Insurance Company Transparency

Shopping For Insurance Online - Behind The Smoke and Mirrors!

By Werner E. Kruck CPCU, ASLI

You need insurance, and you have Internet access, so why bother with an agent. This is a new paradigm, and agents are history - irrelevant icons of a bygone era! At least, that was what was supposed to happen. Instead, independent agents are writing more business than ever, and the purchase of insurance online continues to grow slowly.

Why? Let's examine the reasons we might expect shopping for insurance on the Web to be an advantage.

We can check out the rates of many companies, to make sure we get a low rate. An agent may not check all of the companies and cause us to pay more!

In some cases this is true. Many agents represent only one company. Companies like Allstate, State Farm, Nationwide, American Family, and Farmers are called "captive" agents because they cannot represent any other companies. Your "independent agent" is the one who represents many companies and can search for the best deal.

But when you go to a web site to get a quote, you are probably doing one of three things. Either you are going to an independent agent that is online, you are going direct to a company that will only quote their own products, or you are going to a site that serves as a lead generator to independent agents.

If you go to insurance company sites, and want to get comparison quotes, you will have to enter all of your personal information into each site separately to generate a quote. Online agents can provide multiple quotes with only one set of information. With feeder sites, you may have to wait for a quote, or even a follow up from an agent. If you go to many sites and enter your information, you may have more, not fewer agents contacting you!

When I have my low quote, I can complete the rest of the transaction and get my insurance faster and easier than if I have an agent!

Well, not exactly! A quote is only an estimate, not a binding rate. Many insurance prices rely on data that the insurance company will have to obtain from other sources on you, such as insurance credit scores, prior loss history, and motor vehicle reports, and so a final price cannot be determined until they assess that information. If the information you give them is different, the final price can be significantly different, and they could even decline to write your coverage!

Unless you are a clean risk with no problems, an independent agent will be able to know up front what companies will be a better match for you, information that would take way too long for you to find out on the internet, and it changes constantly as companies make new decisions. Also, agents have had technology to quickly compare rates for years, and they know how to use it.

Fine then! Even if it is not as easy as I thought, at least if I bypass an agent I can get a lower price, because the company is not paying commission to the agent!

Wrong again! If you are using an online agent, such as Insweb or Quotesmith, they are using the same rates and getting the same commissions from the same insurance companies available to you down the street at your local independent agent. If you are going direct to the company, and the company has agents anyway, it will almost always be offering you the very same price, since they cannot afford to undercut their agents. Companies without agents, such as Geico, must still do all of the work an agent does, and at the end of the day, have not proven that they can operate more efficiently and pass savings to their customers. (Remember, Geico says that you "may save 15%". You may also pay more!)

OK, smart guy, so what do you suggest!

Go ahead and get information, quotes, and even purchase insurance online, but make sure that you follow a few simple precautions.

Do not enter personal information into a site unless there is a complete explanation up front as to what the process is that will take place, and a clear description of the what type of business the site is. Look for such information in places such as "About Us".

Make sure that there is a privacy statement, and that you read it. It should clearly tell you under what conditions they will share your information and with who. If it is too complicated, then they do not want your business!

Order your personal information in advance from a service like the ones we list on our general links page, so that you will know what information the companies will look at, and you can get it corrected beforehand if there are any errors.

Don't put false information into the forms just because the truth is bad. They will probably catch it and so you are wasting your time. If they miss it and find out later, you could have difficulty on a claim or be prosecuted under criminal fraud statutes. If you have a real insurable problem, such as a poor driving record or prior losses, you will probably be better off working with an experienced agent.

Start early! Don't wait until you realize that the bill you got from the company last month is now overdue! Give yourself at least two weeks, and better yet, 30 days before your current policy expires.

When comparing quotes, make sure that you look carefully at which coverages are included in the quote, and that they are at the same amount or limit. Also, check carefully for differences in deductible amounts.

If the company is a direct insurer with no agents (such as Amica, Geico or USAA), make sure that you check the company out, not only for stability, but for service reputation, since you will not have an agent to go to bat for you. Check out J.D. Powers Insurance Company Ratings for Homeownersand Auto.

Some final thoughts -

We are not against shopping for insurance online, but quite frankly, we still see it as a significant hassle without much in the way of compensation for the trouble. Once we have our insurance, we do prefer a company that has web self-service so that we can check on payments and do small changes online at our convenience. That beats telephone tag with the agent!

Check out Consumer Reports and look under "auto insurance online" for a comparison of some of the more active sites.

Finally, there is an exception to the statements that company sites will only give you one quote, and that you cannot get a lower rate online than from an agent. Progressive Insurance (www.progressive.com) will give you multiple auto price comparisons, and allegedly, they will sell direct at lower prices in some cases than the agent can give you. Esurance.com only sells auto insrurance over the internet and will give you comparison quotees for other companies.