There have been many articles this week reporting about Walmart selling auto insurance online. The article headlines about this story have often been misleading. Walmart, known for its ultra low prices, is not forming its own auto insurance company to sell car insurance at low, market-beating prices. Walmart is teaming with an online insurance agency, autoinsurance.com, to promote an auto insurance price comparison tool to compare the rates of several companies. Is this auto insurance price comparison service useful? Will it really save people money as advertised? I’ll tell you about how this new service works, and as a former auto insurance industry insider, I’ll tell you why I think you shouldn’t rely on it to find the best rates or auto insurance company for you.
Why is Walmart partnering with autoinsurance.com to provide an auto insurance price comparison service? Here’s an excerpt from an Insurance Journal article about the arrangement:
‘Daniel Eckert, senior vice president of services for Walmart U.S., says the retailer began looking into areas where it could bring its “everyday low prices” and where customers are looking to save money about two and a half years ago. The firm said its studies showed that auto insurance was one area where customers expressed frustration.
“Insurance is one of our consumers’ biggest monthly expenses and many feel they are overpaying for the insurance they have and don’t know if they are getting the best coverage and the coverage they need,” he says. “We thought we could bring something to life in both of these arenas.”’
How does Walmart’s auto insurance price comparison service work?
Walmart provides a link to autoinsurance.com on the Walmart website, and directs customers in Walmart stores to visit autoinsurance.com, to get comparison auto insurance quotes online from different companies. Walmart’s arrangement with autoinsurance.com is currently available only in the eight states of Arkansas, Louisiana, Mississippi, Missouri, Oklahoma, Pennsylvania, Tennessee, and Texas, but there are plans to expand nationwide in coming months. Walmart will receive monthly fees for marketing the service in its stores and promoting it on its own website. Walmart will have displays in store entrances and in store aisles, as well as promote the service on its own website. Autoinsurance.com will receive sales commissions or other compensation from the insurance companies.
To make the process as easy & accurate as possible, using autoinsurance.com authorizes insurance companies & agencies, per the site’s disclosed terms & conditions, to gather information, such as division of motor vehicle reports, credit reports, and information about a customer’s current policy, to find out about drivers, cars, and coverage. However, I know from experience, not all insurance companies release their customer’s information and coverage to consumer reporting agencies, so the quoting process may not be as easy for everyone. Here’s a link to a YouTube video from autoinsurance.com, explaining their online auto insurance quoting process.
People receiving auto insurance quotes can choose to either purchase a policy online immediately, contact a licensed agent at 800-700-7500 (autoinsurance.com agents operate from a call center located in Charlotte, North Carolina), or save the information & purchase a policy at a later time.
Buying auto insurance from Walmart may not be a good idea.
1. Walmart’s auto insurance shopping service does not compare the rates of many important national auto insurance companies.
I’m a big fan of any service allowing people to get accurate online auto insurance quotes from multiple companies, so I’m glad to see Walmart offer this auto insurance price comparison service.
However, it would be a big mistake to depend on Walmart alone to do your auto insurance shopping for you. Autoinsurance.com quotes only a limited number of companies: 21st Century, Travelers, Safeco, and Esurance for preferred and standard risk drivers, Progressive for all types of drivers, and The General for high risk drivers only. Other important companies not included are GEICO, Liberty Mutual, State Farm, Allstate, Farmers, and American Family. By not checking with these other major companies, you might save money using Walmart’s auto insurance price comparison service, but still pay a lot more than you could have saved, if you checked with the other major companies. Autoinsurance.com supposedly plans to work with more companies, so we’ll have to see if the auto insurance price shopping becomes more comprehensive in the future.
2. Great regional auto insurance companies will probably never be included in Walmart’s auto insurance shopping service.
Each state’s auto insurance market is unique. If you qualify for standard or preferred auto insurance rates, some of the best auto insurance companies are regional or single state insurance companies. For example, if you live in Pennsylvania, you would be making a mistake by not getting an auto insurance quote from Erie Insurance. If you are a Texas resident, you should be sure to include a car insurance quote from Texas Farm Bureau, when you shop for the best rates. I’ve written reviews of the major companies comprising each state’s auto & home insurance market, which you can find here, and use to help you find the best companies for you.
3. Walmart’s auto insurance shopping service is an easy way to get price quotes and buy a policy, but may lack in customer service after the sale.
If you purchased auto insurance direct from companies like Progressive, Esurance, or GEICO, you are probably used to having call center representatives assist you. But for companies like Safeco and Travelers, you can usually buy an auto insurance policy from a local agent at the same price as buying direct from the company. I can understand going without a local agent, if there is a considerable price savings for doing so, but if you use the Walmart online auto insurance price comparison service, and Travelers or Safeco has the best price for you, you can most likely buy it at the same rate from a local insurance agent. None of the companies used by autoinsurance.com are known for anything better than mediocre (to poor) customer service, but a good local agent can make insuring with a mediocre company a much better experience, and easier if you need service or have a claim.
Did customers using Walmart’s pilot program really save on average $1,168 on their annual auto insurance costs?
From the Walmart website:
“The $1,168 savings is an average based on customers in place in the Commonwealth of Pennsylvania who purchased policies from AutoInsurance.com and reported their savings during the time period from April 2013 to March 2014.”
I don’t think anyone should expect to save that much, particularly if you are a single car household, where your annual auto insurance costs may be much less than $1,168. However, auto insurance shoppers can see big savings, particularly if they check the rates of many companies, and it’s not unique to the service provided by Walmart. The biggest savings is usually found by people who haven’t shopped with other companies in many years. Also, consumers can see huge price savings when their risk profile changes for the better. The company having okay rates for you when you were age 18 may be way over-priced when you are age 21.
Or, here’s another example, possibly typical to the experience of a Walmart shopper:
Your family has three cars and a teen driver. Over a year ago, you had a lapse in auto insurance coverage for over thirty days, and had to start a new auto insurance policy at a much higher rate. Now that your family & cars have been continuously insured without another lapse for over a year, you may qualify for much lower rates with another company. A situation like this could explain the huge average savings of $1,168 per year.
But even without a positive change in your risk profile, some companies charge twice as much to the same person for the same coverage. Many people pay too much for their insurance because they never shop for better rates, or if they do shop, they don’t check the rates of enough companies. For a lot of people, the best auto & home insurance companies are the ones with the coverage they need at a lower price. With auto & home insurance, you don’t get better service or coverage because you pay more. Some of the best companies have competitive rates. As I said, some companies charge twice as much or more as others for the same coverage, but no single company has low rates for everyone. You have to shop with all the leading companies, to find the company with the best coverage and best price for you. The experience of customer savings through Walmart’s pilot program for its auto insurance price comparison service helps prove what I have been saying for years.
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