It seems like, especially in the daytime, you can’t get through a commerical break without seeing at least one auto insurance ad. Which raises a few questions.
Most of the companies (GEICO, 21st Century, Esurance, The General to name a couple claim you can save money by switching to them. So if one can save money by switching to GEICO, then save money swictching to 21st Century, then save money by switching to Esurance, then can save money by switching back to GEICO does one eventually get paid to have insurance?
Allstate’s ads by constrast seem to say “we’re horribly expensive but you could risk everything you have should you dare try our competition.” The Dean Winters ads imply that if you have an accident, the competion won’t pay your claim. Which I thought was what every insurance company did. So doesn’t this cross the line from normal puffing to blatant lying? Or “If having ‘Alstate’ on your insurance card is more important then getting accident forgiveness or other benefits from our competion you can get our ‘value plan’”.
The State Farm “State of Regret” Jerry ads (car up pole, literally combining home and auto) are funny and memorable but would seem to be attractive to the worst drivers. Maybe State Farm charges bad drivers more than the “15 minute insurance” but eventually you’ll get so many bad drivers in the pool that you can’t charge rates high enough appropriate to your risk.
Allstate, State Farm, and Progressive (is AIG still around?) use the business model of: not the cheapest, but we are less likely to jack up your rates if you get in a minor fender bender.
Some of the “cheap” ones may increase your rates if you get into an accident, even if its not your fault.
Some, I think the General is one of these, is for people who have a poor driving record and can’t get affordable rates elsewhere because of that.
Concerning the claims about saving money: Listen carefully to what they say. It’s usually something along the lines of “those drivers who switched saved an average of $x.” Well, those who weren’t going to save money didn’t switch…
I shop around for car insurance regularly, just to see if switching is worth it. Geico is reliably the cheapest for me, for the coverage I want/need. I am going to shop around again in May when I turn 26. But yeah, Geico is cheap and saved me a bundle when I changed over from Progressive. Allstate and State Farm are reliably the most expensive when I get quotes from them, so expensive in fact that I laugh and think it’s funny. Esurance is usually only a little more than Geico. A local insurance company called Fred Loya was able to beat Geico by like 20 bucks over a 6 month premium, but I don’t think that it was worth it to switch so I didn’t.
In Britain now there seem to be huge numbers of elaborately produced TV ads not so much for motor insurance companies (though there are some of those), but for websites that will give you price comparisons of auto insurance companies. There seem to be several such sites and the ads are both frequent and weird. One site’s ads, for instance, has a theme of talking meerkats with German accents. Another uses a weird looking mustachioed opera singer character. Another has cartoon characters singing disco.
I actually needed new auto insurance recently, and checked out a couple of these sites. I found that there are a vast array of actual insurance companies (mostly not themselves advertising prominently on TV) and that the premiums offered to me differed hugely, from just a few hundred pounds to a couple of thousand. There was nothing, or nothing obvious, to indicate any advantage in going with the more expensive offers, so I went with the cheapest. The companies and premiums listed on the two comparison sites did not differ very much, though.
I too am puzzled by why rates differ so much among companies, but I am even more puzzled as to the apparently fierce competition between insurance comparison sites here, that apparently justifies them in spending heavily on ads, even though, when you actually go to the sites, there is little to choose between them, and the ads have to resort to fanciful gimmicks to differentiate one site from its rivals.
Multiple insurance companies, notably Geico that I know of, underquote the first policy term to reel in your business. With Geico (and similar companies), your rates will nearly always increase at your first renewal in 6 months. That’s the reason you can keep switching and saving money.
I had a Geico policy for three years, and was paying about $127 a month for fairly basic full coverage–way too much, but then I’d had a history of credit problems. I just switched to Progressive a couple months back and *significantly *increased my coverage, while significantly decreasing my monthly fee. Then, I did a Geico quote last night out of curiosity. They quoted me $97 a month (comparable to what I pay Progressive now) for more than twice the coverage I had when I left Geico. But if I’d increased my limits and never switched from Geico, they’d have quoted me $150 or so.
If you’re willing to keep switching insurance companies, you can usually get pretty good deals. But it’s a logistic hassle, and you miss out on long-term customer loyalty benefits. For example, Progressive has some kind of bronze/silver/gold program. The longer you stay with them without having an accident, the more they will forgive in case you ever do.
There can be a huge difference in companies when the claim comes. I have been involved in claims to various companies for my customers.
State Farm, Famers, Allstate are excellent on claims service. The lizard and Erin not so much. The super cheap companies are a colossal pain in the ass when it comes to getting a claim approved.
Think about it, there is only so many ways to save a buck in the car insurance business. If your rates are too low then you have to cut claims cost to stay profitable.
The reasons already listed for Allstate are why I went over to them a few years back-they even sent me a rebate check for $18.70 today since they said I overpaid (and I’m already at a dirt-cheap $80/month).
That is, indeed, the key (I used to work at an ad agency, and had one of the biggest auto insurers as a client).
On average, people who shop for auto insurance get quotes from 3 to 4 different companies (which may or may not include their current company). Most people who shop probably won’t switch unless they get a better deal (and, yes, as rachelellogram notes, there are some insurers, such as Geico, who will get you a “better deal” by offering you poor coverage (higher deductible, lower coverage amounts, etc.)) Every insurance company has different actuarial models, and just because your neighbor got a great deal from, say, State Farm, that doesn’t mean that you will, too.
The “people who switched” language in these ads has almost become a table-stakes sort of claim in auto insurance ads…everyone does it now.
There’s a third-party group which conducts an annual study on people who switch auto insurance companies, and how much they save when they switch. It’s that group’s numbers which all the major insurance companies use in their ads.
Actually, what those ads are really trying to do (at least in part) is to convince current State Farm policyholders to not switch to less-expensive insurers, placing that seed of doubt as to whether you’ll get good service when you need to file a claim.
Oh, and SF is among the harder companies to get coverage from, if you have a bad driving record (or lots of claims). If you’re that sort of driver, if SF is willing to offer you a policy at all, it’ll be at a high rate.
If the General goes after people with poor driving records that can’t get affordable rates elsewhere, how does that business model work? Do they hope drivers count themselves lucky and start to behave themselves? Do they underquote and then jack up rates at the first renewal, the first ticket or accident; or even drop people if their driving continues to be egregious?
I personally have had Progressive since I was on my fathers policy decades ago. It seems that there’s easier ways to save money than switching car insurance and I’m at the highest loyalty level now, so I could total out my car and someone’s Porsche and it wouldn’t affect my rates. I always wondered though, if I collided with one of their immediate claims response SUVs, would I get an immediate claims response?
Good on ya. They’re terrible thieves and regualrly &$*# over their clients. (excuse my klatchian) That’s not personal experience, mind, but the experience of some claims adjustors I know.
J.D. Power’s insurance ratings are really the definitive list of good vs bad insurance companies. I relied *heavily *on this when choosing a new carrier. I would really recommend going with a company that has at least 3 stars in every category. Cost is but one factor in what makes an insurance company good.
The worst carriers (two stars in most or every category) seem to be: 21st century, Automobile Club Group (ACG), Commerce, Esurance, Farmers. I really wanted to go with Amica based on their ratings and word-of-mouth, but their rates were not at all reasonable for me.
I saw those while in London last month and wondered who the heck decided they could make money by creating the Expedia of auto insurance quotes. I’d have to assume they get some sort of cut.
As for insurance ads, I ignore them all. They’ll never get me to switch from USAA.
I assume they get a cut, or rather a commission, too. I do not find that aspect of it puzzling, and I don’t mind. The sites provide a useful service. It would take forever to check out all of the squillions of different insureers individually, and, as I said, the premiums differ a lot.
What puzzles me, however, is that there are so many of these sites, and that, although they differ very little in what they offer, are competing so fiercely via expensive and baroque TV ad campaigns. The ads have to be weird, I guess, because there is so little to differentiate the sites in terms of content or features.
Perhaps what we are seeing now is a battle royal to become the one, monopolistic site that everyone uses, after which the winner will be able to sit back, stop ploughing all their earnings into advertising, perhaps raise their commission a bit, and let the profits roll in. As of now, however, the constant parade of Germanic meerkats and effete, mustachioed opera singers on our screens is just weird.
I think this is a huge YMMV. I’ve heard tons of horror stories about Geico and yet my dad and brother have been in…4 accidents in the past 5 years and Geico was always great.*
And then I’ve heard State Farm will drop you after one accident.
Now, 2 years ago my SO hit a deer and the repair bill was something like a few hundred bucks (including the labor, parts, tax, everything) under the lowest blue book for it. State farm allowed him to take the car to a number of large, convenient shops in the city and paid the whole nut with two phone calls.
Fast forward to him being rear ended by a serial rear-ender (by the other person’s own admission!) 5 months ago; both parties had State Farm and he got a rental car for the entire duration of the repair. He’s under 26 (or whatever the age is when rates start to go down) and nary an increase in premiums.
And in spite of ads I see on TV, I’ve never, ever heard of someone in this region having Progressive. Here they seem to routinely be the butt of jokes mostly like, “Ha, when I went insurance shopping they had the highest rates!”.
*Not all of these were real “accidents” in the car hits car sense. Two of them were badly damaged in parking lots with them in the stores :smack:
