Insurance Company Loyalty Doesn’t Pay

The other day, I was inspired by a conversation I had with a friend. My friend, whom I will refer to as an insurance company loyalist said that she has been with her insurance company for 52 year. They jump when I call them. As I wanted to gain more insight from his perspective, we discussed this belief for a while. This week’s topic is from the perspective that I am in California, and therefore, the insurance law. You may have different laws in another state. I’m not an attorney, so this is not legal counsel.

Prop 103 was an insurance reform proposal that California voters approved in 1988. I believe that the law, although primarily concerned with regulating rates and protecting insurance consumers, also prevents discriminatory tactics being used by insurance companies. This means that an insurance company must treat a 1-day customer with the same care as a 52-year customer. If an insurance company provides preferential service to an older customer than to a newer customer, they could face penalties and fines from the Department of Insurance if it investigates complaints of this nature. Insurance companies will not compromise their customer service, regardless of tenure. Typically, the penalties are much greater than the client’s value. My friend’s policy is the same for everyone, even though the company may be politer. They will jump for him as they would for anyone else. Insurance shoppers should know that no matter how long they have been with one company, their treatment will be the same.

Although I don’t have access to the corporate world, I can bet that the opposite of jumping is true. Insurance companies spend a lot of time studying the business to make profits. I believe loyal customers are the most profitable customers. Once they are comfortable, loyalists can be tapped for benefits such as changes to policies or directions. These corporate leaders won’t speak of special privileges for loyalists. They simply take the loyalty of the insurance loyalist as a given, and assume that regardless what company does or how customers are treated, loyalists will stick with them. Like some sports teams where the product is terrible, fans stay loyal to their team. The executives receive a healthy bonus payment, and the company reaps the benefits from these customers. It makes sense for me to offer you some tips and advice about insurance shopping.

My friend understood that he should shop for insurance as any other consumer would. He should also talk to his agent about pricing with other companies to confirm his pricing. Why waste money on a brand when you can save money? I explained to him that the main factors in determining his best rates are his driving record (tickets, accidents), how many years of driving experience he’s had and how far he drives each annual.

Insurance companies can use other factors to determine rates. These are the most important for shoppers looking for the best price and insurance. Is there a loyalty discount offered by his company? Yes. I asked him what 52 years of loyalty meant to his company. After doing some calculations, we found that his loyalty discount was approximately 7%. We are going to assume that 52 years of loyalty to an insurance company is worth approximately 7%. Would you be willing and able, if offered greater discounts, to stay with us?

Companies that offer discounts to college graduates or specific professions are included in the category of these factors. Was his company offering something similar? He said no. He was more of an insurance shopper than a company loyalist and this discount could have potentially saved him an additional 8%. This is just one example of savings that insurance shoppers could enjoy. Insurance companies offer discounts to alumni organizations or other organizations, and extra discounts for those with a clean driving record. Insurance shoppers need to be open to comparing prices. Comparing quotes is easy and both the insurance shopper as well as the loyalist may find savings.

My view is that you don’t need to shop for your insurance every year. However, I would look out for triggers that indicate you should. Is your rate changing from one policy period? But your primary rating factors didn’t? Does your agent or company pass the change off as ‘new rates’? Is the explanation that you hear confusing? You may not be eligible for the same discounts or rates from every company, so make sure you use your triggers to become a new insurance shopper.