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It is hardly surprising that a Consumer Federation of America study discovers that insurance firms which disburse higher fees to agents and to brokers often have higher monthly payments.
CFA also discovered that higher prices of motor vehicle insurence don`t mean better service for consumers.
"This study proves that consumers must shop very cautiously for coverage," said J. Robert. "The good news is that there are insurance providers that disburse minimal or no commissions, provide low motor vehicles insure costs and have good consumer service."
"On the other hand, this study also found abundance of insurance firms in which high commissions translate into lofty rates, with no gain in service quality," J. Robert said. "Great automobile ins rates as well as good service might be found in case consumers take the time to compare companies."
Findings
CFA checked commission data from the twenty most important writers of insurance for both private passenger cars ins online and homeowners insurance. This sum commission information integrated ordinary commissions and contingent commissions (paid after policies are sold and depend on special sales or profitability goals).
The study compared sum commissions with price, insurer profitability as well as service quality as measured by grievance information and consumer contentment indices. CFA found that:
1. Insurance companies with lower commissions tend to have lower charges. This is not always the case, so consumers should shop carefully.
2. There`s no proof that paying higher fees to an agent or broker produces either better service or higher customer contentment. Actually, there appears to be no correlation between the quantity of commission disbursed and the quality of service provided.
3. Some insurers offer good deals. Other insurance companies have rates that are consistently high.
In less competitive businesses, some insurance companies might be tempted to attract market share by offering higher fees to agents or brokers with higher prices and, sometimes, higher profits for the insurance firm. Credit insurance is one area where this sort of `reverse competition` is most common.
Instructions for Customers
We suggest several tips for customers shopping for autos assurance:
1. Shop around! This study revealed that monthly payment charges usually rise with commissions, though this is not always true. Consumers have to be sure to get quotes from some of the lowest monthly payment insurance corporations, including the direct writers of insurance that regularly don`t pay commissions.
2. Consumers don`t need to disburse more in order to get good service. A number of the insurance providers with the most excellent service records have low costs and low or no commissions. It is worthwhile to shop between the firms which have the lowest costs and the highest customer satisfaction/lowest complaint ratios.
3. To get information on online autos insur rates, check country price information guides. Nearly all the countries have cost information guides. Usually, customers may download these guides from the state`s insurance department web site.
4. To receive complaint information on insurance providers, check with the National Association of Insurance Commissioners` site, www.naic.org.
5. Be cautious with going to only 1 agent or broker for motor vehicle insurence, even in case that broker represents several insurance companies. Customers should be aware that some producers who represent more than 1 insurance company could place the customer in a higher priced company which has larger commissions even in case the customer meets the requirements for a lower cost. States don`t necessitate insurance agents or brokers to place the applicant with the best policy for him.
6. Ask agents and brokers the important questions:
Do you represent me or do you represent the insurance company you`re recommending me?
What commission are you earning compared to the cost of the automobiles coverage program you`re offering I purchase?
Am I getting the lowest cost among all the vehicles coverage firms that you represent for which I meet the requirements?
What other on line vehicles coverage corporations do I meet the criteria for that you represent? What are the costs I would pay at the other insurers and what fee would you receive with each company?
Do you own a contingency commission arrangement with the insurance firm you`re offering? Please completely elucidate that arrangement to me.
If I file a claim, do you represent me or do you represent the insurance company in the claim procedure? Is your reimbursement in some way related to claims filed by me and by additional clients of yours?
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