Something your car insurance company doesn’t want you to know

Have you ever wondered why every car insurance company commercial you’ve ever seen claims they can save you “15% (or more) on your car insurance”? That’s kinda bothered me for some time. I mean: how is it even possible? How can every company claim to be the cheapest? Obviously they can’t, but “Honest” Abe wouldn’t lie, would he?

I finally figured out why they can make this claim. The reason is, because odds are: your current insurer is probably over-charging you. Below is a conversation I had with my former car insurance company after I found a much better deal with another insurer:

NOTE: I deliberately left out company names because I’m convinced they ALL do this.

Me: I would like to cancel my insurance.

Insurance Rep: I’m sorry to hear that, can I ask the reason?

Me: I found a better deal with another company with the same coverage.

Rep: We may be able to match or beat their price. Would you like a quote? It will only take a few moments.

Me: [curious as to why that should be true] …um, OK sure…

Rep: Excellent, I just need to ask you a few questions:

>>>Goes through the normal questions<<<

Rep: So your quote is $XXX (the other company is still cheaper, but a good amount less than I was currently paying)

Me: Wait, that’s less than I’m paying now. How is that possible?

Rep: There are a few reasons, you may qualify for discounts or promotions.

Me: So you’ve been…overcharging me?

Rep: [long pause]….no, I wouldn’t say that.

Me: You quoted me at $XX amount less than I’m paying now…with your company…with the same coverage.

Rep: Like I said, you probably qualified for discounts or promotions.

Me: [THINKING: So…why don’t I get those automati.. -Know what? It’s a moot point:] The other company is still cheaper, I’m just going to go with them.

Rep: Fair enough.

>>>Awkwardly goes through cancellation<<<

I suddenly understand why some companies offer to cancel your former insurance company for you:

Is it naive to wonder why they wouldn’t give me those discounts automatically? To be honest, I’m not convinced that’s the entire story. So I decided to compare my insurance premiums to the value depreciation of my car (according to Kelly Blue Book):

6 month premium when I first purchased insurance: 3% of the value of the car

Same coverage about 2 ½ years later: 4% of the value of the car

Re-quote: 3.2% of the value of the car

*figures are approximate

My car’s value depreciated was (comparatively) much faster than the reduction to my insurance premium, but when I did a re-quote, it was much closer to the original ratio.

This only proves one thing:

While I don’t think failing to take my car’s depreciating value into account was the only think at work here, it certainly looks like it was part of it (my car’s mileage was a question for the re-quote, after all). There’s a number of factors that can decrease your insurance premium. Here are some:

  • Cars & drivers are safer now than when you first bought insurance
  • Safe driver (and other) discounts
  • Your car’s value depreciation (age; mileage; etc.)
  • The insurance company has grown/optimized and can offer better prices to stay competitive

The only thing my numbers and conversations prove is that when one (or more) of these things causes premiums to drop, you need to ask for it. Don’t expect your insurance company to automatically offer you a better rate. That wouldn’t be good for profits.

My solution

Normally, I’m a very loyal customer. But I think from now on, (every six months or so) I will get quotes from car insurance companies (including my current one) to make sure I’m getting the best price. That is, until one of them sends me a letter that reads something like this:

Dear [Insurance Customer]:

You now qualify for X discount and Y promotion. Also, we have adjusted your premium to reflect the CURRENT estimated value of your car. We have done this because we are committed to giving you the best possible price on your car insurance. Enjoy the savings!

Sincerely,

[Insurance Company I have yet to find]

Am I alone on this? Does a company like this exist?

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