely sure what you need, you should be able to consult your existing policy declarations as a benchmark, but you’ll want to review your current financial situation to determine if you have sufficient coverage for your assets, and your willingness to retain risk. Once again, if you are unsure what the right choice is, call the online provider and speak with one of their representatives.
It’s not popular party conversation, but you should reach out to friends and family who you trust and solicit opinions about the insurance carriers they have insured with in the past. This is a good way to narrow down where and how you’ll shop.
Since some of the “intangibles,” like claims and customer service aren’t easy to compare on paper … or on a computer screen, getting testimonial advice can be extremely useful.
And if your friends and family don’t provide you any help, then check out the online comparison auto insurance site or carrier’s reputation online or in social media.
The financial condition of the insurance company is actually important. It is not a frequent happening, but insurance companies do fail. Most of your large, recognizable brands are normally very good bets, but if you don’t recognize the name of the insurance company, understanding their financial rating may sway your opinion.
Many auto insurance companies are not widely branded, and make use of independent insurance agents to market and sell their products, so just because you haven’t heard of them doesn’t mean they are financially weak. So take some time to check them out at A.M. Best if you haven’t heard of them, it’s free and easy, and a smart thing to do.
I don’t stand against comparison auto insurance quotes, but I do disagree with the online sites that prey on the price motive, and the consumer’s misunderstanding of the auto insurance product as a means to convert sales.
If you’re only value proposition is that you can render a price fast, then you don’t have much of a business model.
If you provide the quotes online, but have agents available to service calls, answer questions, and help to bind coverage over the phone, well that is the same as your local independent insurance agency … so again, what is the value?
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