Tips for switching insurance companies

Tamara E. Holmes

With auto and home insurance rates generally on the rise, some consumers will consider leaving their insurance providers for greener pastures, a new study suggests. While chasing a lower premium is tempting, such a move isn’t always smart, experts say.

According to a Forrester Research study, 5 percent of those surveyed said they were likely or highly likely to change insurance providers in the coming year. Another 15 percent said they were on the fence.  The main reasons that consumers gave for switching providers were price, a sense of being valued by the insurer and lifestyle changes, such as the birth of a child.

Customer loyalty also plays a factor, since those most likely to switch insurers were relatively new customers who had been with their current companies for less than one year.

While a consumer’s decision to change providers is a matter of personal choice, a few factors should carry more weight than others.

To stay or not to stay

Price is naturally one of the most important things to consider. For example, you may find that another insurer is willing to provide comparable coverage at a lower rate. But before making a move, don’t just look at one alternative provider, says Loretta Worters, a spokeswoman for the nonprofit Insurance Information Institute. Instead, get insurance quotes from at least three other companies, and check a variety of sources, such as agents, brokers and insurance-shopping websites.

Some consumers stay with a particular insurance provider because they feel a sense of loyalty, although that may not be a good reason to stick around, says Amy Bach, executive director of United Policyholders, a nonprofit group that advocates for insurance consumers. When it comes time to file a claim, many insurers don’t treat long-term customers any differently than they treat new customers, Bach says.

“I have people say to me, ‘I’ve been with this company for years, and this is the first claim I’ve filed and they’re treating me as a criminal,’” Bach says.

Unless a company includes a loyalty clause in the policy -- such as a discount for long-term customers or a non-cancellation policy if you’ve done business with them for a certain period of time -- don’t assume that your longevity will guarantee a better experience, Bach says.

Finally, some consumers are in a better position to switch providers than others. If you live in a region that's more difficult to insure, such as a hurricane-prone coastal area, you might not have many insurers competing for your business. In that case, if you get a good rate, you might do best to stay put.

Rules of the road

If you’re committed to moving on, here are three steps you should follow to make sure you get the best deal possible.

  1. Do your research.  Make sure the company is licensed to operate in your state, Worters says. That way, you’re better protected if a problem crops up with your coverage, as you can take the issue to your state insurance department. Furthermore, make sure the company is on sound financial footing by checking the ratings from independent agencies such as A.M.  Best, Fitch, Moody’s and Standard & Poor’s.
  2. Look to other customers. Find out what current customers have to say about an insurer’s service by asking family and friends for recommendations. You also can find out from your state insurance department whether a particular company has been hit with a slew of customer complaints, Worters says.
  3. Compare policies side by side. One reason another insurance provider could be offering you a lower rate is because it’s offering you less coverage. To make sure you don’t end up taking on more risk, look at how the new policy would stack up against your current coverage, says Jared Balis, owner of Utah Insurance Advisors, an insurance agency.

For example, if you’re switching auto insurance providers, check such factors as the towing and rental coverage, your collision deductible and your liability limits.  Tools are available to help you. For example, Texas’ Office of Public Insurance Counsel provides a policy comparison tool that lets insurance customers in that state compare the terms of auto, home and renter’s policies.

Is there any harm in switching insurance providers too often? While switching from provider to provider isn't a bad thing in and of itself, some insurers may view you as a risky customer if you show a pattern of filing claims and then moving on, Bach says. “If they see a combination of you making claims and bouncing around, that will make you an unwanted customer,” she says.

Nevertheless, when checking your coverage annually to make sure it’s sufficient, it never hurts to see whether your needs can be better met. “If you want to be a savvy consumer, you want to periodically shop around,” Bach says.

Are You Currently Insured?