US Study: Drivers missing out on car insurance savings

Michael Strong, CNBC contributor

As the adage goes, you’d better shop around. But the results of a new survey show that many drivers are not heeding this advice.

According to insuranceQuotes.com, the average American hasn’t changed auto insurance companies in 12 years, and more than a third of U.S. drivers never shop for new insurance.

The study, which interviewed 1,000 adults and had a margin of error of plus or minus 3.6 percent, found that about 25 percent of drivers have been with the same insurance company for more than 16 years, and 7 percent for more than 30 years.

“Americans may think loyalty pays off, but when it comes to insurance, that’s not always the case,” said Laura Adams, insuranceQuotes.com’s senior analyst. “If you haven’t shopped for auto insurance since the ’90s, it’s probably safe to say that you’re not getting the best deal.”

According to the National Association of Insurance Commissioners, the key to shopping for auto insurance is making sure you get an apples-to-apples comparison of your current policy to the new policy.

The regulatory group suggests shopping for at least three quotes, and creating a chart to keep track of necessary coverage including liability, uninsured motorist, medical and physical damage. It also suggests getting prices for a full-year, six-month and monthly payment plan. Some companies offer discounts for paying in a lump sum rather than stretching out the payments.

Millennials and senior citizens are the most reticent when it comes to getting on the computer or picking up the phone to get insurance quotes, according to insuranceQuotes’ study.

“Many people make the mistake of shopping only when they move or buy a new car, but data shows that rates fluctuate even when you haven’t had any major life changes. This is especially true for young people,” Adams said.

Other findings from the survey include:

• Nearly half of Americans do not know that they can change their auto insurance company at any time.

• Six in 10 millennials with auto insurance think they have to wait until their renewal date to switch insurance companies.

For those who don’t want to take the time to call around, Kelley Blue Book suggests drivers use their state’s department of insurance as a resource. These sites typically offer rate comparisons, customer ratings and complaint ratios, as well as the contact information for a variety of major carriers.

KBB.com also urges drivers to ask about discounts related to good driving records, college attendance or serving in the military, and suggests they consider raising their deductibles.

“You’ll have to pay more out of pocket if you have an accident, but if you increase your deductible by just several hundred dollars, for example, you could save anywhere from 15 to 40 percent or more in collision and comprehensive coverage costs,” according to the automotive research firm.

 

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How Self-Driving Cars Will Disrupt A 200 Billion Dollars Industry

Federico Guerrini | Contributor Forbes

Not only, in the age of autonomous vehicles, driving your car could soon become illegal, as Elon Musk recently suggested.

In fact, getting rid of the driver could also have remove the need for private insurances, as all the liability in case of an accident would be transferred to the car’s manufacturer, the software creator, or other third parties. It does make sense, if you think about it for a minute: if you relinquish control over what your car is doing, why should you pay for any misdemeanor?

And it not just common sense: this possibility (purely theoretical, at this point) is outlined in an essay by Yale Law School student Jack Boeglin in the current issue of the Yale Journal of Law & Technology.

“If nondiscretionary-communicative vehicles became mandatory (as the introduction of either the interactive or remote-controlled models might require), there would be no need for private insurance, since all liability for AVs would be transferred to manufacturers,” writes Boeglin, adding that “Eliminating the entire automobile insurance industry (which has roughly $200 billion dollars in annual revenue) would be a monumental boost to administrative efficiency.”

For insurance companies that might be a catastrophe, at least for a while, as they struggle to adjust, but they could soon find other revenue streams, for instance signing deals with the manufacturers.

The chance of having the passengers’ full attention during all the time of the journey, would also create a huge amount of possibilities of monetization for advertisers and content providers.

On the customer’s side, not having to pay for an insurance could prove an irresistible bait for cash-strapped car owners, helping them overcome all their fears related to the further erosion of privacy that could take place if driverless, connected and remotely-controlled vehicles become mainstream.

In Boeglin’s view, freedom, privacy, and liability are not independent elements, but interlocking pieces, that together compose the puzzle of driverless cars’ regulation. It’s like a formula, the final result of which, depends on the weight of each element of the equation.

Do you want more privacy and freedom? You’ll have to pay for it. It’s not an altogether new concept, actually. A number of insurance companies already allow customers to pay less, if the consent to install on their vehicles a ‘black box’ which keeps track of certain parameters, like stopping speed, acceleration, and turning radius. Usage-based insurance programs like Progressive PGR +0.91%Snapshot and Allstate ALL +0.76% Drivewise are good examples of that.

But intelligent cars, with the assistance of 360-degree cameras, could provide much more information: from whether a safe braking distance was observed and the laws of the road were followed, to how smoothly turns were handled.

“These vehicular telematics could also provide a telling comparison between the driving behaviors of the human driver and her automated companion,” Boeglin says.

In other words, they could help estimate the ‘percentage’ of driver’s fault in case of an accident and distribute therefore the liability between the man and the machine. In the case of what the student calls ‘discretionary communicative vehicles’ (those in which the driver can still override autonomous driving) the guilt would be pondered in accordance with the evidence collected by the vehicle’s computer.

In the extreme scenario, in which the human completely relinquishes control to the machine, all the liability would go to the manufacturer.

US: The Insane Reason You Could Pay 50% More For Car Insurance

Source: Time

You probably figure that if you’re a bad driver and collect some fender-benders or speeding tickets in your DMV record, your insurance company is going to charge you accordingly. But what you might not have expected is that insurers also might slap you with penalties — sometimes hefty ones — if you’ve blown off paying a bill here or there.

Car insurance companies in all but three states — California, Hawaii and Massachusetts, where it’s illegal — use a driver’s credit history in the secret sauce of their underwriting formulas. People with bad credit are considered higher-risk customers, so insurers often charge them more, explains Jill Gonzalez, an expert at WalletHub, a personal finance site that just published a study showing what insurance companies in what states penalize drivers the most for poor credit.

WalletHub asked the five biggest car insurance companies in the country for quotes for two imaginary drivers who were identical except that one test case had excellent credit and the other had no credit history.

“There is a strong correlation between one’s credit characteristics and insurance losses,” Gonzalez says. “The insurance companies usually look at the the credit history to see how the insured can manage his or her risk exposure.”

Across the board, the difference between quotes given to the “great credit” versus the “no credit” driver varied by 49%, but some fluctuations were much, much greater.

Credit obviously isn’t the only factor insurers look at to determine premiums, and different companies assign varying degrees of importance to this characteristic. WalletHub’s study finds that Farmers Insurance seems to place the most weight on driver credit data, with a 62% difference between quotes given to WalletHub’s two hypothetical drivers. Even Geico, the insurer WalletHub says “seems to rely on credit data the least,” has a 32% fluctuation between the two driver scenarios.

The results also vary widely by state; in Connecticut, the impact of great credit versus no credit only contributes to a 15% fluctuation in premiums. In Michigan, however, it’s another story: WalletHub finds that credit status contributes to a 115% fluctuation in rates.

Gonzalez says the biggest issue consumers face is that a lot of companies aren’t up-front about their use of credit data in underwriting. “The problem we discovered is that not all of the companies are transparent in letting their customers know that credit scores impact insurance premiums to a significant extent,” she says.

WalletHub looked at the websites of the 10 biggest auto insurers to see how soon, how often and how prominently they advised customers that their credit would be a variable in the eventual premium price they were quoted. It says Progressive is the most transparent, but Gonzalez points out that a lack of transparency among many carriers means that drivers have to do a lot more homework if they have credit problems.

“Consumers with no credit have to do some serious research before deciding on an insurance company,” she says.

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