5 Reasons Loyalty to Your Insurance Company Could Be Costing You Hundreds
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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Loyalty is often rewarded in retail and travel. However, in insurance, it can cost you. Millions of homeowners and drivers stick with the same carrier for years assuming their clean records or bundled policies will keep premiums predictable. But industry experts say that may not be the case.
Here are five reasons why loyalty to an insurance company without review may be costing you money.
1. Price Optimization Could Be Raising Your Rates
Many consumers assume that if they haven’t filed a claim their premiums should stay stable. That’s not always how insurers price policies. Melanie Musson, an insurance and finance expert at Clearsurance.com, said insurance companies are known to use price optimization — where they calculate how much they believe you will be willing to pay before you switch insurance providers.
“Loyalty is one of the most expensive habits in insurance,” agreed Brad Spurgeon, owner and CEO of Brad Spurgeon Insurance Agency Inc. Carriers often offer their best rates to new customers but may raise renewal prices for existing clients by 5% to 10% a year even if there’s been no change in claims history or risk, he said.
2. Automatic Renewals Make Overpaying Easy
One reason overpaying continues is inertia on the payer’s part.
“Typically, at renewal, the insurance company simply raises your rates,” Musson said.
If you’re using autopay, you may not even pay attention to the higher rates. That’s one reason insurers encourage autopay, she explained.
Automatic renewal increases are also usually out of pace with the market trends, said Joe Braier, the president and CEO of Lake Country Advisors. So, consumers who do not shop around or review their coverage on a regular basis might be paying more than is required.
3. Market Forces, Not Your Record, May Be Driving Increases
Even with a spotless claims history, your premiums can rise for reasons that have nothing to do with your behavior.
Spurgeon said carriers adjust rates based on their own loss ratios, reinsurance costs and geographic risk areas. So, having a clean record doesn’t exclusively protect you from market-driven rate hikes, he said.
Other factors, like marital status, credit score and even a move to a higher or lower risk area can also change premiums, Musson pointed out. Never assume that rates have stayed the same — investigate.
4. Bundling Discounts Isn’t Always the Best Deal
If bundling home and auto policies seems like the best way to get a deal, Musson warned that it doesn’t always guarantee savings.
“You may be better off skipping the bundling discount and getting policies from different providers,” Musson said.
Additionally, shopping insurance is not only about finding the lowest premium, Braier said. You want to look at key concerns like coverage provided, deductibles, exclusions and added fees.
Shoppers should compare the same deductible and coverage limits and confirm they are looking at the same type of protection such as replacement cost versus cash value coverage, Musson said.
5. You’re Not Shopping Around Often Enough
While it’s clear that consumers should shop around, how often depends upon your needs. While Musson suggests looking every six months to see if you’re getting the best rates and coverage, Spurgeon recommended every two to three years.
For those ready to negotiate, Musson suggested calling to cancel coverage because you have new coverage lined up. If they don’t want to lose you as a customer, they may offer a better premium, she said.
Insurance is important, but don’t be loyal when it comes to your money. Loyalty is for friends, not insurance companies.
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