Why are the big insurance companies so much cheaper?

Why are the big insurance companies so much cheaper?

I am getting off my parents auto insurance and getting my own. The Quote from the agent my parents use who is local to the area was nearly two hundred dollars more per year than the quote i got from progressive. Is there a reason to use a local company? he tried to sell me on customer service but i only deal with my insurance company maybe once or twice a year so i'-m not sure that its worth $200 to me. Is there a reason to use a local company?


To answer the main question: A larger insurance company generally has more customers which means more individuals taking responsibility (risk) for the whole group and when an accident happens it leaves a small dent in the fiscal well-being of the company. All insurance companies have what is referred to as reinsurance for their larger claims to ensure that if there is a significant (large-scale) claim that several insurance companies (not just one) will carry the burden.I'm not sure I can answer the second question for you (is there a reason to use a local company), but I hope that I can help enlighten you to get the best deal possible from both entities and empower you with greater information so that you are better able to make the judgment for yourself.The first thing that you should find out is whether or not the policies are identical (all numbers matching exactly, premiums, deductibles, coverage amounts--the differences in the breakdown amounts may give you negotiating room). If you are getting substantially better coverage or coverage that is more appropriate for needs from your local company then you should go local. There are some repair shops that do not accept insurance from certain carriers (one near me does not accept the specific company you mentioned). The potential for an accident (whether with an animal or a person regardless of who is at fault) is always a possibility, which is why you want to be appropriately insured (especially if you're involved in an accident with a person who does not have insurance). A little more insurance is better than a little less.Once you determine that the policies are identical, to obtain the best price you could ask for a good driver discount, multicar discount (as you mentioned that it is the same company that carries your parents) and also a price match (or compromise) with the lower-priced company. Paying your premium once a year in a lump sum is cheaper (administratively) than paying monthly (as someone only needs to manage the bookkeeping aspects of your accounts once a year versus twelve times per year). If you're able to do that, you might be able to secure a single-premium payment discount. You might also be able to secure a discount if you have multiple policies with the same carrier (i.e. an emergency hospital policy that would reduce your monthly auto premium). If you are able to keep money in the bank ($500+), perhaps you could have higher deductibles which would in turn lower the cost of your premiums.I would be curious to know how quickly claim service is provided, the other amenities that are provided by both companies (i.e. free roadside assistance, coupons, discounts at local businesses etc.), whether or not they are a stock company and if so, do they have a track record of dividend payouts to their shareholders? In addition, I would be interested to know what reinsurance companies they work with. The fiscal well-being may be substantially better (or worse) depending on who reinsures for them. If it is a company that is well-known to be in financial trouble, I would be concerned, but if there are smaller insurance companies and maybe one or two larger (that aren't in such dire straits) then that would be a better sign.Once you can look at the quotes objectively, hear/read what all are ready, willing, and able to provide, and ensure that you are able to provide your end of the agreement (paying your premiums on time), I am sure that the right decision for you will present itself easily. Even if on those negotiation points there is not absolute compromise, just remember if you were in a serious accident how would you rate the importance of the breakdown components under extreme circumstances.The final component that I would consider is this. If all things appear equal (for the most part), I think it is a good practice to purchase from a local business. As a part of the community it is a great thing to be able to support your local businesses. I'm sure that if you had a local business you would want the reciprocal benefit of loyal local customers supporting your entrepreneurial endeavors.Best of luck to you.Source(s):Experienced negotiator. Family history of insurance producing and underwriting.


Not only big insurance company but every insurance company will provide different quote on your car insurance so obviously you should always get free insurance quotes online from websites like http://auto.youcomparequotes.comso that you are not loosing any money on your car insurance.


Bigger insurance companies have more policy holders- that's what makes them big. The risk is spread over the many more policy holders than smaller companies. However, you are still grouped according to your age and gender, where you live, where you work, how you use your car, credit profile and about 20 more measuring sticks to determine your premiums.Customer service? Not really. You still have to deal with the insurance carrier that he hooked you up with.They may low ball you the first year or two, then hit you with a small, but progressively higher premiums to make up for what they didn't get from you the first year or two. I really can't say that anyone does that, but I have that in the back of my mind. Credit card companies have been doing that for ages with their card agreements.Be careful of CHEAP insurance. It can be expensive. You may be stuck with a hefty deductible or co-payment if you violate the terms of your CHEAP policy. Example: You loan your car out and that person has an accident. You may be stuck with a major portion of the loss because you loand the car out which may have been against the policy limitations. Read them carefully.


The answer to the main part of your question is the same reason why Target and WalMart are cheaper than 7-Eleven and Plaid Pantry.



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