Stuck in the Middle with You

 I saw an ad for a large direct insurer claiming that you can save money by buying direct because you avoid “the middleman.” This is one of the biggest myths in insurance, and business in general.
A vast majority of what will determine if you can save money with one insurer vs. another, is if your characteristics match up with the ideal driver of a particular company. If one company insures 1,000 30 year old drivers, and none of them have any accidents, then by nature if you’re 30 that company is going to offer you a better rate than another company, because they have an anomaly.

In regards to the middle man, companies that you buy insurance through directly employ the middle man. The people that answer the phone when you call Safe Auto, Geico, Progressive, and E-surance aren’t working for free.

Generally speaking, the companies in the previous paragraph spend far more money on advertising and payroll, than do the companies that sell insurance with a middleman.

In an independent agency model, the agents are responsible for most of the acquisition and marketing costs. So all the money that direct companies spend on marketing is matched by all the money that agents are spending on marketing. This renders the direct vs. agent pricing model a useless argument.

You should buy insurance from a company and an agent that is easy to do business with and can give you advice when you need it. There are thousands of insurance companies out there that you’ve never heard of. They exist because they all have some part of the insurance market dominated. If one company had the lowest rates for all class of drivers, direct or agent model, there would only be one company.

Age Ain't Nothing But A Number

Most younger drivers ask me if turning 25 makes a big difference if their car insurance rates. The quick answer is yes, but not as much as you may think. Just like driving a red car has nothing to do with your rate anymore, this is one of those things that used to make a big difference, but doesn’t really matter that much anymore.


Car insurance companies today use a dynamic rating system that compares all the variables of a risk to determine an appropriate rate. There are thousands of available price points depending on how each of your individual characteristics interacts with each other.

When it comes to age, most insurance companies will gradually lower your rate each year you get older. Because the rate changes are gradual, most drivers don’t see a noticeable difference between 24 and 25.

Another reason I advise younger drivers to not get to excited about age is because from the time you’re 16 to the time you’re 25, many things change about you that may negate any rate difference based on age. Some of those common things are, driving history, getting a new vehicle, wanting more coverage, changing from a family policy to your own, even where you live will make a difference.

Here’s a useful tip. If you pay for your insurance monthly, it’s a good idea to shop around for new insurance 30 days prior to your birthday. Most companies will give you credit for being a year older 30 days in advance. And, since most policies don’t renew on your birthday, shopping around will help you get a lower rate prior to your renwal, as well as set up a policy more inline with your birthday to help you get the most accurate rate with each renewal.

Even though your age will make a slight difference in your rate, the two most important things you can do to help keep your rates low is drive safely and maintain insurance continuously. One speeding ticket or a small lapse in insurance can increase your rate 20-40% percent.
If you’re looking for tips on how to save or would like a quote be sure to contact me.