Why NOT Shop Insurance Every Year?

What’s the most common message in every insurance commercial?  It’s that shopping insurance every year will save you $467 on average.  Well, that certainly sounds great.  Sign me up!  But, a bit of simple arithmetic turns up some interesting questions.  Most notably, how is that possible?  According to the Bureau of Labor Statistics, the average person in the United States pays about $1000 a year for auto insurance. If I could shop insurance every year and save roughly $500, shouldn’t my premium be zero after a few years?  Heck, after several years THEY should be paying ME!  Right?  Nope.

Those commercials are mostly false.  They’re just attempts at getting you to go online to get a “free” quote.  What’s wrong with that you say?  Isn’t that the American way?  Good old fashioned competition.  In reality, most people don’t end up saving much money without giving up some coverage or taking on higher deductibles – many times without realizing that they’ve compromised coverage until they have a loss.

Here are some reasons NOT to shop your insurance every year:

• Loose existing relationship – That agent you’ve been with for 14 years knows your account (or should!) better than anyone.  Switching to an online company or a 1-800# means that when you have a claim, guess who has to negotiate everything.  You!  Your current agent is your advocate and can help you get better results in the event of a loss.
• Compromise available options– Shopping insurance every year is a great way to make some companies lose interest in writing your business.  Quotes are never free, and anyone who says they are is trying to sell you one.  Quoting insurance takes time and resources.  If you ask the same 3-4 companies for quotes every year, eventually they will start declining the invitation.  If an insurance carrier has quoted a risk each year for the last three years and not been successful in writing the account, they will typically decline it going forward.  OK, so what?  So, some big, bad insurance company doesn’t want my money.  Fine; they don’t get it.  Well, what happens if you get dropped by your current company, or they have a mandatory rate increase and you NEED to shop it?  Remember those three other companies that felt used and abused?  That’s right; NO INSURANCE FOR YOU!  Or, you’ll pay a lot more for it.  This is especially true for commercial lines, but also hard to write types of insurance (NC homeowners).
• It’s time consuming – Shopping for insurance was supposed to be easy.  THEY said it would be.  But now they need 14 pages of signatures, a complete history of my insurance life and something called “loss runs.”  Look, insurance is complicated.  You need a license to sell it and practically need an interpreter to read the policies.  Don’t underestimate the time you’ll spend each year getting your “free” quotes.

So, what do you do?  How can you guarantee you’re getting the best rates possible?  Bottom line: You can’t.  There’s always a new company out there that could save you a few dollars, that’s true.  You should rely on the advice of your independent agent.  They should be able to tell you what the market looks like (yes, there’s an insurance market) and what your options are.

Typically, we recommend “shopping” insurance every 3-5 years.  The market rarely fluctuates dramatically year to year.  Plus, remember what happened to the Little Boy Who Cried Wolf – eventually companies stopped offering him insurance quotes.