A significant majority of Americans appear to be happy with their auto insurance companies – at least when it comes to how efficiently their claims were handled. That’s according to a recent Consumer Reports survey, which reported that 86 percent of customers were highly satisfied with the handling of their claims by 22 of the nation’s largest auto insurance companies.
“But that doesn’t mean they’re happy about what have to pay for their insurance,” says Greg Daugherty, Consumer Reports’ executive editor, citing a report from the Bureau of Labor Statistics showing that auto insurance premiums jumped 10 percent from June 2008 to June 2010.
So, even as it was reporting the overall customer satisfaction regarding the handling of claims in its October issue, Consumer Reports also included more than 10 tips on how to save on auto insurance premiums.
But first, about that survey: Consumer Reports conducts such a survey every few years, and this one was based on the experiences of 28,241 respondents who filed claims that were either settled or rejected between January of 2006 and June of 2009.
Consumer Reports assigned scores to the insurers, based on the customers’ overall satisfaction with claims handling. A score of 100, for example, would indicate that all respondents were completely satisfied; 80 meant they were very satisfied and 60 indicated they were fairly well satisfied.
All of the 22 companies that were rated scored an 81 or higher. The highest-rated insurers included New Jersey Manufacturers Insurance Company, USAA Group, Amica Mutual Group, and Auto-Owners Insurance Group of Companies, with overall satisfaction scores of 92 or higher
Customers for all four of those companies reported relatively few problems with their claims. And, overall, respondents reported that 75 percent of claims took two weeks or less to be settled, in terms of receiving payment from their insurers.
“We didn’t capture every single auto insurance company in this survey, because in order to accurately, statistically represent the performance of an insurer, we have to have a large enough of a sampling,” says Daugherty. “In some cases, we had data on smaller insurers, but not enough to accurately judge or rank them. So, this list is mostly the larger companies. There may be smaller insurers out there who are making their customers more happy or less happy than the average of 86 percent.”
The survey focused on how claims were handled, “because that’s the crucial interaction most consumers have with their insurance companies – it gauges whether their insurance company will be there when they need them the most,” Daugherty says.
He also points out that even though 86 percent said they were highly satisfied, “there is still that differentiation between 94 and 81, which is a pretty significant gap. We’d like to see those 81’s come up. We’d always like to see every score be higher. But compared to some of the services we rate, like credit cards, 86 is good.”
And now, back to the bad news: That 10 percent hike in premiums in the last two years.
“That a significant hike, in this economy, when people are hurting financially, especially if they were already paying $3,000 to $5,000 a year for their insurance, and when inflation is running at just about nothing,” stresses Daugherty. “Unfortunately, insurers are largely free to set the premiums at whatever level they want.”
The high price of auto insurance is one reason that one in six U.S. drivers are presently uninsured. “A lot of those people just can’t afford it,” he adds.
Which is why Consumer Reports also included in its report a list of tips on how to save money on premiums.
1) Do an annual rate check.
According to the 2009 survey by the Consumer Reports National Research Centers, only 14 percent of 4,500 Consumer subscribers who shopped around found that they would save money by switching insurers. But it’s still a good idea to make a few calls, or go to one of the premium-comparison sites, like Insure.com, NetQuote.com or InsWeb.com.
“If you’ve been with one company a long time, and have a good driving record and a good claims history, often your insurer has bumped you up into a better class, and you’re probably getting a discount based on being with them for eight or 10 years. So you’re paying less than a new customer will pay,” explains Daugherty. “But if you’ve only been there a year or two, you might find you would do better somewhere else. So, it does pay to spend just a bit of time seeing what else is out there.”
2) Choose the correct deductible
Obviously, going with a higher deductible reduces your premium. That’s because if you get into an accident, you will pay more out of your pocket. Increasing your deductible from $200 to $500 can cut your premium on collision by 15 to 30 percent. If you go “all in,” and hike it up to $1,000, you could save 40 percent.
But, the trick is knowing which approach is best for you. If you’re a safe driver, and haven’t had an accident in several years where you have been at fault, going with a higher deductible on collision coverage might be the way to go.
“It also depends on your financial situation,” notes Daugherty. “Most folks who can afford to pay $200 out of their pocket can also afford $500 – but $1,000 is a bigger stretch. If you’re disciplined, and can take the money you save from paying a lower premium, and put it in the bank in case you need it if you get into an accident, it will pay off to get your deductible up as high as you can manage.”
3) Select your vehicle wisely.
Your premiums can vary widely, from one model to another, and that doesn’t just mean if you’re deciding between a Corvette and a Fiesta. Rates can still be significantly higher or lower, from model to model, within the same vehicle class and price range.
“The data is interesting,” ponders Daugherty. “Some of the vehicles with the highest theft rates are also the most mundane, the most common. Some of that may have to do with how easy they are to break into. So, if you’re shopping, and you’ve narrowed it down to two or three vehicles, call your insurance company and compare what the rates would be on each.”
It’s also wise to ask the dealer to show you the “Relative Collision Insurance Cost Information Booklet,” which is published each year by the National Highway Traffic Safety Administration. The Highway Loss Data Institute also reports data on collision, bodily injury and property-damage liability for individual vehicles.
4) Manage teenage-driver risk
It’s no surprise that teenage drivers have higher accident rates than adults. So, adding your teenager to your policy can result in a whopping 50 to 100 percent spike in your premiums.
“Yeah, that kind of increase is pretty frightening,” sympathizes Daugherty. “So, you need to do everything you can to bring that down. One, make sure they take a driving test before getting a license, to reduce their risk of an accident. If your teen is away at college and does not have access to the vehicle, make sure your insurer knows that.”
The biggest cost saving when it comes to cutting teen risk – but one that will likely cause teenage angst to spike nationwide, with howls of adolescent protest in every household – is if you can get your teenager to wait until age 18 or 19 to get a license, instead of 16.
“My gut feeling is that such a suggestion would cause some household turmoil,” says Daugherty wryly. “But if you just can’t afford that big spike in your premium, it’s definitely an option to keep in mind.”