Get insurance bundled while prices are still hot
NEW YORK (Reuters) - If you believe the multitude of insurance ads you see on television, bundling can save you money. And right now, there may actually be some truth in advertising.
One sample quote from Travelers Cos Inc, for example, showed homeowners could save $400 a year by bundling home and auto insurance that would cost $2,450 separately. Of course, individual savings vary greatly, depending on where you live, what you own, your driving record and even your age.
The deals are sweetest for customers who have good credit scores and clean driving records, as insurance carriers go hot-and-heavy after them to buy packages of their auto and home insurance (as well as life and other policies).
Even specialized carriers such as Geico Corp, which focuses on car insurance, are teaming up with other carriers, like Travelers, to offer homeowners insurance.
With insurance prices on the rise (up 2.9 percent on auto and 3.4 percent on home over last year, according to research firm Stifel Nicolaus), insurance analysts say it is time to capitalize on this desperation to get your business.
It's a far cry from just a few years ago.
"It's ironic because insurers had been pretty aggressive about unbundling for a long time," said John Lucker, a principal at Deloitte Consulting LLP who studies the insurance market. "Following the financial meltdown, the market grew soft. Now companies are looking to grow, and the easiest way is to sell more product to the customers they already have."
Rising expenses from natural disasters and the reluctance of customers to switch carriers are also driving the trend. The losses are forcing insurance companies to seek new and more profitable business to fill in the holes.
The good news for consumers is that the new attitude of insurers can translate into better deals. "You're going to save money by bundling," said Wade Chance, an assistant vice president of auto product management at USAA.
The best way to find out what rates are available?
"Shop it. Shop it every year," said Rick Rodgers, a financial adviser based in Lancaster, Pennsylvania, and author of "The New Three-Legged Stool: A Tax Efficient Approach to Retirement Planning.
But consumer advocates note that bundling is not always the answer. Andrew Schrage, co-owner of Money Crashers Personal Finance, a personal finance advice company, said he shops around once or twice a year, but he actually has not moved his auto policy for seven years because no one has been able to match the rate. He does not bundle his policies for that reason.
"I found that I could get cheaper premiums by spreading out my policies among several companies," he said.
And discounts might not seem so great if you have already moved your policies around in the last few years. In the J.D. Power and Associates 2012 U.S. Insurance Shopping Study, published in April, only 25 percent of those surveyed identified themselves as shopping for insurance in the past year, down 8 percent from last year's study.
Robert Hunter, director of insurance for the Consumer Federation of America, suggests a process of elimination to find the best rates, which takes about an hour. For those who take shortcuts and boil the search down to 15 minutes, or one phone call to an online aggregator, or just directly to one company - as you might be persuaded if you listen to commercials - you are probably paying too much.
Start with state websites and look at home and auto rates to pick a few of the lowest, he said. Then look at the complaint ratios for those to narrow it down further.
Call the top two or three to get quotes, asking a lot of questions about the specific policy coverages to make sure you are comparing apples to apples.
Also make sure to get quotes separately for auto and home, and also bundled prices, because you may save money by going with two different carriers. A study from LIMRA, a financial-services trade association, found that only 37 percent bundled auto and home insurance.
"After I've done all that, I'll go to two agents and say give me your best deal," said Hunter. "I find sometimes they can win, but not usually."
The deals on the table now might not last long, however. With hurricane season on the horizon, insurance analysts predict prices will keep going up. With more homes in tornado paths and more coastal property, there is bound to be catastrophic damage even if there are the same number of storms.
Allstate Corp, for example, lost $280 million in April on natural disasters, more than it lost in the first three months of the year combined. It is aggressively marketing bundling.
"You can always have a debate about global warming, but in the past, you didn't have 20 homes in a subdivision in the path of a tornado. It was just an empty field," said Brad Lemons, vice president of property at Nationwide.
"Rates have been too low for too long," said Lucker. "If your investment returns are not strong, you've got to generate more capital or you go out of business."
For now, companies are responding by ramping up even more advertising to push consumers to bundle policies, spending $5.7 billion on advertising in 2011, up 12 percent from the previous year, according to the J.D. Power study.
Said USAA's Chance: "There's an arms race for who can put the most impressions out in front of consumers."
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