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It is hardly astounding but a CFA research discovers that insurance companies that disburse higher fees to agents and brokers often have higher monthly payments.
CFA also revealed that higher costs for online insure do not mean improved service for customers.
"This study confirms that customers need to shop very carefully for coverage," said J. Robert. "The good news is that there are insurance companies that disburse negligible or even no commissions, provide low coverage prices and give good consumer service."
"On the other hand, we also found a lot of insurance companies where high commissions translate into high charges, with no increase in service quality," he said. "Good insure online rates in addition to good service may be found if customers take the time in order to compare insurance providers."
Findings
Consumer Federation of America checked commission information from the 20 most popular writers of insurance for both private passenger american family insurance as well as homeowners coverage. This sum commission information integrated regular commissions and dependent commissions (paid after insurance policies are sold and depend on unique sales or on profitability goals).
The report compared sum commissions with cost, insurer profitability and service quality according to complaint information and customer satisfaction indices. CFA found that:
1. Insurance companies having lower commissions often have lower rates. This is not always the situation, so customers should shop cautiously.
2. There is no evidence that paying higher fees to an insurance agent or broker derives either improved service or higher consumer satisfaction. In fact, there appears to be no connection between the amount of commission disbursed and the value of service given.
3. Some insurance companies offer good deals. Other insurers have charges that are constantly high.
In less competitive businesses, a number of insurers might be enticed to interest market share by offering higher commissions to agents or to brokers together with higher costs and, frequently, higher gains for the insurance firm. Credit coverage is one subject where this kind of `reverse competition` is particularly frequent.
Tips for Consumers
We suggest 6 advices for consumers when shopping for online coverage:
1. Shop around! This research revealed that premium charges usually increase with commissions, although this is not always correct. Customers must be sure to obtain quotes from a number of the lowest premium insurance providers, including the direct writers of insurance that normally do not disburse commissions.
2. Customers don`t have to pay more in order to obtain excellent service. Some of the insurance companies which have the best service records have low costs and also low or even no commissions. It is worthwhile to shop among the insurance companies with the lowest costs and the highest consumer contentment/lowest grievance ratios.
3. To receive information about ins rates, check country price information guides. Most of the states have these guides. Typically, customers can download them from the state`s insurance department web site.
4. To get grievance information on insurance providers, check with the National Association of Insurance Commissioners` site, www.naic.org.
5. Beware of going to only 1 agent or broker for coverage online, even if that agent represents several insurance providers. Consumers have to know that several producers who represent more than one company could place the customer in a higher priced insurance provider which has larger commissions even if the customer qualifies for a lower price. States don`t oblige insurance agents or brokers to place the applicant with the most excellent policy for him.
6. Ask agents and brokers the right questions:
Do you represent me or do you represent the insurance firm you`re suggesting me to use?
What commission are you gaining compared to the price of the insurence plan you`re recommending me to buy?
Am I getting the lowest cost among all the coverage online firms that you represent for which I meet the requirements?
What other ins coverage providers do I meet the requirements for that you represent? What are the costs I would pay at the other insurance companies and what commission would you earn in each insurance provider?
Do you have a contingency commission agreement with the company you are recommending? Please completely elucidate that arrangement to me.
If I have a claim, do you represent me or the insurance firm in the claim process? Is your compensation in any way connected to claims filed by me or additional customers of yours?
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