Remember the unbelievable story of Nicole Scheufler, who saved hundreds of dollars on her insurance policy through an insuretech startup called Gabi? Well, it turns out that when you need to save money on car insurance, you can’t believe everything you read.
Car insurance isn’t a one-size-fits-all proposition. What works for one person may not work for another. I discovered that the hard way. Scroll to the end of that story for a clue. Turns out the same tried-and-true strategies that helped you save money on insurance last year can work today. But beware of shortcuts.
A recent Policygenius.com survey found that 1 in 3 Americans have never re-shopped their auto insurance. Of those who’ve never re-shopped, 32% said it was because they thought it would take too much time, while about 16% said they don’t want to do the paperwork.
Gabi is one of several promising insuretech companies that use technology to find both savings and efficiency in the insurance industry. As I reported, they’re also turning the industry’s focus away from making quick sales and toward building long-term relationships that could benefit both consumers like Scheufler and forward-looking insurance companies. That’s a good thing.
What happened when I tried to save money on car insurance
The Gabi app, you’ll recall, helped Scheufler find a policy through a company called Clearcover for her 2015 Mazda CX5 that cost about $100 a month, hundreds less than her previous policy.
I signed up for Gabi to see if it would work for me. After I surrendered my name, driver’s license number, and the login for my current auto insurance, Gabi went into radio silence for three days and then sent me the following message:
Hi Christopher, this is Natallia from Gabi. I just found you savings of $585 on your AAA policy.
Wow, $585? Where do I sign up?
Natallia asked me to review the policy and fill out the payment form.
So far, so good.
Then came the bad news
After carefully reviewing your policy, we were unable to confirm the potential savings we initially sent. We’ve confirmed that you can save $39 per year by switching your Auto insurance to Kemper Preferred. Please review the attached Gabi proposal. Just let us know what’s your decision.
Wait, how did we go from $585 to $39? I asked.
So, unfortunately, the initial rates changed once we gathered the driver’s license, updated birthdays, annual miles and then we submit the info inside the insurance carriers website.
Then your insurance history & driving record came back, (even though you have a clean record) and there are cases where the rates we receive change when the carrier runs these reports.
I apologize for this, our goal is to find you savings and we are constantly reviewing all cases like yours to fine-tune the communication between our system and the carriers.
That’s a little disappointing.
Needless to say, I’m not going to switch carriers to save $39. I still like Gabi and believe it’s a valuable tool for people who want to save money on car insurance. But, now that I’ve been through the process, I think there’s a little more to it than downloading an app.
Strategies for saving money on car insurance
There are other ways to save, experts told me.
Mind your credit score
One of the most overlooked ways to save money on insurance is to have a high credit score, according to James Garvey, CEO of Self Lender, a site that helps consumers build their credit score. “In all but three states, it is legal for insurance companies to underwrite your insurance policies with your credit score,” he says. “While this may seem unfair, it’s, unfortunately, the reality that most Americans experience today.” But if you live in California, Hawaii or Massachusetts, then your credit score won’t be eligible for underwriting your policy.
Ask your employer
“One type of insurance discount that many people never even think about can come from an employer,” says Joel Ohman, founder of CarInsuranceComparison.com. “Many large companies offer various discounts to their employees if they purchase a policy through a preferred insurance provider that the employer may have some type of special arrangement with. Often employees don’t even think to check with their employer or they forget to bring it up to the insurer.”
Play it safe
That’s the advice of insurance agent Jenny Saint Preux. That includes installing a security system. “Even a passively enabled security system can afford savings on your premium,” she says. “Monitored systems, such as LoJack and OnStar, generally afford greater savings.” You can also complete a defensive driving course, which can lower your premiums, she says.
“Believe it or not, a bad driving record, in addition to a bad financial credit report, may cause the underwriter to rate the case, meaning they will add an additional premium due to the risk of the insured that the carrier is undertaking,” explains Mark Charnet, founder and CEO of American Prosperity Group. So drive safely — and don’t expect a discount if you have a string of moving violations.
Cast a wide net
Gabi is just one potential source for saving money on car insurance. Last spring, personal finance consultant Kassandra Dasentmy turned to PolicyGenius.com for help. “We had coverage with State Farm for several years but felt that we could find a cheaper alternative,” she says. PolicyGenius.com came through. ” we are now paying less than half the amount in monthly premiums,” she says. (Alas, when I try to use PolicyGenius, it tells me there’s a waiting list in my home state of Arizona. Wow, today is not my day to save money on car insurance!)
Maybe you’re asking the wrong question
“Insurance is often purchased as a commodity,” explains Rob Drury, executive director of the Association of Christian Financial Advisors, “price being the eventual determining factor in the decision.”
But maybe that’s the wrong approach.
“In reality, cost is perhaps the least important consideration,” he says.
Why? Premiums are actuarial; that is, they’re carefully and conservatively calculated based entirely on risk.
In other words, there is no such thing as expensive or cheap insurance. If a premium is low, it represents a minimal risk that is either unlikely to occur, or would result in minimal expense. And if it is high, it represents a peril that is likely to occur or is exceptionally costly to rectify.
“If one policy’s premium is substantially less than another’s, it is a clear sign that the coverage is relatively inadequate,” he says.
Put differently, if you find a cheap policy, maybe you should ask: What is it missing? You’ll want to find out now — and not by accident.