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.