A recent study by the consumer advocate Office of Public Insurance Counsel (OPIC), found what most people have suspected for years. The study strongly supported the notion that shopping around for a new auto policy can result in big savings and the longer a policyholder stays with the same insurer, the more likely it is that they will be paying more than they should.
According to the study a policyholder that stays with the same insurer for eight years or longer could save a whopping 19 percent if they switch insurers. OPIC executive director Deeia Beck said in a press release, “This study supports what we have believed for a long time, consumers must shop their policies to ensure they aren’t overpaying for insurance.”
The savings will not be as dramatic for everyone. In fact policyholders who have only been with their insurer for two years or less will probably not save any money. If you have been with the same insurance company for three years the savings could ring in at around 5.2 percent, once you have been with the same insurer for six years the savings could be as high as 11.6 percent. OPIC does advise that if you currently bundle your policies you may have to shop all of your polices to achieve this kind of savings.
High Retention is Part of the Problem
Insurers have some of the highest retention rates they have ever enjoyed and this can often mean that consumers are overspending on their insurance.
A J.D. Power and Associates report found that while the number of insurers shopping their coverage was at the lowest point in the past five years, those that did shop around saved $359 on average.
Deloitte discovered in a 2010 study that out of every 10 policyholders four had been with their current insurer for more than 10 years. Six of the 10, rarely or never shopped around for a better deal.
OPIC speculated on a number of reasons that consumers tend to stay put with their insurers, even when they know there are probably better deals out there. One of the major reasons is that shopping insurance is difficult and time consuming. This is especially true if you are shopping around numerous policies or a bundle.
High satisfaction rates among all of the major insurers are another contributing factor. Happy customers tend to shop around less, even if they think it might result in a lower premium. Once they do start shopping though, they often find it is possible to save significantly on their insurance costs.
Finding a Great Deal
Car insurance tends to have higher profit margins than other lines such as homeowners and insurers compete fiercely for customers. In many cases they will offer extremely low rates to new policyholders and over time the rates rise which means that long term customers are often paying more than they need to for car insurance.
Shopping your policy every couple of years is the best way to make sure you are paying a competitive rate. When comparing rates be sure to compare apples to apples, check that the coverage limits and deductibles are the same. Ask for all discounts that you are eligible for and consider taking a defensive driving course which may result in a discount as well. Bundling is another great way to lower your premium, combining your car and house insurance can often result in up to a 30 percent discount.
Studies have shown that long term customers will often end up paying more for car insurance so shopping around on a regular basis will make sure you are always paying the best rate.
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