I. Overview of Topic
Now is not the greatest time to be an auto insurance agent. Auto insurance is another one of those service businesses that are becoming more and more dominated by online providers.
In fact, arguing that auto insurance agents are needed at all anymore has become a hard case to make. Why spend part of your weekend visiting an auto insurance office in order to be pitched on a single car insurance company's policy when you can buy auto insurance online any time - evening, weekends, etc. Not only that, but buying auto insurance online enables you to compare the offerings of several companies side-by-side in terms of policies and premiums. Plus, you can buy the policy online (in most states), and even file claims online.
One could point out, of course, that many people have a personal preference for meeting and talking face-to-face with an insurance agent, rather than simply pounding a computer keyboard. For one thing, they may feel more secure about transferring money (premium payments) in person than online. For another, they like having a knowledgeable person they can communicate with and ask questions of.
But the number of such people as a percentage of the adult population is dwindling. According to ComScore, a market research firm, 69% of 2,000 U.S. consumers surveyed last year said they would consider purchasing their next auto insurance policy online. Online auto insurance purchasing has been growing at an amazing 50% + rate over the past couple years.
So, whether you're looking for a replacement policy or for your first policy, auto insurance online offers a lot of benefits: speed, convenience, cost-savings, and better information about available policies from a range of insurance companies.
But before signing up for a policy, whether online or in-person, make sure you're familiar with the basics of auto insurance.
Auto Insurance Online Primer
If you drive a car in the U.S. you need insurance. That's obvious. But what kind and at what price?
- Liability insurance. There are two types of liability insurance, bodily injury and property damage. If you buy a 15/30/25 coverage that means the insurer pays up to $15,000 for bodily injury per person, $30,000 for bodily injury per accident, and $25,000 for property damage per accident. So this would be a low amount of coverage, and you must assess your own situation in deciding what level of coverage is best for you. All states, except Wisconsin and New Hampshire, require that you carry liability insurance.
- Collision. Pays for medical expenses and property damage that you sustain in an accident in which you are at fault.
- Comprehensive. Provides coverage for theft or loss from accidents other than collision, for example property damage sustained from flood, fire, or vandalism.
- Uninsured/underinsured motorist. Pays you if the other driver in an accident does not have insurance or does not have adequate insurance. (Not required in all states.)
- Personal injury protection. PIP pays your otherwise unrecovered medical expenses and lost wages resulting from an accident. May also include a death benefit. (About 15 states now require PIP coverage.)
A source of some confusion for many are so-called "no-fault" auto insurance systems. In a no-fault system, all drivers pay their own accident costs, regardless of who is to blame. It was for a long time thought that this system would reduce litigation and hold down costs. It didn't. Usually, it resulted in higher accident rates, higher costs, and higher insurance premiums. As a result, most states that had enacted no-fault laws repealed them (NV, DC, NJ, PA, GA, CT, CO, FL). leaving only Hawaii, Kansas, Michigan, Massachusetts, Minnesota, New York North Dakota, and Utah. However a couple states - New Jersey and Pennsylvania - adopted "choice no-fault", allowing drivers to choose between no-fault and a traditional policy. (Results, in terms of premium levels, have been mixed so far.)
What are the minimum levels of insurance coverage required on a state-by-state basis? Click here for a complete listing.
Keeping Down Your Premiums
Insurance companies would seem to have some strange ideas about what factors to consider in setting your insurance rates. I once found my rates increased after another driver hit my car, and when I called the company, and explained that the accident had not been my fault, the customer service rep answered, "But you were in the wrong place at the wrong time."
In other words, it's all done by the numbers, there's no real concern about equity in setting rates. So you have to try to provide the company with numbers that will result in reasonable premiums. Some of these you have some control over and some you don't. Among the factors that will be taken into account are: age/gender (single males under 25 get higher rates; women generally get lower rates); location (California and New Jersey rates are high; urban rates are higher than rural rates; many companies now even look at your zip code); driving history (if you've filed one or more claims in the past five years, this will boost your premium significantly; so will a speeding ticket or other violation, even if there was no claim filed); amount you drive; type of car (expensive cars get higher premiums, so do cars with high rates of theft, like the Honda Accord and Toyota Camry; so do off-road vehicles and large SUV's).
Choosing an Auto Insurance Company Online
If you run a Google search for "auto insurance" or "car insurance" you'll see that this is a crowded business online. There are hundreds of companies advertising auto insurance online. However your best bet is to use one of the companies which allow you to order online, like Esurance.com or InsureMe.com.
Note that each online insurance company has its own little process and series of screens it takes your through before it give you a quote.
For example, Esurance.com begins by asking you your zip code - an easy enough question. Then on the ensuing screens they request detailed information -- How many cars you are insuring. How many drivers. Year/Make/Model of your car. Uses of your car. Discounts for which you may be qualified, such as airbags, antilock brakes, car alarm, etc. Coverage you are looking for. Etc.
The Esurance.com application process is actually fairly easy, and takes only a few minutes - at which time you're provided with a specific quote from Esurance.com , which is a virtual (online) insurance provider.
In contrast, InsureMe.com takes you through much the same application process, but concludes without providing a specific quote. Instead, it lists several brick-and-mortar insurance companies which will contact you later, either by phone or email, with specific quotes. This has the advantage that you will be able to compare policies and quotes, and the disadvantage that you will have to wait awhile for the companies to contact you.
Other aggregators will have other processes -- some, for example, run your credit report as part of the process.
In any case, as a final step in choosing a policy, you may want to check out the insurance company at AMBest.com, especially if it's one you're not familiar with. You'll have to create an account on AMBest.com to look up an auto insurance company's rating, but it's fairly simple to do so. Once you've created your account, click on "rating and analysis" and input your company's name. Companies are assigned a letter grade from "A++" downward. You'll want your selected company to have at least a "B" rating, which is "good."
Incidentally, even if you already have what you think is a reasonably-priced policy, it's a good idea to apply online to see if you can get a better premium rate. After all, there's no obligation and it only takes a few minutes. According to a recent survey of consumers by EDP Weekly, one in three people who shopped online for auto insurance and then bought a new policy saved more than $500 with some saving $1,000 or more.
That's it - our ten minutes are up! (OK, maybe twelve or thirteen if
you're a slow reader.) Below is a listing of Web resources to help you
continue your research on auto insurance online.
II. For Additional Research
This Section provides reviews and recommendations of Web sites and other
National Association of Insurance Commissioners (NAIC)
State governments regulate auto insurance in the U.S. Each state has its own insurance commission, which is responsible for regulating rates and handling complaints. Each insurance company must have a state license in order to market insurance in that state. The main umbrella organization of state insurance commissions is the National Association of Insurance Commissioners (NAIC). Of particular interest is their tutorial "Understanding Your Auto Insurance Policy"
note especially the section, "Key Points to Remember When Considering an Auto Policy."
Insurance Institute for Highway Safety
The Insurance Institute for Highway Safety is an independent non-profit organization dedicated to the goal of reducing highway deaths, injuries, and property losses, says their website. Their site contains the results of crash tests and insurance losses on hundreds of vehicles, and a wide variety of data on thefts, claims history and safety statistics used by insurance companies in setting rates. Worth taking a look, especially if you're buying a new car and getting a new insurance policy.
National Insurance Crime Bureau
A major factor in determining car insurance rates are the claims histories of the various makes and models. If you're in the market for a new or used car you may want to take this into consideration. For example, if you purchase a high-risk model, such as Honda Civic, Toyota Camry or Cadillac Escalade - which are stolen a lot -- your insurance company will charge you more simply due to the greater risk of loss. NICB is a nonprofit organization for preventing insurance fraud and you can access their analyses and investigations at NICB.com, including fact sheets on airbags, anti-theft devices, cloned vehicles, collision repair fraud, vehicle theft fraud, and more. You can also run a VINCheck to search their unrecovered stolen vehicle database - just to make sure, or somewhat sure, that that nice used car you're considering buying isn't hot.