After shopping around, comparing quotes, and identifying a car insurance provider that offers both competitive rates and reliability, it may make sense to stay with them until they lose their competitive edge, fail to meet your expectations, or your circumstances change in a manner that warrants switching to another carrier. Loyalty is a commendable quality, but it should be grounded in sensible reasons. It becomes counterproductive when it results in missed opportunities for superior coverage, more affordable policies, and greater satisfaction with your auto insurance provider.
Surveys indicate that some policyholders are either loyal to their carriers or they don’t like to shop around. A recent AAA survey shows that 8% of motorists have remained with the same car insurance company for the past two decades, while 21% have stayed with their insurer for the last six years. Furthermore roughly one-third of motorists admit to never actively seeking out alternative vehicle insurance options. So, what convinces these people that they found an automobile insurer worth staying with?
Advantages of Staying with your Auto Insurance Company
Many motorists tend to believe that not much changes in the insurance landscape over just a few years. If they have already secured a reasonably priced and reputable carrier, the idea of exploring other options may not even cross their minds. Moreover, maintaining the status quo involves minimal effort, especially when they have set up auto-renewal for their policies. Consequently, inertia often plays a significant role in why people choose to remain with their current insurance providers.
Here are some of the reasons that influence individuals to continue renewing their existing vehicle insurance policies:
1) Renewal discounts are offered by many vehicle insurers to keep customers. It may be a small percentage but give policyholders the feeling of being appreciated. Some companies start offering small discounts each time a policyholder renews with them. Many companies offer large discounts after 3 – 5 years.
2) Loyalty perks can add up to an attractive package with savings and free add-ons. According to Nationwide, you could get up to 15% loyalty discounts and up to 30% according to GEICO. This doesn’t mean everyone can get these savings but people can still get impressive savings. Various carriers offer other perks. For example, progressive offers free Accident Forgiveness after 5 years.
3) Accident Forgiveness is great, especially if you get it for free. Also, it can help companies keep customers. If you have one at-fault accident, your car insurer would not let it affect your rates if you have Accident Forgiveness coverage. This means the company won’t be able to charge you higher premiums.
But it would be harder for you to leave the company because only your current insurer forgives the accident you had and all the other companies see it and offer higher quotes because of it for the next 3 – 5 years. So, it is highly important to choose the right company at the start if you are a type of person who is unlikely to switch for some time once you sign up.
4) Bundling and multi-car insurance arrangements can save a lot of money that people may not want to lose. They also make it tougher to make a move because policyholders need to break a stronger tie with their automobile insurance providers. On the other hand, they can save more when they find another carrier offering larger discounts for bundling and multi-vehicle insurance policies.
Still, it is harder to change your auto insurance when you know you will be losing a bundling discount on your home, which is usually more expensive and harder to find discounts.
5) The agent is often the reason people sign-up and stay with a particular company. A good agent would make sure changes in your life would be considered and your policy remains up to date. They can also put their customers on better rates since they can bind policies on behalf of the company. Many policyholders stay for the agent.
Disadvantages of Staying Loyal to your Car Insurance Carrier
One of the first recommendations from experts regarding vehicle insurance is to conduct an annual review. The reasoning behind this advice is that there is valuable information to be gained from investing the time to gather multiple quotes, conduct comparisons, and make a decision based on the latest findings. Here are some of the potential disadvantages that loyal policyholders may face when they disregard this advice, which is often given by their own insurers as well.
1) Missing out on savings can make it costly to renew your current automobile insurance policy. Deciding to stay put has an opportunity cost and it can be hundreds of dollars. Policyholders are more likely to save big when they haven’t shopped around for a while and are paying high rates at the moment.
Many motorists may be paying higher premiums at the moment because they are young, had an accident or speeding ticket last year. They may see that their rates came down a bit and feel relieved and stay. However, this may be their change to move away from a high-risk car insurer to a standard one and not only save money but also get better policy provisions.
2) Getting caught by a price optimization algorithm can be a punishment for staying loyal. Several studies confirm that policyholders can save on average 20% if they haven’t shopped around for 5 – 8 years, despite all the loyalty discounts they are currently getting. This suggests that some auto insurers are giving with one hand and taking away with another.
Price optimization is a strategy employed by certain vehicle insurance companies, where they identify loyal policyholders who are unlikely to switch providers and then charge them higher premiums. This is a key reason experts advise policyholders to shop around annually. Loyalty discounts can inadvertently result in increased costs if a price optimization algorithm identifies loyal customers who are less likely to seek alternative options and gradually raises their rates.
3) Recent changes in your details may spook your current insurer, leading to significant rate hikes. Then, you might find yourself overstaying your welcome. While certain auto insurance providers may offer competitive rates for low-risk drivers, their terms may become less favorable when you introduce high-risk vehicles or add teenage drivers to your policy. It’s crucial for motorists to keep their information updated, and get several insurance quotes when making such changes.
4) You may lose out on better coverage and free add-ons. Often companies offer different incentives like free roadside recovery, diminishing deductibles or switching discounts. There are also other innovative products that may serve you better but not offered by your current provider like pay-per-mile or telematics-based auto insurance policies.
Most car insurance companies offer numerous discounts geared to persuading customers to stay or switch and they can be for purchasing your policy in advance, loyalty, switching, signing online, paying in full and even setting up an Electronic Funds Transfer. These are easy saving opportunities with hardly any qualification conditions and they can make switching or staying sweater.
Ultimately, the choice is yours, but it’s advisable to regularly assess the market by shopping around for vehicle insurance at least once a year. Additionally, it’s advantageous to do so promptly upon receiving your renewal notice. This approach provides ample time to evaluate your options and take full advantage of any signing discounts, whether you decide to remain with your current insurer or explore new ones.