It`s hardly astonishing that a CFA research finds that insurance providers which disburse higher commissions to agents and to brokers tend to have higher premiums.
Consumer Federation of America also discovered that higher prices of
travel insurance do not translate into better service for consumers.
"This research proves that customers must shop very carefully for insurance," said J. Robert. "The good news is that there are insurance providers that disburse negligible or even no commissions, provide low web insurance prices and give very good consumer service."
"Yet, this study also found abundance of insurance firms where high commissions convert into lofty rates, with no improvement in service quality," J. Robert said. "Good ins rates in addition to service might be found in case consumers take the time to comparison shop."
Findings
Consumer Federation of America (CFA) researched commission information from the 20 most popular writers of coverage for both private passenger web insure as well as homeowners insurance. This total commission information integrated regular commissions and dependent commissions (paid after insurance policies are sold and depend on special sales or on profitability goals).
The research compared total commissions with cost, insurer profitability and also service quality according to grievance information and customer satisfaction indices. CFA discovered that:
1. Insurers which have lower commissions often have lower charges. This isn`t always the situation, so consumers should shop carefully.
2. There`s no proof that disbursing higher commissions to an insurance agent or broker produces either improved service or higher customer satisfaction. Actually, there appears to be no correlation between the amount of commission disbursed and the value of service provided.
3. Some insurance firms offer particularly high-quality deals. Other providers have rates that are almost always high.
In less competitive businesses, some insurance companies may be tempted to attract market share by offering higher commissions to agents or to brokers together with higher costs and, often, higher gains for the insurance provider. Credit insurance is one subject in which this type of `reverse competition` is particularly prevalent.
Advices for Customers
We propose 6 tips for customers shopping for on line policy:
1. Shop around! This study revealed that monthly payment charges tend to rise with commissions, but this is not all the time true. Customers have to be sure to obtain quotes from a number of the lowest monthly payment insurance companies, including the direct writers of insurance that usually do not pay commissions.
2. Customers don`t need to pay more in order to obtain excellent service. Several of the insurance companies which have the most excellent service records have low costs and low or no commissions. It pays to shop between the firms with the lowest prices and the highest customer contentment/lowest complaint ratios.
3. In order to get information on travel insurance rates, check country price information guides. Most of the states have price information guides. Usually, consumers can download these guides from the country`s insurance department web site.
4. In order to get complaint information on insurance companies, check in the National Association of Insurance Commissioners` Internet site, www.naic.org.
5. Be careful with consulting with only one insurance agent or broker for online ins coverage, even in case that broker represents several insurance corporations. Consumers must know that some brokers representing more than 1 insurance company could place the consumer in a higher priced insurer with larger commissions even in case the customer qualifies for a lower price. States don`t require insurance agents or brokers to put the applicant with the best insurance plan for him.
6. Ask agents and brokers the right questions:
Do you act for me or do you act for the insurance company you are proposing me to use?
What commission are you earning as a percentage of the price of the on line ins coverage plan you are recommending I buy?
Am I getting the lowest cost among all the insurance policy online companies that you represent for which I qualify?
What additional ins policy on line corporations do I meet the criteria for that you act for? What are the prices I would pay at those insurance providers and what fee would you gain in every company?
Do you own a contingency commission arrangement with the insurance company you are recommending? Please fully clarify that agreement to me.
In case I have a claim, do you represent me or do you represent the insurance firm in the claim procedure? Is your compensation in some way connected to claims filed by me and additional clients of yours?
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