Updated: 9/6/2011 12:48 PM ET|
10 things your auto insurer won't say
There's a lot to consider when insuring a car -- rates, teen drivers, what happens if you have an accident. Is your insurer looking out for you?
1. "When I say this is a good policy, I mean it's good for me."
Although agents can help you navigate auto policies, some may not have your best interests at heart. Often, large auto and home insurers use "contingent" commissions to compensate agents who sold their policies. These fees come in two types: "steering" commissions, for signing customers with a particular carrier, and profit-based commissions, when clients don't file a lot of costly claims. The concern with the former is that unscrupulous agents push certain policies to reap larger commissions; with the latter, they might delay or discourage claims.
How can you protect yourself? Ask about commissions, and have prospective agents explain their recommendations.
2. "Young drivers can't catch a break."
Statistics show that drivers under age 25, especially males, are in a high-risk group and have difficulty getting insured. But the specifics are startling: Drivers in New York under age 19 pay a median auto insurance rate that is more than 100% higher than drivers ages 60 to 74, according to a 2009 survey published on InsuranceRates.com.
It typically takes three years of driving experience to be quoted a lower rate, according to AllInsuranceInfo.org. But there are other ways to ensure a better rate in the short term. For example, avoid sports cars and opt for a car with a lower engine capacity.
Also, ask your insurer for ways to score a lower premium.
According to information posted on AllInsuranceInfo.org, some insurers will give a lower rate to young drivers who complete defensive-driving courses.
3. "Spotty credit? That'll cost you."
Since the 1990s, insurers have discovered a strong correlation between low credit scores and lots of claims. Today, more than 90% of insurers use credit histories in their underwriting, according to the Insurance Information Institute in New York. Although consumer advocates say that unfairly penalizes the poor, it can also bite the middle class, says Birny Birnbaum, the executive director at the Center for Economic Justice. After all, "87% of families in bankruptcy are there because of a job loss, medical catastrophe or divorce," he says.
Because many insurers do factor in credit histories, it's important to get a credit report from each of the three major bureaus -- TransUnion, Experian and Equifax -- and check them for errors before you shop for insurance. (Free reports are available once a year from AnnualCreditReport.com.)
4. "How do we set premiums? That's for us to know and you to find out."
As insurers continue to adopt complex pricing systems, not everyone is seeing savings. Why the disparity? For starters, premiums vary widely by state. According to a 2007 study from the National Association of Insurance Commissioners, the average yearlong policy in 2005 cost $949, ranging from a low of $664 in Iowa to a high of $1,343 in the District of Columbia.
What has muddied the waters even further are the formulas used to set premiums for individuals. Twenty years ago, most insurers sorted customers into four or five pricing tiers, based on where they lived, their ages and their driving records. Over the past decade, hundreds of variables have been added to the mix, including credit histories, homeownership and limits on past policies. Because each insurer interprets these variables differently, it's even tougher for consumers to get a handle on the system.
5. "Your repaired car might look and run like new, but it's worth a lot less."
As many policyholders know, when the other party's insurer is paying for repairs after an accident, you have the right to opt for original manufacturer parts instead of generic after-market ones. But even with the best parts and service in the world, a fully repaired vehicle will often be worth less as a used car or trade-in than an identical car without the accident history.
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The bodyman perspective. I've been in this business 25 years now and let me tell you, the insurance industry is ruining this business. Insurance companies used to invest premiums in the stock market, that was where they made their money. When that went south, they focused on the body shops and parts. They started squeezing and have never let up. They turned to aftermarket parts and used parts. They found ways to pay less for parts that had to be changed. Just last month I changed a quarter panel on an accord for liberty mutual, the very next week I changed a quarter panel on the same type of accord for allstate. What was the difference? Allstate paid $150 less for the same repair. We see this all the time, less pay for the same work. My biggest loss of productivity is with aftermarket parts. I get paid the same as I would to use a factory part, but can spend up to an extra hour trying to make just one of these parts fit. In the course of a year I lose over a 100 hours of productivity, am I compensated? HELL NO! On the flip side insurance companies are making many, many millions of dollars of extra profit using these parts. What is wrong with this picture?
This was a good business when I got into it in 1986. The complexity of repairing cars has increased five-fold with all the new technology but the wages have gone backwards. Labor rates have gone up, but at the end of the day I'm making what I used to make in 1995. This has been the case for five years now. Do you think anyone in the insurance industry is making the money they made 16 years ago? WE DO THE ACTUAL WORK, THEY KEEP THE MONEY. Just look at how their profits have gone up in the last 20 years.
As for the insurance company preferred shops, Progressive and Allstate are the worst abusers. They do not have your best interest in mind, only their profits. State Farm does not use aftermarket parts and are one of the best. Liberty Mutual is also a good company.
I cannot count the number of times insurance company employees have had their personal cars fixed for free at shops I have worked. The system is broken and something has got to give. No one is getting into this business anymore and can you blame them. Some insurance companies were looking into training convicts to repair cars, do we really want to go there? Would you trust your families safety to someone who wasn't smart enough to stay out of jail? All it takes is to leave a bolt loose on a suspension or steering part or to leave a compromised part on a car. Even tight bolts can work there way loose if not torqued properly.
This is skilled labor and if a car is hit hard it gets VERY technical.
There needs to be limits on their profits. I've heard Allstate gives bonuses at the end of the year based on their profits. So the more the insurance adjuster shortchanges me, the bigger the bonus he gets. Again, what is wrong with this picture?
The consumer has a duty to shop around. Just be careful of what you are buying. Sometimes buying cheap gets you exactly what you paid for come time for a claim. Direct buying insurance online may give you a lower premium but who are you going to have answer your questions. When buying insurance from an agent you are also buying his knowledge and service. As a consumer there is also a duty to check out your insurance representative to make sure he is working for you and not just for himself. Talk to your friends and neighbors, get recommendations. Reputaion does matter. Treat it the same as when you shop for that new car, appliance, repairman for home, or any other service that you are paying for. This article gives some good tips but it also makes it look like all insurance is out to screw you. NOT TRUE and if a person is that paronoid there is always the option of being self insured that is if you think you can afford it.
I agree with many of the previous posters. You can get cheap insurance anywhere online or over the phone to a faceless entity. But if you want coverage that fits your needs, and you need to make sure your claim is covered, then you go to a good agent. It's totally out of order to title this article, "Things your Auto Insurer will not say". Most insurance agents take pride in their work. I work for an agent and we make sure we get to know our customers, and make sure the insurance policy is one that they need. Our customers appreciate the fact that we go over their policies every year with them - taking into consideration any life changes. And yes, we talk about the higher rates for youthful operators. We are honest and straightforward, and it stinks that you set us back like this for the sake of putting out a "sensational" article. Shame on you.
Let’s cut to the chase and dump the bull shall we. In our new age American way of doing things all contracts are conveyed by attorneys. Why? To look out for their clients own self best interest. In short, a contract in today’s American business world is a road map as to how at the time it is issued one or more signatories can circumvent, escape the theoretical application of its binding value. How do I know? Several years ago a major storm dropped a massive 150 plus yr old tree on our home. 17 yrs of never a claim with American (screw the) Family Insurance we contacted our agent. Never mind we had their “BEST?” super Blue policy cover everything because all they ever paid for was the removal of the tree off the house. Our legal case was headed by our then MN State Attorney General against American (screw the) Family Insurance. In 3 separate trials we prevailed. Yep we won! Big F’en whoop. American (screw the) Family Insurance filed yet another appeal changing the tenets of their argued position. The then atty. Gen. lost being re-elected and the new atty. Gen. dropped the case leaving us out in the cold. Long and the short, American (screw the) Family Insurance cost us 17 yrs. of policy payments and when we needed them to step forward they flipped us the finger adding 45 grand that we paid in repairs to our expensive insurance education. All true and a matter of public record here in MN. As a small consolation but truly heart-warming none the less was our agent through all those years was so distraught over the events she terminated her agency with American (screw the) Family Insurance and took up residence with another major co. Just remember, the agent is more than likely not an attorney, they are more often than not trained by one or more insurance companies on the “PLUS” points contained within the policy as sales tools and not the shortfalls. Always look at it this way, an insurance company doesn’t make money on what they pay out, they make money on what they cause “YOU” to pay in.
I was with the same insurance company since I got my first car as a teenager, (over 20 years ago). My parents used them for over 30 years. Know what I got when I had my first accident? HALF, yes, that's right, HALF of my cars value, (I took the averages from several websites, Kelly Blue Book, Edmunds, and NADA.) I had to DOUBLE what they gave me to REPLACE my car. I had asked on three separate occasions if my car had enough coverage and if it was covered for REPLACEMENT COST (MY replacement cost, what it would take me to get the same vehicle back if it was totaled), all three times the slime ball said YES, then took my money. (I had even inquired about some type of collector car coverage or anything like that and he told me that I was fine and that I didn't need it.) After the accident he told me that he was sorry but he didn't have anything to do with that part of the claim, and I had to call some claims adjuster. She just said the car is totaled, WOULD NOT give me an amount, WOULD NOT tell me how much actual damage my vehicle had sustained, nor tell me WHERE MY CAR WAS towed to, (just that it was in one of their "secured lots"). After many, many, many calls, she finally gave me an amount, and told me if I didn't like it to sue them. (I bought the car back for salvage value because I made more off of the parts/new tires, etc. than she sent me a check for.)
ANYBODY that tries to sell you the SAME coverage for MORE money and INSISTS that you shouldn't be informed and/or shop around is a crook. LOYALTY means nothing any more.
Needless to say, I shop around for the cheapest (same/better coverage, and yes, I actually read my contracts) insurance now, and it's all been better coverage than those jokers ever gave me.
And as a side point, I already knew about most of this stuff in this article anyway.
If you use my credit score, you have to give me credit. that;s why it's called a credit score!
corporate america bending us over. all my insurance policies have to be paid in advance.
it's info they should not be entitled too. thanks politicians.
I have been in the insurnace industry for nearly twenty years and this article is a complete insult.
I'm almost always offered fine insurance on appliances I buy, but they're usually 1/6th the price of the vacuum cleaner, TV, etc. and don't even kick-in until after the 1-2 year standard warranty. Since most of such items either break down early due to defects or last a long time for me, I pass on such warranties - it's cheaper to replace the odd one that fails with the cash I save by not getting insurance.
All that doesn't mean the insurance isn't good - it's fine. But the cost is not good!
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