Sunday, March 21, 2010

Always look beyond the car insurance quotes

In the good old days, people were trapped in their employment. The lyrics of the classic song, "Sixteen Tons" say it all: "Another day older and deeper in debt... I owe my soul to the company store." The company paid, but the only place to buy food and the other necessities of life was the company store. With the prices set unaffordably high, people had to go into debt to put food on their tables. In accounting terms, they never ever paid off that debt. It's a strange reflection on those times - that employers felt their labor would never willingly stay loyal. Today, people are more free to sell their labor and, if the job is not good for some reason, they can move on to try somewhere else. To that extent, employers have to build up a relationship with their employees. Trust and loyalty must be encouraged on both sides. It's the same with those who sell goods and services. There are vast numbers of potential customers "out there". How do you convert "potential" into "actual" and then keep those customers loyal? Well, Toyota seemed to have the answer to the question and then, as it slowly forgot about the need to maintain their customers' good opinions, lost their brand image for safety and reliability. What price loyalty from Toyota customers?

Moving to the insurance industry, we find the same "for profit" attitude that has just driven Toyota into a wall. Insurers should be looking after their customers, ensuring they always have a good experience, particularly when making a claim. Instead, the insurers have this remarkable reputation for trying to weasel out of paying the full value of every claim made. It seems the words, "small print", were invented just to let them off the hook. Why, then, has the free market not operated to drive them out of business? Ah, the wonders of capitalism do not apply to the insurance industry. We get caught in so many different ways. First off, all but three US states make it mandatory for us to have auto insurance. That forces us to look for the product. Then we run into the insurers' exemption from the antitrust laws. Sadly, in 1944, the federal government thought it would be a good idea if the insurers did not have to compete with each other and no administration has had the political will to repeal that law. So we get prosecuted if we drive uninsured, but have to pay whatever premiums the insurance companies feel like asking. Life is just not fair.In a perfect world, insurers would automatically pay a loyalty bonus if you have yet another year without a claim. This will encourage you to stay and not move to a competitor. But when you get your renewal notice, it comes with rate increases. You check out the car insurance quotes on sites like this. Hey, there are welcome bonuses for the good drivers. This does encourage companies to pay a loyalty bonus. The problem is that the welcoming rates go up fast as the year goes by. Once the new company has you, it wants its money back. The car insurance quotes only cover the initial premium. There is no guarantee against increases. Now all that is needed to make both bonuses real is for everyone to move every year. This would create such chaos that real loyalty bonuses would suddenly appear and offer an incentive to stay. Except most people do not move. It is not loyalty. It is inertia and we all lose as a result.


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