You found an agent, got your VIN numbers, calculated how many miles you drive per year, chose the limits and made your down payment. You get your I.D. card for the glove box and sigh a breath of relief. Finally, it’s over. That looming task of getting your car insurance policy is complete.
You make a point to drive carefully all year long. No speeding (or at least you didn’t get caught) and no accidents. Six months later you’re contacted by your insurer regarding your “car insurance renewal.”
A twenty page document shows up in the mail with a bunch of information you can’t understand, or simply don’t have the patience to. On top of all that, you notice your rate is the same or even worse, has gone up! How can that be?
Your Car Insurance Renewal Rate Went Up
Why didn’t your agent contact you ahead of time to make you aware of this so you’d have enough time to switch to a different insurer or at least gather some new insurance quotes? Well, your agent receives a renewal commission when you policy is renewed. That’s right. Your agent gets paid when they first place your business and then every subsequent time it renews, regardless of whether they do any work in the meantime.
My years of experience working on the corporate side of the insurance industry and directly with insurance agents will help shed some light on the reasons you might not be getting the deal you deserve when your car insurance policy renews, along with steps to take to make sure it doesn’t continue to happen to you.
First, insurers typically pay a higher commission for new business than when it renews, because it costs more to get you in the door. It’s known as the acquisition cost for new policies. The biggest reason the acquisition cost is higher is due to the advertising cost it takes to get us to sign up. Therefore, agents make more money by writing more new business policies. That’s a no brainer. That means lots of attention upfront and not so much later down the line.
Another reason your agent may not shop your rate for you every year is because you don’t demand it. The fact is agents and insurers know that most of us will typically suck it up and just pay the renewal because we’re too busy to go through the process of shopping again or because we just don’t know any better.
Agents benefit when a car insurance policy automatically renews because they get paid for doing nothing, as the insurer handles the processing of the car insurance renewal. If it isn’t broke don’t fix it, right? Wrong. You may be wasting hundreds of dollars every year by not having your insurance quoted by multiple carriers.
So what can you do? The good news is you can take a few simple steps to ensure you’re treated fairly by your independent agent when it comes to how much money you pay when your policy renews.
Ask About Your Renewal When You Get Your Policy
It starts when you get your initial policy. Remember, this is the point when you will have the agent’s full attention because they haven’t been paid yet! Simply ask your agent what their company policy is regarding renewals. If their company policy doesn’t include shopping your rate every year before your policy renews, find a new agent.
If they aren’t willing to shop your rate every year, how can they be comfortable accepting their renewal commission? Assuming your agent explains they always shop every renewal, be sure to ask for the comparison quotes before your policy renews if you notice it’s renewing with the same company every year.
This information is especially important if you reported a claim or received any traffic violations. Those infractions may have caused your rate to spike with your current insurer, whereas a different insurer may be willing to give you a deal to get your business moved over to them. Of course, this will require you to do a little extra work and maybe have an uncomfortable conversation or two, but you may be able to save hundreds of dollars on your insurance, which will allow you to spend money on things you actually want.