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Thanks to the World Wide Web, the car insurance industry is more competitive today than ever before. Thousands of people are finding great insurance deals on the Internet every day! With so many different choices, it’s important that consumers know how to make the best use of the tools available when looking for the best car insurance rates.
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Many websites offer good advice about shopping for car insurance. Since, there is no guarantee that your insurance provider will have the absolute best rates at any given time and in any given situation, most financial consultants agree that it’s best to compare rates with other providers at least once a year or when your auto policy comes up for renewal.
Competition Drives Prices Down
Competition is good for most any industry and car insurance is no exception. The Internet has helped to level the playing field for insurance providers by allowing small regional companies to compete head-to-head with large national concerns.
According to studies released by the National Association of Insurance Commissioners (NAIC), annual car insurance premiums have been dropping steadily over the last five years.
In 2005, the average family paid $832 for their auto insurance coverage.
By 2009, this amount had dropped all the way to $785, down $4 from the 2008 figure of $789. This is indeed good news for consumers who have seen rising prices in most every other sector of the economy.
Proportionately, consumers are paying out a smaller percentage of their income for car insurance than at any point in recent years, a 17% decrease, from 1.27% of a family’s total income in 2005, to just 1.05% of a typical family’s income just four years later in 2009.
Industry sources add that far fewer auto insurance customers are being relegated to their states’ assigned risk pools. In the decade between 1994 and 2004, this number shrank by 4% to 1.6% of insured motorists. These statistics are provided by the Insurance Information Institute.
Auto Insurers Advertising More
Auto insurers are spending increasing amounts of money on conventional advertising, investing billions of dollars in traditional media sources, television, radio, and print. Unfortunately, these conventional marketing tools aren’t working as well as they had been in the past.
However, the nation’s largest auto insurance companies aren’t getting as much return on their investments as they would like according to recent published reports in Advertising Age Magazine.
Advertising Age likens the current media blitz to all out war calling it an advertising brawl. Nearly $4 billion is being spent by hungry auto insurance companies in an attempt to indelibly etch their trademarks, logos, and name brands on the American consciousness.
Nowadays, insurance shoppers are keenly aware that large advertising campaigns aren’t always a sign of the best product, service, or especially price. With the world of information at their fingertips, more and more consumers are turning to the Internet for their car insurance needs.
Customers Save by Shopping Online
Industry sources claim that more than a third of consumers, 34% prefer to purchase a car insurance policy online. Internet-savvy consumers can compare the services of dozens of different companies quickly and efficiently in a matter of minutes. A side-by-side comparison of coverage and pricing gives insurance customers a distinct edge when it comes to saving money.
A J.D. Power and Associates insurance shopping study found that 52% of shoppers looking for car insurance begin their search online.
Power discovered that 73% of shoppers visit at least one insurance company website as well as other informational and commercial comparison sites. Most importantly, the study revealed that nearly a third of insurance shoppers, 32%, get their insurance quotes only via the Internet, with about the same number of shoppers claiming they prefer to purchase new car insurance online.
An insurance shopper has the expectation of visiting a site, obtaining information, and completing an insurance purchase in a single visit.
Shopping for car insurance has become a virtual self-service experience. If the occasion arises, shoppers still have the opportunity to chat with a live agent online or by phone, but most are able to quickly and conveniently find answers to their own questions online.
Sometimes It’s Better to Switch
J.D. Power found that the number of insurance customers seriously looking for a new company dropped to a five-year low. Only a quarter of insurance customers followed conventional advice by reviewing their policies and looking at other companies. Of those who did, 43% switched companies.
However, the financial rewards for switching car insurance companies have diminished somewhat in recent years, in part because of the many thousands of customers who already have taken advantage of lower rates by switching their insurance carriers.
In 2011, the savings for car insurance customers who switched companies averaged $359 per year down from an average of $412 in 2010.
While insurers weren’t able to woo many customers away from their competitors, these numbers do suggest that customer loyalty has been increasing amongst auto insurance companies. This is true even with the significant increases in advertising and spending already noted, a 12% increase in 2011.
Websites Are Important
According to a brand new study by J.D. Power and Associates, an insurance company’s website can quickly put a customer at ease and therefore more likely to buy their insurance products. Websites have become important tools in attracting new insurance business as well as maintaining a company’s existing client base.
A website that is difficult to navigate or is perceived as unfriendly can cause a potential customer to shop elsewhere. Not only would the company in question lose a prospective client, but that customer will turn other consumers away from a website they feel did not adequately serve their needs.
Customer Satisfaction Surveys
The J.D. Power insurance shopping study also noted that insurance companies have been responding positively to consumer demands for more convenient shopping and more customer specific specialty insurance policies.
The results of their recent study suggest that customers are more satisfied with their auto insurance providers than at any time since 2000 when the annual survey began. Overall satisfaction rose 1.5% above the 2011 numbers, an average of 804 points out of a possible 1000.
Forbes Magazine published the results of the 2012 J.D. Power U.S. Auto Insurance Study, listing the country’s top rated car insurance companies. This year’s J.D. Power Five Star Winner was the Hartford Insurance Company with an overall point total of 857.
Next on the list was Liberty Mutual, followed by American Family, the Auto Club Group, Nationwide Insurance, Amica Mutual, State Farm, Erie Insurance, MetLife, and number 10, Auto-Owners Insurance. Just out of the top ten, but tied in total points with Auto-Owners, was the popular Geico.
The State You Live in Makes a Difference
Most consumers recognize that car insurance requirements vary from state to state. As requirements vary, so do the rates that insurance companies will charge. While you may not want to move from one state to another just to obtain lower car insurance premiums, it’s helpful to know some of the states where rates are the highest and lowest in the U.S.
Of the 50 states and the District of Columbia, four states have average car insurance costs above $2,000 per year.
Louisiana is the highest in the nation with an average annual cost of $2,536 for annual auto policy. Insurance costs in Oklahoma, Michigan, and West Virginia average just over $2,000 per year.
On the other end of the scale, the state with the lowest annual car insurance rates is Maine at just $889 per year. Two other states that show annual average insurance costs at less than $1,000 are Iowa at $985 and Wisconsin at $987.
Lifestyle Changes Can Impact Car Insurance Costs
Insurance carriers consider many factors when determining how much you will pay for your annual car insurance policy. Your location, the state you live in, and whether you live in a busy urban area or a quiet rural setting is one important factor that we’ve already touched upon.
A NAIC survey found a number of lifestyle changes that Americans have recently undergone that have resulted in significant savings on auto insurance. Some of these changes were due to the recent economic recession. Others are just common sense ways to save money in general.
Of those who responded to the NAIC survey, 40% reported that they were driving less. Many instead were utilizing available public transportation systems. Nearly 20% of those who were asked told NAIC that they had traded their car for one that was lower in cost. Others got rid of an extra car altogether.
One negative finding of the survey was that some 20% of respondents claimed to have cancelled their existing car insurance or reduced their coverage in order to save money. This is true in spite of the fact that they will be forced to pay significantly higher premiums in the future after having been uninsured for a period of time.
Lower Credit Scores: Higher Premiums
Consumers want to be very careful about maintaining their credit record since auto insurers are relying more heavily on credit scores to rate individual car insurance policies. Most U.S. states allow insurers to use credit information in making a rate determination finding that a current credit score is a reliable indicator of potential future losses the company might suffer.
More than a third of motorists who were surveyed did not realize that poor credit could negatively affect their car insurance rates. Overall, consumers should be aware of all of the criteria that car insurance companies will use to set their premium rates.
The best tip anyone can give for finding lower insurance premiums is to thoroughly investigate the marketplace and comparison shop as many insurance providers as you can in your area. Smart online shopping will save money now, and in the future.
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