Buying Auto Insurance Online

Bill Wilson

Abstract There are a number of insurance bulletin boards on the internet. On one I frequent, a consumer asked about buying auto insurance online. The advice another consumer gave included, "Do not listen to anyone who has sold any kind of insurance...it is a boy's club." That brought on a series of responses from some agents, including some real-life stories about the value of an agent.

CONSUMER #1:

Has anyone had any experience purchasing their auto insurance online? If so, who have you tried? How was the experience? Did you save money?

CONSUMER #2:

If you know your way around in the insurance biz, you can save a buck or two shopping online. If you don't know your way around, I suggest you find a local agent.

CONSUMER #3: 

It is worth your while to get multiple quotes online. I have coverage on three cars and the difference between comparison quotes is up to $1,500 more with some of the highly advertised brokers. I have three cars and can only drive one at a time and rarely long distances. In California, your ZIP code determines a LOT on the cost of insurance.

As far as shopping for anything online, I never thought I would buy a car on the computer...I saved $2,100 by shopping on the net and avoided all that paperwork in the showroom, and never got the salesman going back and forth with the manager to diddle over prices. I walked in with the deal made on paper and bought a plasma TV with the money I saved. Use your computer...never make a commitment until it is spelled out as the final price with taxes and insurance. Definitely shop online for insurance. It does work. Do not listen to anyone who has sold any kind of insurance...it is a boy's club.

AGENT #1:    
  
Buying CDs or even automobiles on the internet is one thing. Putting everything you own or may ever own on the line to save a few bucks (maybe, but probably not) is another. Not all insurance policies are the same, not all companies or agents are the same. Insurance is NOT a commodity and it's a hard lesson when you kill someone in an auto accident or have your home burn down and discover after the fact that you have no coverage, but could have had it for $20 extra if a good agent who fully understood your exposures recommended it.

CONSUMER #2:

That's a bit harsh and draconian, wouldn't you say? My [direct writer] agent is a real putz, but he fills my order each year according to my coverage specs. I'm happy. We never talk money; it's always about limits.

AGENT #1:

As for my "harsh and draconian" statement, there are probably several claims being denied right now as I type this because of inadequate or improper coverage. I could give you several examples of homes destroyed with NO coverage due to quirky policy language.

Such catastrophic examples are fairly rare, but we buy insurance to avoid such losses. If your agent just "fills your order

CONSUMER #4:

Better yet, save a bunch of $$$ by carrying only PLPD (unless you crash alot :). I have never insured a car for 30 years, nor have any of my kids. Over the years, we have saved a ton. You know the insurance companies make money, so take the same risk they do and put the profits in YOUR pocket.

AGENT #1:

The risk you take is VASTLY greater than the one an insurance company takes. You are putting EVERYTHING you own on the line...the company is putting a tiny bit that a LOT of people own on the line.

AGENT #2:

If you can afford to stand the loss, there's no reason to buy insurance. But, circumstances have a way of changing peoples' thinking. A family I insure never carried comprehensive or collision on their cars. The cars tended to be older and it made sense to do what they did. But...they got a slightly better car once and continued to avoid physical damage coverage. Then the "good" car was broken into and its radio stolen. They asked if there was coverage.

I said, "No. Remember all they money you've been saving? Use it to buy a radio." And they suddenly realized that the whole darned car coulda been swiped and they'd have been out $5,000. From then on, they bought "full" coverage on anything worth $5,000 or more. We had, together, discovered their point of pain.But for others, it could just as easily be $30,000, as it apparently is for our guest poster.," why do you need him, as long as you have a masterful knowledge of coverage and understand the need for higher limits? That's the exception, not the rule.

CONSUMER #2:

Wow, such dramatic responses to a pretty basic question. Like anything, you have to be smart and do a little research before you buy anything and check out who you are doing business with. 

I actually checked out Insurance.com. They advertise heavily on AOL and so I gave them a look. My experience with them was great. I went through their application process online. I got confused on some of the questions about coverage and the different liability amounts, so I called the 800 number. I spoke with a licensed agent who answered my questions, suggested the appropriate coverage and helped me complete the application. 

All and all a good experience.

AGENT #1:

But how could you choose a policy without comparing the coverages in each policy? For example, if you were to compare the policies of three companies at random, it is quite likely that you would find a dramatic difference between them with regard to some coverages. It's the business of an independent agent to know the differences and how those differences best match YOUR exposures to loss.

AGENT #2:

As [Agent #1] pointed out, there can be some coverage differences from one company to another. There can also be some differences in the way companies treat insureds under certain circumstances.  For example:

A company we represent differs from many others in that:

1.  They "forgive" one moving violation per 3 years. Most other companies raise rates for even the first moving violation. What can one moving violation surcharge cost you?

2.  They don't surcharge at-fault accidents when the damage is less than $1,300 (one per 3 year period). So, the little dinger in the Wal-Mart parking lot won't necessarily get your rates raised. On the other hand, an insured of mine that I had with another company had his rates raised after he filed a $60 claim. He did that direct with the carrier before I could warn him of the consequences.

3.  The first company I mention above says that if their insured is hit by an uninsured motorist, and if we know that guy's name — i.e., it's not a hit-&-run —the company will waive their insured's collison deductible and pay to fix the car frrom the first dollar. With most other companies, you can file on your own collision, but you have to stand your own deductible until your company gets paid by the other party, and that can take a long, long time.

4.  This company offers a renewal discount of 3% after 3 years and 6% after 6 years. This is not a "claim free" discount. It's a reward for loyalty.

5.  If the company insures the home and cars with its package policy, and if one event causes damage to the insured's home and cars (e.g., hail, fire), one of the deductibles is waived.

Our other companies have some "non-price" benefits of interest.  For example:

One company reduces the applicable deductible by $50 for each claim free year, up to a max of $250. They also do not apply depreciation to certain kinds of parts such as tires. (Anybody ever have a tire vandalism claim???)

Another company covers rented boats and recreational vehicles in its package policy. An insured of mine rented a boat and hit a rock. Boat sank. The rental agreement said she'd be liable for damage to the boat. Total damage:  $8,000.  Who paid? The insurer paid. Check YOUR policy to see if that's covered. If not, would one of the companies whose quote you passed on because it was $50 more expensive pay for this? Did the "agent" on the internet site or the other end of the phone ask you about anything like this?

This company's package policy also covers rental cars under the property damage liability coverage, not the collison coverage, so no deductible applies. And, they pay for any "diminution of value" created by application of damage-title laws. Think this is insignificant? Think again. Does the consumer understand this? Does your "agent" understand it?  Answer to both:  most likely not.

Can a customer of a car rental company be liable for thousands of dollars because of "diminution of value"? Yes. Would any consumer care to explain this to me? If not, you'd better be real careful about the car insurance you buy OR about selecting or rejecting the "collison damage waiver" when you rent a car.

Ladies and Gents, the personal auto policy is a complex contract that covers complex behaviors, and anyone who ventures into "do it yourself" auto insurance runs substantial risks. 

I can appreciate a person's aversion to dealing with "insurance salesmen."  We have tolerated and perhaps even encouraged the entry into our business by people who need to make quotas rather than those who need to do the right thing. But, if you can avoid people like this and still get auto insurance at a fair price, I think most people would be well advised to buy from an experienced, smart, ethical agent, and searching for one of these would be well worth your time, even if it could be frustrating 

Moral of this story: There's more to it than price. Much more.

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