It is barely astonishing that a CFA research finds that insurance providers that pay higher commissions to agents and brokers often have higher monthly payments.
CFA also revealed that higher prices for insurance coverage don`t translate into better service for customers.
"This research confirms that customers need to shop very cautiously for coverage," said J. Robert. "The good news is there are insurance providers that disburse minimal or even no commissions, provide low insurance prices and give great customer service."
"Yet, this study also found abundance of insurance corporations where high commissions translate into high charges, with no gain in service quality," he said. "Great ins rates as well as service may be found in case consumers take the time in order to compare insurance companies."
Findings
Consumer Federation of America checked commission data from the twenty most popular writers of insurance for both private passenger insurence online as well as homeowners insurance. This sum commission information integrated standard commissions and dependent commissions (paid after policies are sold and based on special sales or profitability goals).
The research compared sum commissions with price, insurer profitability as well as service quality as measured by complaint data and consumer satisfaction indices. Consumer Federation of America (CFA) revealed that:
1. Insurance providers with lower commissions tend to have lower rates. This isn`t always the case, so customers must shop cautiously.
2. There is no evidence that disbursing higher commissions to an agent or to a broker produces either improved service or higher customer satisfaction. In fact, there seems to be no connection between the quantity of commission paid and the quality of service provided.
3. Some insurance providers propose particularly very good deals. Others have rates that are constantly high.
In less competitive businesses, a number of insurance companies might be enticed to interest market share by proposing higher fees to agents or to brokers with higher prices and, frequently, higher profits for the insurance company. Credit coverage is one subject in which this type of `reverse competition` is particularly frequent.
Advices for Consumers
We give a number of tips for customers shopping for insurance online:
1. Shop around! This study discovered that premium charges often rise with commissions, though this isn`t all the time true. Consumers are supposed to be sure to obtain quotes from a number of the lowest monthly payment insurance firms, including the direct writers of coverage that normally do not disburse commissions.
2. Consumers don`t have to disburse more in order to receive excellent service. Some of the companies with the most excellent service records have low prices and low or even no commissions. It is worthwhile to shop among the companies which have the lowest costs and the highest customer satisfaction/lowest complaint ratios.
3. To receive information on ins rates, review country price information guides. The majority of the states have price information guides. Typically, customers can download them from the state`s insurance department web-site.
4. For complaint information on insurance corporations, check in the National Association of Insurance Commissioners` Internet site, www.naic.org.
5. Beware of going to only 1 insurance agent or broker for insure online, even if that agent represents a number of insurance companies. Consumers should know that several brokers representing more than a single insurance firm might place the consumer in a higher priced company with larger commissions even in case the consumer meets the criteria for a lower price. States do not oblige insurance agents and brokers to place the client with the best insurance policy for him.
6. Ask insurance agents and brokers the important questions:
Do you act for me or do you act for the insurance company you`re offering me to use?
What commission are you gaining compared to the cost of the insurance online program you are proposing I purchase?
Am I getting the lowest price among all the insure online corporations which you represent for which I meet the requirements?
What additional insurance companies do I meet the requirements for that you act for? What are the costs I would disburse at those firms and what commission would you get in each insurance company?
Do you have a contingency commission arrangement with the company you`re recommending? Please fully clarify that agreement to me.
In case I file a claim, do you represent me or do you act for the insurance company in the claim procedure? Is your recompense somehow connected to claims filed by me or by additional customers of yours?
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