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Everybody loves a bargain, but in the insurance industry, it’s not going to happen. There’s no such thing as a loss leader to get customers in the door or a hookup from a friend who can get you the wholesale price.

This is because the insurance industry is heavily regulated by state governments. State insurance commissions serve four primary oversight functions, ensuring that:

Rates are fair and equitable for all consumers
Insurance companies are solvent and pay claims as promised
Brokers and agents are licensed
Policies fill their intended needs—that there are no gaps or surprises buried in the fine print
In other words, you can’t legally be sold a policy that says if a tree falls on your house, it must have exactly 17 leaves or you won’t be covered…by someone who doesn’t know what a premium is…that is six times more expensive than your neighbor’s policy…just because the agent doesn’t like your hairstyle.

Insurance companies must use actuarial data to justify their rates and get approval from each state’s commission before those rates go into effect. So how is it that the cost can vary so much for the same coverage from different companies?

Insurance companies are ninjas when it comes to data slicing. In the case of auto insurance, your premium generally includes all driving-age household members and consists of a base rate that is adjusted by many factors:

Age
Gender
Marital status
Driving pattern
Claims history
Location
Credit history
Make, model and year of your vehicle(s)
Type of Home, size and age.

There are a lot of ways insurers can use that data to make a case for their proposed rates. You’ll generally find the cheapest with a company that understands your risk. For instance, some specialize in non-standard auto insurance for individuals with bad credit, a DUI history or other factors that make them high-risk. Because the insurer understands these risks really well, they know how to price those policies properly.

By understanding our clientele, we can give advice targeted to your unique situation, making sure you’re covered where you should be and not paying for coverage that you don’t need.

You’re never going to find a sale on insurance because rates are not decided arbitrarily. This is why working with an agent who fully understands your needs will usually uncover the lowest premiums and best secure your future. And that is a responsibility we take very seriously! Thank you for your business!

Posted 1:04 PM

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NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
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