10 Secrets Auto Insurance Companies Don’t Want You to Know

Vehicle insurance companies influence the way motorists perceive certain terms, deploy tactics to increase policyholder retention, profits and reputation and develop new algorithms to differentiate premiums as much as possible. These efforts are not top secret, deceiving or misleading but they certainly require better explanation. Then, policyholders can spot them easily and even use them to their advantage. It would help if you know how they think, operate and what information they use.

Auto insurance companies dedicate large resources to analyse data and use them to their advantage. So, they may always be one step ahead and  some of their highly guarded secrets like what information they really consider when evaluating risks and calculating premiums can never be fully understood. Nevertheless, certain practices and terms used can be analysed and their true meaning exposed. Here are some of those things automobile insurers may not want you to know and avoid;

  1. Royalty discounts

Lately, it is widely argued that there is a price optimization practice going on in the background, where companies can single out the policyholders who are unlikely to shop around even if their rates are increased and charge them more. As a result, while loyal customers qualify for a small loyalty vehicle insurance discount, they may actually be paying much more because they are profiled to be loyal and unlikely to leave the company. For example, you may get a 10% loyalty discount but charged 20% more because you just won’t leave the company for better deals. Always shop around and switch when you find a good deal to avoid getting caught by price optimization algorithms.

  1. Policy auto renewals

Yes, car insurance auto renewals help in making sure policy continuation. However, it helps insurers because policyholders feel more comfortable when they know their policy will auto renew in the worst case. So, they don’t feel the urgency to shop around and by the time they want to do something about their expensive renewal quote the policy is already renewed and they decide to check next time. Use auto-renewal as a helpful tool and not an excuse to avoid getting a few quotes.

  1. Insurance company agents (not yours)

Nearly always people refer to agents as my agent although they are in fact agents of the insurance company and often working exclusively for one of them. In that sense, they aren’t really advisors for you but a sales agent for the provider. Motorists should look for an independent broker or an agent if they want them to be able to shop around and offer them the best quotes.

  1. Upselling

Upselling and loading up policies is a common practice and agents can make them sound essential to your protection. Often auto insurance policy add-ons are expensive considering what they are for and most vehicle owners wouldn’t have a financial ruin if they didn’t have them. Motorists should be able to look at costs and benefits before they decide. Once you start adding extras like roadside recovery you end up with expensive premiums. Besides, you may already have a membership to a Recovery Service.

  1. Monthly installments

Nearly every auto insurer either has a fee or charges interest when a customer wants to pay by installments. On the other hand, many customers may not realize the additional fee and think it is a free service. Policyholders can actually save on average 9% with many companies if they can afford to pay the premium in full and avoid the installment fees.

  1. Low ball claim settlement offers

A report released in 2007 by the North Dakota Insurance Department revealed that one company used incentives to achieve low claim settlements. Automobile insurers offer claims adjusters pizza parties and gift cards when they manage to get a low settlement. Other similar rewards and pressures to employees to meet lower claim payment goals are known in the industry too. This is definitely what car insurers don’t want you to know. You should be aware of these tactics, especially when you have a claim.

  1. Calls made to your auto insurer

Policyholders should be careful and make it very clear if they are asking for advice or reporting a claim. Otherwise, the agent they talked to about a recent incident may already open a claim file on their policy. Companies shouldn’t take this conversation into account until a claim is made and they end up paying for it and they probably won’t. But they might if there are other claims and traffic tickets on the file as well. Most automobile insurance providers and agents will allow you to ask hypothetical questions without even giving your name, if you haven’t yet decided if you want to make a claim or not.

  1. Low deductibles

Most motorists would prefer a policy with lower deductibles. Again, nothing is free in most cases and you will be charged higher vehicle insurance premiums for having lower deductibles. Look at the figures carefully. Picking the policy that has lower deductibles will surely be a smart choice “if” you have two quotes for the same price and coverage. This may not be seen as one of those things that automobile insurance companies keep quiet about, but rather something they don’t need to tell you.

  1. Policy wordings

They have written the documents and know exactly how to use the wordings to suit them. Many states have come up with legislation that requires car insurance companies to produce wordings in plain English. Remember that the agent has to explain every little detail you don’t understand. Take time to ask questions and get them clarified. Not having any clue about terms, conditions and restrictions of your auto insurance policy can open up all sorts of issues in the future. If you don’t like the terms you should switch to another company with more lenient and clear terms.

  1. Credit score

Most motorists may know that auto insurers check their credit score but they may not realize how important it is. Today, almost all carriers check your credit score and penalize you if it is not good. Many consumer advocates believe credit scores help companies charge better rates for wealthy people and penalize poor. You can turn the table on them by looking after your credit before they look at it. Instead of being penalized for bad credit you get discounts for a great one. Also, they don’t tell you but automobile insurers can check about policyholders in many ways. You are likely to get caught in a lie so don’t do it.

Not every automobile insurer is out there to get you. For example, a few people report to get claim checks that are more than they bargained for. A few things they have not included in calculations but the carriers made allowances for those as well. There are some great ones out there and it is your job to find them. And you can do it if you know the things kept secret by car insurance providers.