It is worth pointing out from the start that this isnt an argument about it being a commodity or not. It is more about thinking that it is for the purpose of shopping around for the best prices. Once you conclude this process and get your results you can switch back to your original view point and consider the findings in front of you based on the quote you got.
About 2/3 of motorists hardly ever get alternative quotes and just keep renewing their policies year after year. They have absolutely no idea if they are paying a fair premium or even if their current provider is any good at times. The problem is that most large car insurers know this and they even have calculations that aimed at predicting at what price current policyholders would walk out.
Keeping It Simple
Of course, buying any kind of a policy is a serious matter and deserves attention. But there may be a downside to a timid approach. One of the reasons people withhold from getting car insurance quotes from multiple companies is that they overthink it and that makes the whole process look much more complicated than it is.
The idea is to prevent it and get more people looking after their interest by trying to find the best price they can get in the marketplace. That is how healthy markets are formed and prices brought closer to each other. Otherwise, there would be wild swings between the cheapest and most expensive and many insurers would be able to get away with charging whatever they like.
There has been a study by the Financial Conduct Authority (FCA) in the UK looking into ways motorists use car insurance comparison websites. They have identified two types of attitudes towards this medium. One group was very cautious and worried about the possibility of muddling things up and not getting paid when they have a claim because of it.
The other group was keen to go through the whole process, see the results and save money that they didnt hang around to look at explanations or adverts on the platform. They just sailed through the form completing all the details required as quickly as possible. They pointed out in interviews that this was the only way. If they carefully looked at every detail on the way they wouldnt probably make it to the end as they would get confused and bored with it.
So, thinking that all the policies and vehicle insurers are pretty similar to each other and all they needed to do was to find the cheapest and save helped them. Still, they just didnt buy the cheapest coverage. They reported that they looked at the price, brand and coverage and chose the policy that gives the biggest savings, most brand comfort and extra add-ons.
Is Car Insurance a Commodity?
Majority of people in the industry would fervently argue against it being a commodity. They are probably right since there are many intricacies to arranging coverage. However, if you think that most companies follow the industry standards in drawing up policy documents and finalizing claims you wouldnt be too far off from thinking that they may be similar after all.
Unfortunately, this isnt necessarily the case and an ordinary motorist wouldnt be able to tell if the policy wordings are standard or favors the carrier in a way that they can easily decline a claim. However, you need to have faith in these things. You need to have faith in the company and the state insurance commissioners to ensure no funny businesses going on in an industry that trust is everything.
It is at the end of the day a promise that they will compensate your losses in exchange for the premium they demand. It is fair to say that most carriers are behind their words. At times they may be extra careful and make drivers go through hoops but there are many crooks who think they can bend the system and get paid for nothing too.