Insurance Navy announced yesterday that it is predicting the sales of its ‘cheap car insurance’ to double in the next 12 months if the tumultuous financial markets do not rebound in the next 2-3 months, company CEO, Ed Sneneh, said.
“Standard and preferred insurers are investing in the stock and mortgage markets. That will leave them vulnerable to the market changes, like in the case of AIG. To stay in line and maintain some profitability these companies- which do not market ‘cheap car insurance’- may find themselves with no choice but increase their premiums across all the boarders,’ Sneneh revealed.
Standard & preferred insurers use ‘credit scoring’ in rating auto insurance policies. The continuation of the credit crisis nationwide means that more people will suffer higher rates because of poorer credit rating. Furthermore, the continuing decline in economic activities may encourage claims that are not credible or immaterial, pushing the insurers overhead little higher, hence forcing premiums to go even higher. Mr. Sneneh said that he “believe[s] that standard and preferred carriers will look at every possible factor to recover their losses and to increase their cash flow, including raising premiums.”
Local and some regional insurers that focus on marketing ‘cheap car insurance,’ or ‘low cost automobile insurance’ have more stringent investment strategies and are more ‘efficient’ in claim handling. These insurers are far less affected by the changes in the stock or mortgage markets. Very few numbers of these companies use credit scoring in pricing automobile insurance. For these reasons, the demand on ‘low cost auto insurance’ or ‘cheap car insurance’ will be much greater.
Low Cost Insurance Branding
Some reputable companies are adapting quickly to the new trends by creating brand new automobile insurance programs under titles as ‘Low Cost Insurance.’ Under these programs credit check is not necessary and less strict underwriting guidelines are used in issuing the policies. Policy liability limits are kept at State minimum or little higher than minimum.
Is there ‘really’ a thing as ‘cheap car insurance?’ Mr. Sneneh says that the answer to that question depends on how you look at it. He explained that if you define automobile insurance premium as how much you will pay today to the insurance company that sold you your liability policy in the next, say, 6 months then the answer is yes. There are differences in how much companies charge for their policies for certain classes of people in certain geographical areas.
But if you look at your cost as how much you will pay today, plus the time elements in handling and paying the claim, amount of protection you are provided in terms of liability limits in the policy, quality of customer services, and other time factors, then the concept of “low cost automobile insurance,” or “cheap auto insurance quot;” may not be more than a marketing pitch.
When setting premiums for automobile liability insurance, companies take in consideration the probability of certain claims based on several sets underwriting factors. The first set of factors are credit, age, gender, marital status, past driving history, claim history, geographical area, type of vehicle. The limits and types of liability (potential loss limits) are the second most important set of factors affecting the price. Finally the companies will then incorporate certain margins for profit, agent commission, and cost of their customer and claim services.
When you call an insurance comapny/ agent for a quote you provide them with enough information related to the first set above. The company now knows most, if not all, relevant information about you. In most cases, the company, not the consumer, is the party that sets (suggests) the limits and the types of the liability and tell you the price. Certain ‘cheap auto liability insurance’ companies have only one type and only the minimum limit mandated by law, so with these companies choosing the limits is not even an option. However, things that are still unknown to you are the third set of factors that affect the price, mainly the time element and fairness related to handling potential claims. Here companies do vary among each others.
In the opinion of many insurance professionals, there is no such thing outside the marketing world that is called “cheap car insurance” or “low cost car insurance.” There are companies that are more efficient than others or companies that do trade offs between factors (i.e accepting less profit for better service).What should that mean to the consumer? ‘The answer to that questions lies in understanding the reasons why you are buying the insurance policy,’ Sneneh stated. The main reason why insurance exists is the “protection of wealth.” Liability offered in your auto insurance policy is aimed at protecting your wealth in the event you become liable for a negligent act while your vehicle is being driven. The amount of coverage should be proportional to your present and potential wealth. Minimum liability limits may be extremely insufficient for someone with considerable wealth because it leaves a major portion of their wealth unprotected.
People who shop for insurance because they care most about compliance with the law may be less attentive to the limits of liability. Their primary focus is the price. The same applies to those who get insurance just to comply with lienholder’s requirements or requirements of a vehicle lease. In the event of lease, things can be little different. Leasing companies which are considered to be ‘owner’ of the vehicle may require higher liability limits.The vast majority of preferred insurers which provide better quality services to their customers will provide high prices, or even refuse to provide insurance, to certain drivers who are considered “high risk.” People with excessive violations, poor credit history, ZIP codes with high claim experience and foreign licensees may find it either prohibitive or unacceptable to get insurance with a preferred/ standard insurer. For those, other insurers come into the picture and offer less coverages for relatively lower premiums than standard/ preferred insurers.
Shopping for Insurance Starts With ‘Needs’ not Brands
Sneneh, a Charted Financial Consultant, stressed the importance of ‘needs shopping’ approach. “Forget about cheap or low cost marketing pitches and look first at your needs… what do you need your auto insurance policy to do for you, and only then you decide on the next step” Sneneh said. We should remember that the choice should always be given to quotes offered with high liability limits that are offered by preferred/ standard insurers, then to non-standard insurers if the first option was not possible. For that reason, patience is needed here. Phone shopping may not be appropriate for many individuals with special financial backgrounds and needs.
Professional Independent Agents May Provide Better Services
Shopping for automobile insurance can become a tedious task. Reviewing present insurance policy is as important as getting several prices from different insurers. For that reason, dealing with an independent insurance agency can save big time. Many independent agents represent several insurers, preferred, standard, and non-standard insurers and these agents have ‘cheap car insurance’ and insurance that is not cheap!’ Communicating your goals and ideas to a professional independent insurance agent may help you save time, money and get the coverage you need. Many agents who feel that the person on the other line is looking for a cheap insurance price in a couple of minutes will provide such a quote. However, it takes more than a couple of minutes to provide a needs-based auto insurance quote.
Insurance Navy is an independent leader in the auto & business insurance agency system in the Chicago metro area. It represents dozens of preferred, standard, and non-standard insurers. Its CEO, Ed Sneneh, is a former instructor of insurance and finance, and is a Charted Financial Consultant & Charted Life Underwriter. The company provides on its website the ability to get instant quotes from several insurers simultaneously. Each quote is reviewed by qualified staff and client is advised personally on the nature of the products available based on their needs.
