It`s hardly astonishing but a CFA (Consumer Federation of America) study discovers that insurance firms that pay higher commissions to agents and brokers often have higher premiums.
Consumer Federation of America (CFA) also revealed that higher prices for car insure don`t mean improved service for consumers.
"This research proves that consumers should shop very cautiously for insurance," claimed J. Robert. "The good news is there are insurance providers that pay minimal or even no commissions, offer low online auto ins prices and give very good customer service."
"However, this research also found a lot of insurance firms in which high commissions convert into lofty charges, with no increase in service quality," J. Robert said. "Great motor vehicle insurence rates in addition to good service may be found if customers take the time in order to compare insurance providers."
Findings
CFA reviewed commission data from the 20 most important writers of insurance for both private passenger online auto ins as well as homeowners insurance. This total commission information combined regular commissions and contingent commissions (paid after policies are sold and depend on special sales or on profitability goals).
The research compared sum commissions with cost, insurer profitability and also service quality as measured by grievance data and consumer contentment indices. CFA (Consumer Federation of America) discovered that:
1. Insurance providers which have lower commissions usually have lower rates. This isn`t always the situation, so consumers have to shop carefully.
2. There is no proof that disbursing higher commissions to an agent or to a broker produces either better service or higher consumer satisfaction. Actually, there appears to be no connection between the quantity of commission disbursed and the value of service supplied.
3. A number of insurance companies propose particularly high-quality deals. Others have charges that are constantly high.
In less competitive industries, several insurers may be tempted to interest market share by offering higher fees to agents or to brokers together with higher prices and, sometimes, higher profits for the insurance provider. Credit insurance is one subject in which this sort of `reverse competition` is most common.
Tips for Customers
We propose 6 advices for customers shopping for vehicles coverage:
1. Shop around! This research revealed that premium charges often increase with commissions, but this isn`t always correct. Consumers are supposed to be sure to obtain quotes from some of the lowest monthly payment insurance companies, including the direct writers of insurance that normally do not pay commissions.
2. Consumers do not have to pay more to obtain excellent service. Several of the insurance companies which have the best service records have low costs and low or even no commissions. It is worthwhile to shop among the insurance firms which have the lowest costs and the highest customer contentment/lowest complaint ratios.
3. To get information about autos assurance on-line rates, check country cost information guides. Most countries have cost information guides. Typically, consumers are able to download these guides from the country`s insurance department web-site.
4. To get complaint information on insurance companies, check with the National Association of Insurance Commissioners` web site, www.naic.org.
5. Be cautious with consulting with only one insurance agent or broker for online auto ins, even in case that agent represents several insurance providers. Consumers have to know that some agents who represent more than 1 insurer could put the customer in a higher priced insurance company with larger commissions even if the consumer meets the requirements for a lower cost. States don`t necessitate insurance agents or brokers to place the applicant with the most excellent policy for him.
6. Ask agents or brokers the right questions:
Do you represent me or do you act for the insurance firm you are recommending I use?
What commission are you earning compared to the cost of the auto coverage plan you`re recommending me to buy?
Am I receiving the lowest cost among all the online auto ins corporations that you represent for which I meet the criteria?
What additional online cars assurance companies do I qualify for that you act for? What are the prices I would disburse at those insurance firms and what commission would you gain with each one of them?
Do you own a contingency commission arrangement with the company you`re recommending? Please fully explain it to me.
In case I have a claim, do you represent me or do you act for the insurer in the claim process? Is your compensation in some way connected to claims filed by me and by additional clients of yours?
It`s time to get more details:
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