Good Question: Are Car Insurance Ads Taking Us For A Ride?

By Jason DeRusha, WCCO-TV

— Geico will save you 15 percent. 21st Century says, if you leave Geico, you’ll save $460. Progressive customers save hundreds when they switch, too. So, how can all these car insurance companies save you money?

Mallerie Shirley of St. Paul asked WCCO-TV’s Jason DeRusha that very question.

Are the insurance companies lying or is it true?

“Well, it’s both,” said Andy Whitman, PhD., a professor of insurance at University of Minnesota’s Carlson School of Management.

Whitman has written books on the insurance industry and regulation, and he said the advertisments are technically correct, if you read the fine print.

“It’s truth for their average insurer who’s priced the way they’re pricing it, but it’s absolutely not true for specific ‘insureds,'” he said.

The ads are promoting savings from customers who did in fact switch. Presumably, the customers who didn’t switch didn’t realize any savings.

While it’s true that people are saving money, you just might not the person saving money.

“These claims in advertisment are not fraudulent, because they’re not aimed specifically at any one person,” said Whitman.

The other factor is that different insurance companies have different target audiences in the underwriting practices, according to Whitman.

“One company might be targeting teenage drivers,” he said, “somebody else targeting seniors.”

So in fact, all the different companies could be saving different segments of the population money. If one customer compared identical plans with all the companies, that one customer would not achieving savings at all.

Either way, Whitman warns against shopping for insurance solely based on price.

“None of the deals show whether the insurance companies fairly pay claims,” he said, “The test and the quality of the company is if they fairly pay claims.”

To those interested in switching, Whitman suggests researching the insurance company before buying, asking friends if they’ve had good luck with their company paying out claims and checking with independent agents and agents that represent a single company for price quotes.

He also says to get price quotes every couple of years and then take those prices to your insurance company to see if they’ll match.

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