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Insurance companies promise that switching over to thei... Insurance companies promise that switching over to their product can save you a bundle of money. But just how accurate are their claims? (mlinksva, Flickr)

If you get the feeling you’re seeing more ads for car insurance in recent years, there’s a good reason. You are. Spending on auto insurance advertising ballooned from $600 million in 2003 to over $1.7 billion in 2007. In 2008, Geico alone spent more than $600 million, with State Farm and Allstate not far behind.

From talking lizards to modern cavemen to that guy who used to be the fake President on 24, it’s almost impossible to escape the constant barrage of advertisements offering huge discounts on car insurance. But how much can you really save? Take a look at the claims in the advertising and it defies logic. If you can switch to Allstate and save 20%, then over to State Farm, where you can pocket $489, jump to GEICO next to get back over $500, and by the time you make the switch to Progressive to save $550, the insurance company should be paying you. And that $451 from Esurance? That’s bonus time, right?

Read The Fine Print -- In The Ads

Well, not exactly. You need to read the fine print because there is always an asterisk associated with those claims. Typically, the insurance companies offer those numbers as the average savings for customers who switched and reported that they saved money. Customers who switched and didn’t save money don’t count when factoring that average. Neither do customers who shopped that company and decided the rates were too high to switch.

Logic says that nobody switches auto insurance companies to pay more. And if you get a few quotes, one will obviously be the cheapest. With few exceptions, like having a particularly poor customer service or claims experience, a cheaper rate is about the only reason to switch.

Most insurance companies maintain proprietary databases and statistical models they use to calculate the risks they take when insuring an individual. Since all of the companies use a wide variety of rating variables and weigh them differently, the odds are pretty good that one company out there will have a better rate for you than all the others. The flip side to that rationale is that no one company can save everyone money.

What’s certainly true is that insurance companies are relying less on fuzzy, neighborly, feel-good advertising and instead are appealing to consumer’s wallets to earn their business. According to Dick Luedke, spokesman for State Farm, the largest auto insurer in the country with around 41,000,000 auto policies in force, “There is no question that the market is very competitive right now.”

But you need to look at more than just the price tag when deciding which company to go with. “Price is not the only thing a customer should look at,” said Luedke. “You really don’t know what your insurance policy is worth -- truly worth -- until you file a claim. The best value is not always the best price.”

Ask For The Discounts

But with price being where the rubber meets the road today, we asked around to find out what those discount claims are really about. Luedke, whose State Farm alternately advertises whole dollar savings as well as savings “up to 40%,” told us that the discounts usually amount to multi-car or multi-line bundles (meaning a car and home or renter’s policy togeter) as well as good driver bonuses. To State Farm, a good driver is one with no at-fault accidents or moving violations in three years.

Other insurance companies offer most of these discounts as well. Some, such as Esurance, an online-only upstart that now has a presence in 30 states, offer a discount simply for switching and another for generating your quote online, whether you purchase online or phone in your order to their call center.

Could it be that your current agent is simply not sharing all of the available discounts or you are not asking the right questions during your annual policy review? (You do have an annual policy review, don’t you?) According to Raleigh Floyd, spokesperson for Allstate, “If you are not taking advantage of all the discounts available to you, then yes, you’re paying too much.”

While it may seem that your current agent is fleecing you when you can get such a better deal elsewhere, the truth is that perhaps your insurance company’s rating variables might not favor you right now.

In explaining why the extremely competitive marketplace encourages such advertising on price, Esurance Chief Marketing Office John Swigart said, “As [the market’s] gotten more competitive and since many consumers make their final decision based on price, it is important to state and demonstrate that you’re competitive on price.”

More Tips

Here are some ways you can save money on car insurance:

Drive safely. Sort of obvious, no? Maintaining a clean driving record with as few accidents and tickets as possible is one of the best things you can do to qualify for the best rates. Insurance is based in math and it’s pretty clear that if you keep forcing the insurance company to pay up, sooner or later your rates are going to increase or they may drop you altogether, forcing you to pay even more with another carrier.

Insure more than one car. Like donuts and that warehouse club package of paper towels, buying in bulk is a good way to save.

Buy a homeowner’s or renter’s policy from the same company -- more bulk buying.

Maintain good credit. Yes, that ugly credit score albatross rears its ugly head again. Data indicate that people with poor finances tend to use their insurance more. So, pay your bills on time.

Speaking of paying your bills on time, while most insurance companies offer you the option these days of paying monthly with an automatic payment plan, some will offer a discount if you pay the whole premium up front. If you have the cash, go for it.

Let your insurance company know if your regular commute doesn’t involve your family car. It’s kind of hard to get into accidents when the car is parked.

Raise your deductible if you can afford to, as minor fender benders and bumper bruises become out-of-pocket expenses and your insurance company won’t need to pay up when they happen. Similarly drop comprehensive theft and damage coverage on an older clunker that might not be worth much more than your deductible.

Shop around! If there’s one thing this barrage of ads is honestly telling us it’s that there are people out there saving money and it’s free to ask around and get a quote. Maybe you will end up being one of those “average” drivers who switches and becomes the right kind of statistic, with an asterisk, of course.


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  • 192 Comments
      admanweek
      • 5 Months Ago
      I had my auto insurance with Progressive - they raised me last month from $618 to $688 for a 6-month premium on 2 cars (no, we don't have any tickets or accidents). Since we're now retired, I decided to spend a few hours on the phone calling for alternate quotes. The bottom line, Geico was the cheapest - I got the same policy for $380 for 6 months that Progressive wanted to charge me $688 for. I still suspect that the companies give you an ultra-low premium for the 1st year that you're switching (like a loss-leader item at a store), and then may raise it in the future, for no reason at all (like Progressive did with us). So I'll continue to shop around in the future if there's any premium hikes. But this time, I really did save 40% with Geico, just like the ads say!
      • 5 Months Ago
      Of course each insurance company can report that the average consumer who switched to their program saved money - because who is going to switch if they DON'T save money (unless their current insurance carrier has denied them for whatever reason). What they should report is the percentage that DIDN'T sign up because the cost was higher - that would be a better indicator of who saves you money and who doesn't.
      Bert Heyder
      • 5 Months Ago
      Sure they're real, like bending over to pick up that dropped bar of soap in the men'sshower, watch out!
      • 5 Months Ago
      I just switched to All State. State Farm went way up on my rates while claiming to give me huge discounts for multipe line and accident free coverage. I paid for a year for house and 6 months for car for same as State Farm wanted for just the house. Never hurts to compare.
      • 5 Months Ago
      MAYBE SOME DON'T REMEMBER BUT A WHILE BACK IT WAS ON 60 MINUTES HOW GEICO WAS BUYING RADAR GUNS FOR THE POLICE,SOUNDS LIKE THEY WANT TO RAISE YOUR PREMIUMS!
      mike
      • 5 Months Ago
      the only time ive ever felt like i was saving any money was when i switched to wawanessa ins. out of san diego its less than half price from what anyone else charges,and no i do not work for em either i just couldnt believe how much cheaper it was espesialy if you have teen drivers
      • 5 Months Ago
      Here are a few tips from an Auto Insurance Rating Supervisor and Underwriter: After working over 31 years in Personal Lines Insurance I can tell you there are good insurance co's and substandard insurance co's. (One of the co's in the article is a substandard co.) As suggested in the article you should have an annual review of your insurance policies. A substandard insurance company will insure anyone and therefore your rates will be higher. If you have a clean record, have good credit, and will insure an additional line, such as a homeowner or renters policy, you should get the best rate available. Do compare rates. And most important to remember: it is a good idea to stick with one company. If you build a good history with a company you do get free things such as "Accident Forgiveness" for a first accident....no surcharge for three years. Some companies do offer Accident Forgiveness for new customers but you will pay extra for this!!!!!!! Also, for a long time customer you will be given extra consideration if you do have a catastrophic occurrance and probably would not be cancelled. A long time customer can use this information when filling a claim and should get exceptional service for that claim. My company is a top 5 company and is not mentioned in this article. We do not advertise as having the lowest rates. We do offer all the same discounts as the others who advertise and our rates are as every bit competitive. We do value our long time customers. " Responsiblity " is our motto.
      • 5 Months Ago
      oh yeah and I get an annual per diem back
      • 5 Months Ago
      I had State Farm for years and never had to pay out of pocket besides my deductible for any claims. I switched to Geico a couple of years ago because it was cheaper and now I have my first claim and they want me to pay $2000 plus my $500 deductible for some kind of betterment charge. So in the long run I am not saving any money!! I am going back to State Farm!!
      yourinsuranceman
      • 5 Months Ago
      There is no insurance company that has the lowest rates. There are many factors involved in rating. Many companies have certain risks they prefer and ones they don't and their rate will reflect that. And companies that say they don't have the "middle man (agent/broker)" to pay, have to pay an employee to do the work the "middle man" does. An employee is far more costly than paying a small commission.
      • 5 Months Ago
      How an insurance company behaves when there is a claim is also important. I had State Ft arm for over 10 years 3 cars, home insurance, umbrella insurance all of it. When there was hail damage to the roof of our house, out of 32 houses on our street, only 4 did not get a new roof. All four had State Farm, apparently they cover any thing they insure with an invisible Shield, so hail or anything else does not damage State Farm covered entities. Was very disappointed after being with them for 10 years with no claims. Changed to ANPAC, and every year I get 25% of the premium back due to no claims. Oh and ANPAC does not advertise so you may not have heard of it. I had not either. I been with them 5 years.
      kfetter249
      • 5 Months Ago
      What a lot of companies do is quote dangerously lower limits. Telephone agent told me their 100/300/100 limits are equivalent to $500,000 combined single limit since they add up to $500,000 which is absurd. Another agent who handles only my state did not understand how the auto medical benefits work and recommended a plan with a $90,000 gap. It's easy to quote lower premiums when you cut the limits.
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