Have you ever wondered how your insurance agent gets paid? Knowing the answer can help you save your hard-earned money.
Across the board, the insurance industry has operated behind the scenes for decades. Especially because the full range of quotes was only visible to insiders, making it easy to manipulate customers into paying more—without them suspecting a thing.
If you want to get an accurate price point for your coverage needs, the process can take hours, if not days. And that’s not even counting the typical wave of frustrations, like:
Pushy salespeople offering “deals” to get a customer to buy right away
Long telephone calls that may or may not end with an actual quote
A trip to a local insurance agent or broker’s office that involve giving all your personal information to a stranger and their company in exchange for a quote that may or may not represent the best deal available
While it’s true that within the industry, agents are supposed to work in the best interest of customers, there is little to no recourse for agents who do not. It is not illegal to create a situation where a customer will be more likely to choose a more expensive policy (with higher commissions for the agent) even if this practice is frowned upon.
The practice of working within a customer’s best interest is known as fiduciary responsibility. Agents are not required but can pledge to carry out fiduciary duties on a voluntary basis. However, with no regulating agency to penalize agents who misuse their power, little is done to protect consumers.
Below are three reasons insurance agents may not be working in your best interest. Of course, you can skip the whole agent-induced-headache process and shop with Insurify. You get 7+ real quotes within minutes, and you can save your profile to receive price change alerts in the future.
1. Agents get commissions ($$$) from insurance companies.
Unfortunate but true: your agent may be recommending more expensive policies because the commission rates are better.
Most insurance agents are paid by commission, meaning the more policies they sell, the more money they make. Commission rates vary company to company and also state by state, according to local regulations. However, most commission rates are between eight and 25 percent.
Insurance companies aiming to capture more of the market incentivize agents by offering larger commissions on policies. This works out well for agents, especially if their customers don’t understand how they get paid—and certainly because customers have no access to the commission rates offered to agents.
How do agents get their customers to buy a more expensive policy? Well…
2. Agents don’t show all the quotes available to you.
If you’re wondering how insurance agents get customers to buy more expensive policies, it’s important to understand the benefits of obscurity. Agents have access to more quotes more quickly than the average consumer—that is, until Insurify came along to offer real transparency to insurance shoppers.
All an agent has to do to talk customers into buying a certain policy is to show them a couple of quotes from the insurance providers that pay them the highest commission. None the wiser, customers might choose the policy they believe is the best deal out of the options presented to them.
And it doesn’t stop there…
3. Agents recommend coverages you may not need…or might not adjust your coverage for many years!
Everyone has different needs and priorities when it comes to insurance. Just because a product exists doesn’t make the product right for you.
Many people with older vehicles choose to forgo comprehensive or collision coverage because the cost of coverage would soon exceed the cost of replacing the vehicle. Agents may use scare tactics, however, to convince customers to buy coverages like this when they really don’t need it.
In another common example, some customers may want roadside assistance from a provider independent of their insurance company, like AAA. This may be because it offers a better deal on the service itself, like longer tow distances, or other incentives, like member benefits that provide discounts on hotels. However, agents may recommend buying through your car insurance company simply because it adds a little bump to their commission check. They might even advise you add it to work in tandem with your AAA coverage, assuring you it can be canceled at any time.
Additionally, your coverage needs may change over the years. You may get married, start a family, buy a new home, or get a better paying job. All these factors influence your coverage needs and risk profile. And if you haven’t talked to your agent for years, they’ll take your insurance renewal for granted, and never adjust your coverage.
Why? Because commission rates are great, and your agent gets paid even if you end up canceling coverage.
But there’s a real danger in being underinsured. If you get into an at-fault accident and sued for more than your car insurance can pay, you might find yourself in major debt or at risk of losing your home and property. All because your insurance coverage didn’t change when your life was changing, too.
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Data scientists at Insurify analyzed more than 40 million real-time auto insurance rates from our partner providers across the United States to compile the car insurance quotes, statistics, and data visualizations displayed on this page. The car insurance data includes coverage analysis and details on drivers' vehicles, driving records, and demographic information. Quotes for Allstate, Farmers, GEICO, State Farm, and USAA are estimates based on Quadrant Information Service's database of auto insurance rates. With these insights, Insurify is able to offer drivers insight into how companies price their car insurance premiums.