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It`s hardly astonishing that a CFA (Consumer Federation of America) study discovers that insurance corporations which disburse higher fees to agents and brokers tend to have higher monthly payments.
CFA also revealed that higher costs for online insurance do not necessarily mean better service for consumers.
"This study proves that customers need to shop very cautiously for insurance," said J. Robert. "The good news is that there are insurance corporations that pay minimal or even no commissions, propose low ins costs and give good consumer service."
"On the other hand, this study also found abundance of insurance firms in which high commissions translate into lofty rates, with no improvement in service quality," Robert said. "Good insure rates in addition to service can be found in case consumers take the time to comparison shop."
Findings
Consumer Federation of America reviewed commission data from the twenty most important writers of insurance for both individual passenger coverage online and homeowners insurance. This total commission data combined regular commissions and dependent commissions (paid after policies are sold and based on special sales or on profitability goals).
The research compared total commissions with price, insurer profitability as well as service quality according to grievance information and consumer satisfaction indices. Consumer Federation of America found that:
1. Insurance providers which have lower commissions usually have lower charges. This is not always the case, so customers have to shop cautiously.
2. There is no evidence that disbursing higher fees to an insurance agent or broker derives either improved service or higher customer contentment. In fact, there appears to be no correlation between the quantity of commission paid and the value of service given.
3. A number of insurance firms propose particularly good deals. Other insurers have rates that are consistently high.
In less competitive businesses, a number of insurance firms might be enticed to attract market share by proposing higher commissions to agents or to brokers along with higher prices and, sometimes, higher gains for the insurer. Credit coverage is one area in which this type of `reverse competition` is particularly prevalent.
Tips for Customers
We give a number of advices for consumers shopping for online coverage:
1. Shop around! This study revealed that premium charges usually increase with commissions, although this isn`t always true. Consumers are supposed to be certain to obtain quotes from some of the lowest monthly payment insurance corporations, including the direct writers of coverage that usually do not pay commissions.
2. Consumers don`t need to pay more in order to obtain good service. Some of the insurers with the best service records have low prices and also low or no commissions. It pays to shop among the insurers which have the lowest prices and the highest consumer satisfaction/lowest complaint ratios.
3. In order to receive information concerning online insurance rates, review state price information guides. The majority of the countries have cost information guides. Usually, customers may download them from the state`s insurance department site.
4. For complaint information on insurance corporations, check with the National Association of Insurance Commissioners` site, www.naic.org.
5. Be cautious with consulting with only a single agent or broker for insurance on line, even if that agent represents several insurance corporations. Consumers must know that some brokers who represent more than one insurance firm might place the consumer in a higher priced company with larger commissions even in case the customer meets the requirements for a lower cost. States don`t oblige insurance agents and brokers to put the client with the best plan for him.
6. Ask insurance agents or brokers the right questions:
Do you represent me or do you act for the insurance corporation you are suggesting I use?
What commission are you gaining as a percentage of the price of the ins plan you are proposing me to buy?
Am I receiving the lowest price among all the online insurance providers which you represent for which I meet the criteria?
What additional insurance coverage firms do I meet the requirements for that you act for? What are the costs I would disburse at those insurance providers and what commission would you earn with every insurance company?
Do you have a contingency commission agreement with the insurance company you`re suggesting? Please completely elucidate that agreement to me.
If I file a claim, do you act for me or the insurance provider in the claim procedure? Is your compensation somehow related to claims filed by me and by other clients of yours?
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