This is a question that comes up fairly often when we talk to our clients. Does loyalty mean anything anymore? Will I get preferential pricing if I stay with an agency for a long time? Do they have a longevity discount? Do I lose anything by shopping my insurance every few years and switching? These are all excellent questions.
Let’s talk about premiums first, since that is the first thing that comes to most people’s minds when they think of loyalty. Do I get a discount for staying with a particular company? The short answer is no. I am not aware of any companies that give a longevity discount or any pricing break directly. There can be some small benefits to being with a company for a longer period of time such as your premium not going up quite as much when you have a claim, getting some built in accident forgiveness, etc. However, you premium does not decrease for being with a company for a long time.
Why the heck do I not get rewarded for my loyalty with a lower premium? Answer: Statistics. Insurance rating is based solely on statistics. Insurance companies are the original data aggregators. Why do companies ask for my date of birth, driver’s license number, social security number, my occupation, how much education I have, and a million other pieces of personal data? Statistics. Insurance companies use all of these different pieces of information to predict how likely you are to have a claim. For example, if you have a higher insurance score (Uses data similar to a credit score but not the same thing. Also, it does not affect your credit when run.), you are statistically less likely to have either an automobile or homeowners claim. This doesn’t mean that you will have a claim if your score is low. It means that out of every 100 people with a high score and every 100 people with a low score. The low score group will tend to have more claims. They, therefore, pay a higher insurance premium. The same reasoning goes with the rest of your information.
So does loyalty matter to insurance companies? Yes! Every time we have a customer that has had 1 too many claims, forgotten to pay their bill too many times, a business owner starts doing something a little out of the insurance companies comfort zone (like renting golf carts when you’re a hardware store), one of the first things we discuss with the company or they will ask us is…you guessed it. How long has this customer been with us? Bingo! If the answer is less than 3 years, you will get little to no preferential treatment. If the answer is longer than 3 years, you will get preferential treatment in some circumstances. If you have been with the company for more than 10 years, you will get the preferential treatment most of the time. Now if you have 3 too many claims, never pay your bill on time or start a dynamite factory in the back of the hardware store, it doesn’t matter how long you’ve been with the company. You’re going to have problems.
How does this play out? John and Lori have two kids that are 16 and 18. The 18 year old is a gem and does everything right. The 16 year old? He’s been in two accidents in 3 years. That’s a problem with any company. We call the company after they say they want to non-renew the policy. Scenario A: John and Lori have been with ABC Company for 2 years. We say let’s keep them on for one more year and see if things can improve. ABC Company says: Nope! Two accidents are already too many for Junior. Scenario B: John and Lori have been with ABC Company for 25 years. We say let’s keep them on for another year, they have been with you for 25 years and have only turned in 1 other claim that entire time. ABC Company says: Ok, they’ve been with us for a long time and it’s been very good for both of us. We can stick by them as long as they don’t have any other claims! Hooray!!! Now, we introduce Junior to the braking system of the vehicle and show him what the definition of “Speed Limit” is. He also gets a job to help us pay for our more expensive insurance premium due to his lead foot.
As you can see, it’s not plain to see where loyalty plays in with insurance companies but it is still a factor in insurance decisions every day. We even have companies that will be more lenient on long-timers when introducing new rating systems if they are detrimental to said long-timers. There are a number of situations where loyalty is beneficial but none of them are readily evident today.
With all that being said, should you never switch? No. There are a number of reasons to switch, better coverage, better customer service, better pricing, etc. However, don’t take the switch lightly. Make sure you really are switching to something better with someone better. If you want to see if it’s worth the switch today, call us at the Frederick agency 419-732-3171. We’ll review your options and help you decide what is right for you.
By Brennan Madison