There are Three Sources for Insurance Advice.
- Direct Insurance Writers – these are online or over the phone providers where you speak to someone in a call center or click to chat to issue an insurance policy. Examples are Esurance, Geico and Progressive Direct.
- Captive Insurance Agents – local agents who represent ONLY one insurance company. Examples are State Farm, Nationwide, Farmers, and most Allstate agents.
- Independent Insurance Agents – local agents who represent multiple insurance companies. Sometimes referred to as insurance brokers.
Where do their loyalties lie?
This article describe’s a Pennsylvania doctor who was responsible for an automobile fatality. He had auto insurance with USAA for 17 years, and USAA never advised him to increase his bodily injury liability coverage on his auto policy.
The court found that USAA had no responsibility to provide auto insurance advice to the doctor, even though his needs changed dramatically over the years, AND USAA now provided $1,000,000 of personal liability protection on their homeowners insurance.
USAA has no fiduciary responsibility to advise insurance clients as to what coverage they SHOULD buy, only to provide the policy that the clients ask for.
My online GEICO experience
In order to get an idea of what GEICO’s rates were like, I completed their online quote form. If you look carefully at the offer I received, after requesting $500,000 limits of liability (the best they could do was $300,000), they list the lowest limits as the “most popular.”
Notice that the “most popular” limits only provide about 9% of the coverage the other quotes provide, but they still cost 80% of the rate for the better coverage (they called it Similar because they couldn’t do the $500,000 limit I asked for).
I immediately recognized that GEICO is attempting to limit their exposure by offering me very low limits at almost the same price of decent coverage.
How is this possible? GEICO is an insurance company, and has NO obligation to provide good insurance advice. If you, the consumer, decide to go with the “most popular” option, then that is the risk YOU TAKE!
Armed with this knowledge – do you think you can trust GEICO to provide the best insurance advice?
Do Captive Agent’s Provide Good Insurance Advice?
I know several great captive insurance agents, and I don’t want to paint with a broad brush, but I have seen some very questionable coverage selections come through from captive agents.
A captive agent only has access to ONE insurance company. The biggest in our area are State Farm, Nationwide, Allstate and Farmers Insurance.
When your needs change, and you no longer fit the ideal client of the only company the captive agent can provide, I’ve seen them react in one of two ways:
- They refer you to an agent that can help, opting to do the best thing for the client, and building good will.
- They suggest reducing coverage options to lower premiums.
I wish I could say they all fall on their sword and refer their clients to other agents that can help, but I have seen many, many prospects insurance declarations that had very low optional coverage like Uninsured and Underinsured motorists coverage. When asked why they had such low coverage selections, these future clients often said they were premium reduction recommendations made by their soon to be former captive agent.
Unlike the direct writers I discussed above – captive agents DO have an obligation to provide advice to their clients. Unfortunately, because they only represent one provider, they may not have all the best tools at their disposal to provide the best insurance advice.
The Best Source for Insurance Advice
As an independent agent, you could say that I am biased. You may be right, but I came to the conclusion that a truly independent agent provides the best opportunity for good insurance advice for several reasons.
- Independent agents represent many insurance companies that have a wide variety of client profiles. This means YOU WIN because the agent can place you with the insurance provider that fits your specific needs AND wants you the most (has the lowest premium for the right coverage). You save time and money by allowing an independent agent to shop for you!
- Independent agents can insure just about anything. Not every independent agent has a provider for every situation, but in 99.9% of cases an independent agent will be able to insure what you bought – or the business you want to open – or the trip you want to take.
- Independents agents DO HAVE a legal standard of care to provide to their insurance clients.
- Independent agents don’t have to worry about aggressive sales quotas, or oppressive time manage
ment regimes. Captive agents typically have a sales manager who will pressure them to produce a significant amount of new business each month. Additionally, insurance company call centers often have rules about how much time a customer service representative can spend on a phone call with a client. If a rep takes too much time with you, they could be disciplined. Both of these conditions can cloud someone’s judgement, and NEITHER condition apply to independent agents!
- Independent Agents often earn advanced insurance designations which truly make them insurance experts. Examples are Certified Insurance Counselor (CIC), Certified Professional Insurance Agent (CPIA), and Chartered Property & Casualty Underwriter (CPCU).
I hope this article cemented your confidence in your independent agent that you already use, and if you have insurance through a direct writer or captive agent, I hope you’ll contact New Heritage Insurance for a coverage review.
We won’t be the right fit for everybody, but we have products that provide better protection at lower premiums for the majority of prospective clients that come to us from the direct or captive environment.
At the very least, you’ll get FREE, UNBIASED insurance advice on your policy. We’ll let you know if its GOOD, BAD or UGLY!