It’s no surprise that in the last few years how consumers shop for car insurance has changed drastically. Third-party comparison sites that provide car insurance quotes have taken the industry by storm, giving consumers the ability to shop, review and switch insurers faster than ever. But what does the rise of these sites mean to customers, and to insurance agencies as a whole? And where does car insurance shopping go from here?
Getting a car insurance quote online through a comparison site may seem hassle-free, more efficient and more relevant, but as the industry evolves there are two main points consumers must be aware of:
1. Hassle-Free Doesn’t Mean Quicker or Accurate:
One of the main customer value propositions of car insurance comparison sites is their ability to quickly provide insurance quotes for a variety of companies that sell in a consumer’s geographical location. The problem is that to truly get an accurate car insurance quote, consumers must be willing to provide more details than sites that generate quotes request.
For example, most comparison sites provide quotes after a consumer has put in first name, last name, Zip code, age and car details. Using public rate filings from sample data, these sites then provide an estimate of what your average annual rate may be. What this fails to take into consideration is all of the unique variables that companies use to determine your risk profile, which ultimately determines your premium.
In addition, no comparison site currently covers the whole car insurance market. Consumers that go to three different comparison sites will typically not only be shown different providers in their area, but also different prices for the same company. This is because comparison sites often have deals that prioritize partner companies over cheaper and better options.
See also: The New Age of Insurance Aggregators
Consumers are only being shown select companies, and those companies’ quotes are most likely inaccurate. So consumers are going to multiple car insurance companies, filling out numerous driver profiles and then comparing the rates they are being shown. This can be more time-consuming than simply calling one, two or even three companies to get a direct quote.
2. Cheapest Doesn’t Mean Best
With third-party comparison and review sites putting the strongest focus on which companies provide the cheapest insurance, getting the right insurance coverage has taken a backseat. While using comparison sites may result in paying less, it can also result in being underinsured. Having the proper car insurance coverage ultimately is a step toward financial protection.
Take a driver who opts for the cheapest coverage, which only includes the state’s minimum car insurance limits of 25/50/25. Let’s say that driver is found to be at fault in an accident that causes $35,000 of injury to the other party. It is up to the driver to then pay $10,000 out of pocket to cover the difference between what the insurance company has insured them for and the cost of the damages done.
One problem with comparison sites is that prices for higher coverage limits are not shown because they aren’t the cheapest option. Consumers must not be tricked into thinking the cheapest companies are the ones best-suited for them. Instead, consumers should find a policy with enough coverage to fully insure them and their financial assets, and then turn toward the tools available to them for saving money for that policy.
How Comparison Shopping Affects Car Insurance Companies
Not only are customers being affected by comparison sites, but so are car insurance companies themselves, with there now being a fierce need for competitive prices. Never before has it been so easy for consumers to find rates at just a click of a button. And while there is a concern over the accuracy of these rates that are being shown, it doesn’t take away the fact that customers are seeing these prices, and insurance companies are having to take that into consideration.
How do companies combat getting a call from a customer who has seen a quote for $200 less than what that company can actually offer? Some have become exclusive partners with insurance shopping engines, possibly under the assumption that, if you can’t beat them, join them. Others are working to make sure their logo, their rates and their brand aren’t being displayed. But at the end of the day, neither of these are benefiting the customer.
What Insurance Shopping Looks Like 5 Years Down the Road
There is no doubt that consumers have preferred the ability to compare, review and get quotes from a number of companies in a matter of minutes. But it’s only a matter of time before the perceived ease of use wears off. For comparison sites to truly succeed, one of two things will need to happen.
- A site will need to build personal relationships with all of the top brands. Until then, we can expect that rates will be inaccurate and that insurance companies will be listed by comparison site’s bias toward their exclusive partners and not by what’s best for the customer.
- A comparison site will need to be just that but for other comparison sites in the insurance industry. Yes, you heard right. For the comparison business model to work in the insurance vertical, a comparison site will need to compare quotes, offerings, discounts and top companies being listed on other comparison sites. And while prices still may not be 100% accurate due to the nature of how insurance rates are determined, this could potentially solve the solution of company bias.
See also: Waves of Change in Digital Expectations
Because we don’t see companies such as State Farm, which only allows its appointed agents to to sell their product, ever agreeing to option number one, we have to suspect option number two is the next best solution. Is it a perfect solution? No.
Comparison site shopping as we know it will have to change in the next five years. How? We will have to wait and see.