It sounds reasonable you can get less expensive auto insurance if you buy direct from the insurance company, because there is no commission paid to an agent. Just like buying wholesale is less expensive than buying retail — you save cash by cutting out the middle man. Insurance companies selling direct to the public through their call centers or the Internet want you to believe this is true.
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However, it is not true. In shopping my auto insurance, and my many years of experience selling car insurance, without being paid a commission in an insurance company’s direct operations, I know buying car insurance from companies using agents does not mean higher rates.
People would call me for an insurance quote. Sometimes I could beat the rates of their insurance company and save them a lot of money. Sometimes I could not beat the rates, even though the insurance company they had paid an agent a 15% commission, and I received a salary, without a commission. My company’s insurance was not always cheaper, in spite of the fact no commission was paid to anyone.
Why Buying Insurance Direct May Not Save You Money
The commission insurance companies pay agents is just one type of marketing expense. All insurance companies have marketing expenses to get customers — even if the insurance company does not pay an agent commission.
Company A pays an agent a 10% commission to sell and service an auto insurance policy. The agent goes out and finds customers for the insurance company, and when customers have a policy change, they contact their agent to process the change.
Company B does not pay commission and sells direct to the public. Company B saves money by not having to pay a commission, but instead, Company B has to pay employees, and pay the cost of benefits for these employees, to sell & service Company B’s auto insurance. Also, Company B has to invest a lot more in advertising than Company A to get people to contact Company B’s employees to sell them auto insurance.
A company I worked for measured the costs of selling direct and using agents, and selling through agents turned out to be less expensive. The company still sells through agents and direct operations — at the same price — but only to be available to customers wanting agents, and customers preferring to buy direct from the company.
Here is how you can REALLY save money on insurance!
If you really want to save $100s on your car & home insurance, don’t think you can cut corners by checking only 1 or 2 companies that sell direct. If you want a good price — and good service — get auto insurance quotes from companies that sell direct, through their own agents, and through independent agents to find the best company for you.
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