Balancing costs versus customer service in car insurance

Changing providers may improve your experience, but you may be disappointed with the savings.

When it comes to car insurance, today’s advertising almost entirely focuses on just two things – cost and convenience. However, according to J.D. Power’s 2014 Insurance Shopping Study, neither of those factors are the main reason consumers change providers. The findings show people are more likely to switch carriers because of a bad experience than are for a rate increase.

Nearly one in three drivers (28 percent) who changed providers in 2013 did so because they had a bad customer service experience. Only 13 percent of those who shopped last year did so because of a premium rate increase. Of course this doesn’t mean that cost isn’t a factor – eight in ten consumers who shopped ended up Values(ing a new provider based on who offered the most competitive pricing.

Where this gets really interesting is with how satisfied consumers are once they switch. Overall, drivers who switched last year were less satisfied than they have been in previous years. New buyer satisfaction in the 2014 report reached 821 on a 1,000-point scale – that may sound high, but it’s actually 17 points down from the previous report.

The number one reason most new buyers gave for being dissatisfied is that cost savings didn’t live up to their expectations.

“While switching to a new insurer usually results in savings,” says senior insurance practice director Jeremy Bowler, “the ads make promises of saving that a growing number of new customers don’t believe they received.”

On average, customers who switched providers in 2013 saved an average of $300. The longer a customer had been with their previous provider, the more savings they usually received. So customer with their previous insurer for 11 years or more actually saved $426 on average.

Balancing savings with service in your new provider

“Cost savings is important when you’re considering changing insurance providers,” says Consolidated Credit President Gary Herman, “but it’s not the only factor, and you have to read between the lines of insurance advertising just like you do for credit cards. Otherwise that too-good-to-be-true offer may turn out to be just that.”

Consolidated Credit offers these three tips:

  • Check regularly with your current provider to see if you qualify for any cost savings. If your current policy doesn’t include the latest discounts, you may be able to save money without switching providers if you’re satisfied with their service. This will also make it harder to get tempted into switching just because you see a better advertised price.
  • When you’re shopping around, check satisfaction ratings as carefully as you check prices. Spend some time looking up insurers online to see what people are saying about them. Remember, if you have a claim and need service, a few bucks off your monthly bill isn’t going to make up for the time, hassle, and money you may end up spending when you actually need your insurance to work for you.
  • Keep in mind that your credit score matters when it comes to insurance cost. Every consumer has a credit-based insurance score that plays a major role in determining what you will pay. With that in mind, taking steps to improve your credit score before you change providers or negotiate with your current provider can help you save money so you can choose a better service experience even if it’s a little bit more expensive.

According to statistics, the average American family spends about 15 percent of their monthly budget on transportation costs, including insurance. Cutting car insurance costs can help improve your budget, but only paying attention to the bottom line can leave you in a bind when you have an issue. Remember, there are always other ways you can cut your transportation costs is you need to free up more cash flow in your monthly budget.