Three Things You May Not Know About Your Auto Insurer

Posted on Jan 31st, 10:28 pm, under Auto Insurance 101

Buying auto insurance may seem like a straightforward thing: look for the deal that offers the features you want, for a price that you can afford. However, there are many other factors at play behind the scenes that customers are frequently unaware of. These are just a few of the tricks of the trade that buyers should know before they purchase auto insurance:

1. What agents are paid affects what they tell you.

Agents can help you make sense of auto insurance policies, but don't think they have your best interest at heart. The bottom line is that they're paid to sell you their products. Insurance firms offer agents two types of commissions: "steering commissions", which they get for successfully directing consumers to a specific insurance company; and profit-based commissions, for when customers don't file lots of expensive insurance claims. 

What are the potential issues with these? Profit-based commissions gives unscrupulous agents an incentive to discourage or delay claims. Steering comisions, on the other hand, can make them force certain policies on customers in order to get bigger commissions. Therefore, next time you buy a policy, ask agents to explain why they're recommending a certain plan and inquire about their commissions as well. 

2. Younger drivers are charged extremely premiums.

Insurance companies consider teenagers and drivers under 25 a high-risk group, especially males of this age. They get charged higher rates, as we've pointed out before, but what you may not know is that this can be almost 100 percent more than drivers between 60 and 74 (according to InsuranceRates.com).

There isn't much you can do about this, since insurance firms all over the country go by these general standards. Typically, younger drivers will need at least three years of experience if they want to avail of lower rates. It helps, however, to use cars with lower engine capacity and to complete a defensive driving course. And whatever you do, don't use a sports car. Ask your insurance provider about how you can further lower rates for younger drivers.

3. Your auto mechanic? That's their mechanic.

Like medical insurers and HMOs, auto insurers have their own affiliates among car repair facilities. So if you ever get into an accident, your insurance firm will refer you to their list of "preferred providers". What's more, some large auto insurers, such as Allstate, have even gone so far as to purchase their own nationwide chain of auto repair shops.

Of course, in almost all cases, it's still your choice whether you want to use your insurer's auto repair shop or not. It can be convenient to do so, and you can usually get your deductible waived or reduced. However, there's an incentive for these preferred providers to cut corners, since they're under pressure to keep repair costs low. Therefore, make sure you ask an independent inspector to examine the repairs and ensure that your car got what it needed.