Fact or Myth: How To Avoid Ever-Increasing Insurance Rates

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Blog Series 1 of 4

Common misconceptions about your insurance rates, coverage, and industry.

Over the years, I have heard just about every consumer opinion regarding rates charges by insurance companies, what is covered and what is not, how great or poor one carrier is, and just about everything else you can think of regarding your insurance. The fact is that insurance is a complicated business. Our team believes in client education, because without the right education, it is hard to determine the best route to take. In this blog we will dive into the facts — what is true, what is false, and what lies in between. This blog series will consist of several different blogs over the next 12 months to provide clarity, insight, and understanding to help you receive the best value for your hard-earned dollars.

Is it fact or myth?

The Myth: Insurance is like musical chairs. You need to shop every year, or the company will continue to take advantage of you ever increasing your rates.

The Fact Is: This misconception is a myth. Insurance carriers must file their rates with the department of insurance. In our state, The Texas Department of Insurance is a large organization with a focus on consumer protection and education. A carrier must file rate increases with TDI along with justification to the reason for the rate increase. Below are a few reasons why a company may increase their rates.

  • Poor loss ratios – If Carrier “A” takes in $250,000,000 in premium but losses millions more than the premiums received, they will not be in business long if they do not act. In Texas, we live in a loss volatile state. This is one reason why rates continue to increase. Therefore, premiums are ever changing in our state. A carrier must receive the premium for the risk to continue to pay claims and maintain reserves in case of the unexpected.
  • Increased labor rates and inflation – Things cost more. Each year products and services increase due to increases in labor cost and many other overhead factors. Whether it be in the medical, construction, or automotive repair industry — when insurance is paying, it sure seems like things cost more. It all ties back into the premium’s consumers pay. It does take these groups more time to complete paperwork, work with adjusters, etc. resulting in increased cost.
  • Increased risk. Each year that your home gets another year older without major renovations, the risk of claim increases. Insurance carriers know their data and statistics. This increased risk comes with increases in premium dependent upon your home’s age, and whether the plumbing, electrical, HVAC, and roof have completely been replaced. This is one of the many reasons our agency encourages our clients to come in for an annual review. We want our clients to receive the best value. If there was a major renovation, we want them to reap the benefits and savings of the decrease in risk.
  • Individual Claims Frequency – At fault claims and other claims can have a major impact on the premiums you pay. I am personally a fan of a $1,000 collision deductible. If you back into a pole knocking out your taillight, it makes more sense to come out of pocket in my opinion rather than filing a collision claim on your policy. The higher deductible also saves some money as well on your premiums. We never discourage our clients from filing a claim, however, find it important that they understand the transfer of risk, allowing them to decide what is best for their situation

I could go on and on regarding this myth. Long story short, rates are tied mainly to the claims dollars paid out versus the premiums collected. In 2016 – 2018 carriers across the board struggled to find a sweet spot with auto insurance. Loss ratios were in the red. Some companies were paying out $1.12+ for every $1.00 collected in premium. When we talk about hundreds of millions of dollars this is bad news for an insurance company. Insurance companies are typically adjusting rates constantly to retain their clients, while doing what they must to maintain financial stability. This is the major reason behind rate adjustment in the industry.

Insurance is not like musical chairs, nor is there any conspiracy to bait and switch.

Regulatory organizations like the Department of Insurance are in place to protect consumers against any unscrupulous activities. You may need to shop, or you may have a great deal. Having an independent agency working on your behalf is a great way to ensure you receive the best value year over year.

So how can you combat rate increases? It boils down to one word, SHOP. If you are with insurance company “A” and they are unable to adjust their loss ratio through enhanced underwriting, or other non-rate factors, you will be feeling it. At the same time, there are great companies that are ahead of the curve pricing more competitive. Nearly all insurance companies are moving up and down regarding rates, and coverage. One is the cheapest, then they realize they were not getting the rate for the risk and take aggressive rate increases to offset the loss. The sad part is, they know their statistics. They know the likelihood of you taking the time to shop is poor. In a prior blog, I mentioned that nearly 40% of consumers have never shopped for insurance according to a survey conducted by insurancequotes.com.

There are several reasons why consumers choose not to shop.

  • They believe their rates cannot be beaten due to the carrier they are currently with was cheaper several years ago when they purchased their policies. (Once cheapest, always cheapest mentality)
  • They believe the process will be cumbersome and not worth the time.
  • Life is busy and the task has been placed on the backburner.
  • It has never crossed their mind that there may be better coverage, and premium options available.
  • They are uncomfortable with new unfamiliar things.
  • It is a big hassle they do not need.

I cannot speak for every agency; however, I can speak on ours. We have created systems that make the quoting and onboarding process as easy as we believe it can be. So, how easy is it and how much hassle and time does it cost you?

  1. Call, email, or request a quote on our website. This takes 30 seconds – 2 minutes.
  2. Answer a few quick questions via email, or phone. This takes 1-3 min.
  3. Receive your quote per your preference, email, virtually, face to face in our office/your home, over the phone, or any other way you find convenient.
  4. More savings with more coverage? YES! How do I purchase? We collect your preferred payment method, set up your payment schedule, handle notifying your lienholders, process your new policies and welcome you onboard.
  5. Receive an email with your insurance documents review and electronically sign. ALL DONE!

Many times, after we present a household’s personal insurance options, the client is in disbelief. This is due to the fact most have stayed where they were for many years without shopping. The savings and increases in coverage have the client scratching their head. Is this too good to be true? Is there something missing? How can it be that cheap? All are logical questions. The fact is they get much more for a lot less, due to the fact we shopped not one but dozens of great companies in search of the best value. The icing on the cake is our agency is INDEPENDENT. We are not limited to one carrier and the premiums and limited products they choose to offer. When insurance companies compete, you win!

There is much more to value than price. Price is simply one component of value. Will your agency be there for you when you need them most? Will they forward you or ask you to call a 1-800 number or will they provide you with an unmatched customer experience? You will find that our mission is to exceed your expectations every time you need anything from us. We strive to not only offer the best price but more importantly the education, options, and advice you deserve to help do what insurance was created to do, protect.

To learn more about the value we have to offer you, visit our website www.trophyinsurancesolutions.com. If you would like to see the value we have provided hundreds of families across Texas and Oklahoma, simply give us a call, (940) 325-2003, send us an email info@trophyinsurancesolutions.com, or visit our offices in Mineral Wells, and Weatherford, TX. A highly trained, licensed insurance professional will get to work and show you The Trophy Difference.