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It is hardly astonishing that a CFA study discovers that insurance companies that pay higher commissions to agents and brokers usually have higher monthly payments.
CFA also discovered that higher prices of online coverage do not translate into improved service for consumers.
"This research confirms that customers should shop very cautiously for insurance," claimed J. Robert. "The good news is there are insurance providers that disburse minimal or even no commissions, propose low online coverage prices and give great customer service."
"Yet, this study also found many companies where high commissions convert into high rates, with no gain in service quality," he claimed. "Great insure coverage rates and also good service could be found in case consumers take the time to compare companies."
Findings
Consumer Federation of America researched commission data from the twenty top writers of insurance for both private passenger ins and homeowners insurance. This sum commission information integrated ordinary commissions and dependent commissions (paid after policies are sold and depend on unique sales or on profitability goals).
The research compared total commissions with price, insurer profitability and also service quality as measured by complaint data and consumer satisfaction indices. CFA (Consumer Federation of America) discovered that:
1. Insurance firms which have lower commissions often have lower charges. This isn`t always the case, so consumers must shop cautiously.
2. There`s no evidence that paying higher commissions to an agent or broker derives either better service or higher consumer satisfaction. In fact, there seems to be no connection between the amount of commission disbursed and the value of service given.
3. A number of insurance providers offer particularly very good deals. Other insurance providers have rates that are constantly high.
In less competitive industries, a number of insurance companies might be tempted to attract market share by offering higher commissions to agents or to brokers in addition to higher prices and, often, higher profits for the insurance company. Credit insurance is one area in which this kind of `reverse competition` is particularly frequent.
Tips for Customers
We propose 6 advices for consumers shopping for online insurance:
1. Shop around! This study revealed that premium charges often increase with commissions, but this is not all the time correct. Consumers must be sure to get quotes from several of the lowest premium insurance companies, including the direct writers of coverage that usually do not pay commissions.
2. Customers do not have to disburse more to receive good service. Some of the insurance companies which have the most excellent service records have low prices and low or no commissions. It pays to shop between the companies which have the lowest prices and the highest consumer contentment/lowest complaint ratios.
3. In order to receive information regarding insurance online rates, check country price information guides. Most countries have cost information guides. Typically, consumers may download them from the country`s insurance department web site.
4. For complaint information on insurance providers, check in the National Association of Insurance Commissioners` web-site, www.naic.org.
5. Beware of going to just one agent or broker for insurance coverage online, even if that broker represents several insurance firms. Consumers should know that several agents representing more than 1 insurer might place the customer in a higher priced insurance company with larger commissions even if the customer meets the requirements for a lower price. States do not require agents and brokers to place the consumer with the best insurance policy for him.
6. Ask insurance agents and brokers the right questions:
Do you represent me or do you act for the insurance corporation you are suggesting me?
What commission are you earning compared to the price of the online insurance coverage program you are recommending me to buy?
Am I receiving the lowest price between all the insurence online companies that you represent for which I meet the requirements?
What additional insurance coverage firms do I meet the criteria for that you represent? What are the costs I would pay at the other companies and what fee would you receive in every company?
Do you have a contingency commission arrangement with the insurance company you are recommending? Please completely elucidate that arrangement to me.
In case I file a claim, do you represent me or do you represent the insurance firm in the claim procedure? Is your compensation somehow related to claims filed by me and by additional clients of yours?
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