Info from a former insurance company employee

[bjl584]

A former insurance agent posting this online. I thought it may be worth sharing.
The lesson here is to pay close attention to your policy(s) and comparative shop regularly




We Had "Loyalty Lists" Every month, I'd get a report of customers who hadn't shopped around in 2+ years. These were our golden geese - we could raise their rates aggressively because they'd proven they wouldn't leave. One customer I remember was paying $3,200 annually for coverage that should have cost $1,800. She stayed for 5 years.

The "File and Use" Scam Here's something most people don't know: in many states, insurance companies can raise your rates immediately and justify it later. We'd implement 15-20% increases across entire ZIP codes, knowing regulators would take months to review. By then, we'd collected millions in extra premiums.

Claim Frequency Was Irrelevant Your rates weren't really based on how often you'd claim - they were based on how likely you were to shop around. A customer with 3 claims who got quotes every year paid less than a claim-free customer who never compared rates. It was pure price discrimination.

We Loved Policy Confusion Complex policy language wasn't an accident. The more confusing your coverage, the less likely you'd comparison shop effectively. We'd change terminology between companies deliberately to make apple-to-apple comparisons nearly impossible.

The Real Game-Changer Tools like ComparisonAdviser absolutely terrify insurance companies because they eliminate our biggest advantage: information asymmetry. When customers can instantly see what competitors charge with identical coverage and discounts applied, our whole "loyalty tax" model collapses.

I've watched too many good people get fleeced by an industry that profits from customer ignorance. Use ComparisonAdviser religiously - it's the only way to beat a system designed to exploit your trust.

The truth? Every year you don't comparison shop, you're probably donating $500-1,500 to your insurance company's profit margins.

[riverwed070707]

I really despise this industry. I understand why its necessary, but it always fascinated me when I realized wealthy people and businesses self insure because the premiums you pay over 10-20 years far exceed the occasional claim you might make. I've shifted all my house policies to $10k deductibles as rates have climbed because the only way I'm making a claim is if the house is a total loss - anything less and I'm just paying cash for the repair. Still pay something in the ballpark of $10k/yr in premiums across my properties and vehicles.

[riverwed070707]

Also the best thing you can do for your car insurance is to drive older cars. I know this board knows this, but the way consumers get wrapped up in whether they can afford a monthly payment vs looking at the total cost of ownership is mind blowing. I have a teen driver, 3 vehicles, 3 drivers and we pay $2,400/yr for car insurance. This is up from $800 before she started driving but still well under what parents I know with teen drivers and newer cars are paying - some of them $600 to $800 A MONTH not including the car payment, higher registration cost, etc.

[Fishindude77]

Has always seemed crazy that we spend a great deal of our income every year on something we hope we will never need or use.

[ua_guy]

Now that consumer protections are being weakened, we can all look forward to insurance companies being even more aggressive and under-handed in stealing hard-earned money.

We have an insurance review planned for a month from now where our CFP's team takes a look across all our policies and evaluates coverages in micro detail. This is something we've generally done ourselves, but it will be good to get an outside opinion and to learn things we don't know about how coverages apply or where we may have too much exposure. The follow-up and sales pitch is this team helps bid the policies and link us up with insurers who can better meet our needs.

After a spat with our current insurer late last year (and the agent we are forced to work with), I shopped a few other of the common carriers out of spite, and in hopes of saving some money. Did you know they share information about what vehicles and assets you have covered? It made the quotation process slightly easier, although, I think they might share rate information too as the policy costs were remarkably similar... At any rate, it was hours of time and trying to communicate excruciating and repetitive detail, so I will be SO happy that a broker will be doing the next round of work.

[myrdale]

We Had "Loyalty Lists" Every month, I'd get a report of customers who hadn't shopped around in 2+ years. These were our golden geese - we could raise their rates aggressively because they'd proven they wouldn't leave. One customer I remember was paying $3,200 annually for coverage that should have cost $1,800. She stayed for 5 years.

This is me right now.

My insurance premium just jumped to $1500 for six months. Farmer's excuse was it was due to my proximity to Atlanta. Five years ago when I purchased the truck new insurance was <$1000 for the same period.

[Jluke]

How do you “shop around” if you don’t intend to switch companies? So you don’t become one of the golden geese

[MonkeyMama]

Also the best thing you can do for your car insurance is to drive older cars. I know this board knows this, but the way consumers get wrapped up in whether they can afford a monthly payment vs looking at the total cost of ownership is mind blowing. I have a teen driver, 3 vehicles, 3 drivers and we pay $2,400/yr for car insurance. This is up from $800 before she started driving but still well under what parents I know with teen drivers and newer cars are paying - some of them $600 to $800 A MONTH not including the car payment, higher registration cost, etc.

A coworker was just telling me the insurance for their teen is $1,100+ per month. I really had to bite my tongue. Obviously a newer vehicle. Money has clearly never been this person's strong suit (re: past interactions). & to be clear, they most definitely can not afford this insurance.

In contrast, both my kids paid (from their own money) $1,000 per year for liability insurance. It was just a couple of years before their auto insurance premiums came down to earth. Not that they have any reason to drive new cars, but going a little newer and getting full coverage wasn't scary once they were adults. I am blissfully unaware what it would cost my 20yo to insure a new car or a 1yo car.

[Drake3287]

Is there a way your insurance company knows if you've shopped around or not? Not sure how'd they know that. I've been with AAA for both home and auto for 40 years and like many people I like to feel like they'd treat me right if I ever needed them. Foolish thinking I'm sure.

[Drake3287]

And yes, the insurance industry is the worst or the worst in the US. They literally control us all and of course our politicians do nothing to protect us. Here in California almost everyone is afraid of having their homeowners policy dropped by them.

[ua_guy]

Is there a way your insurance company knows if you've shopped around or not? Not sure how'd they know that. I've been with AAA for both home and auto for 40 years and like many people I like to feel like they'd treat me right if I ever needed them. Foolish thinking I'm sure.

Maybe wishful, not necessarily foolish. Any reasonable person would expect to be satisfactorily taken care of, and it's what we all deserve for the premiums we pay. But your suspicion is right. The claims department is a whole different animal, and all the nasty little limitations and gotchas come out of the policy when you have a loss. It's total chance...your adjuster can be good, or they can really suck.

As for California home insurance, living this right now. My folks have become trustees and custodians for my great aunt, almost 100 years old, and they manage all her finances and practical affairs. She lives North of LA and her homeowner's insurer just threatened to drop her. Demanded the roof be replaced to keep coverage. The home is on year 15 of a 30 year, high quality composite roof that has been maintained. We've had 3 contractors out and they are all in disbelief - the roof is in great shape, no reason to replace it, no repairs needed. Insurance company demands. Nobody will reason with them on the phone or look into why such a demand is being made. So my folks have been shopping for a new insurer and nobody will take the home, her neighbors are all fighting similar situations as insurers threaten to drop coverage or have pulled out of the area completely. They'll end up with CA's insurer of last resort which isn't good for anybody.

[Fishindude77]

We've been with State Farm quite a while because I like the folks that run the place, have developed a relationship and they treat us well.
Like everyone else, insurance is a big part of the budget so I shopped it out a while back and State Farm prices was a little less expensive than the other outfit I checked.

I do believe there is some value to having a good relationship with your insurance man / woman, especially if you have a significant claim.

[kork13]

There are other factors involved ... but when my father & I bought the home in central FL for his 98y/o mother to live in (2 doors down from my father), he basically refused to buy home insurance for the place, preferring instead to self-insure & put money aside every month against any damage/incidents. He made convincing arguments, and I ultimately agreed to go that way. The biggest problem is that it's not the primary home for either of us, so all of the insurance companies are treating it as an investment home (which it kinda is, but only marginally so). We could have put the house in my grandmother's name, but that would have complicated things for us, knowing that she's likely within the last 5-ish years of her life & has other children (heirs) to consider. My father got a few quotes, and they were all about 3x higher than his own home insurance, and he balked. Many insurance companies have completely abandoned FL, and just won't write policies down there. The good thing is that they live in the dead middle of FL, and the city hasn't been significantly impacted by any hurricanes since the 1930s -- by the time a storm reaches them on the interior, it's been weakened to the point that it's less dangerous & destructive ... and the city was designed well such that flooding is a much lower threat, with good drainage pulling everything into the lake the city sits on. Beyond those passive safeguards .... we're basically just crossing our fingers that it'l be okay, I guess. Any damage less than a total loss will be relatively easy to cover ... and even a total loss won't be the end of the world for any of us. Which is fine, realistically -- I've always viewed insurance as a means of protecting you from events that you're not able to deal with otherwise. In this case, we mostly can do so.

[srblanco7]

This thread is a wonderful reminder that it's time for us to shop around. Our insurance package covers 4 drivers - two below 25 with 4 vehicles total, primary home, and $5M umbrella is now running around $8700 per year. IMHO, crazy expensive given that we live in a low risk area and the only claim we've filed in the last several years was related to DD striking a deer with her vehicle (she'd tell you the deer hit her , but that's semantics).

I'm interested in how others shop around. Do you just call several companies? Anyone use a broker? I'm contemplating a broker - with a mindset of simplifying our lives. Let them shop on our behalf recognizing that they take a 2-3% cut of what we pay in premiums.

[riverwed070707]

This thread is a wonderful reminder that it's time for us to shop around. Our insurance package covers 4 drivers - two below 25 with 4 vehicles total, primary home, and $5M umbrella is now running around $8700 per year. IMHO, crazy expensive given that we live in a low risk area and the only claim we've filed in the last several years was related to DD striking a deer with her vehicle (she'd tell you the deer hit her , but that's semantics).

I'm interested in how others shop around. Do you just call several companies? Anyone use a broker? I'm contemplating a broker - with a mindset of simplifying our lives. Let them shop on our behalf recognizing that they take a 2-3% cut of what we pay in premiums.

I use a broker. Since I have rental properties, not all insurance companies will cover all my needs and I often end up with a couple different providers. Every time my renewals come back with a significant increase, we shop around and often end up changing. Saves me the leg work of having to make a dozen calls for quotes and they just tell me which company(s) have the best rates for my needs. Its not unusual for me to switch insurance providers every 2-3 years and with a broker it doesn't feel like a hassle.