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Car Insurance Junk Mail

Written by Todd Clay. Posted in Research Last Updated: 01/18/2011

How auto insurance companies market through the mail –

Junk Mail Card from Allstate

This one came in my junk mail pile courtesy of Allstate.

Ever since I started writing for businesses, I’ve been intrigued by “junk mail”. The industry calls it direct mail, but consumers don’t seem to care.

Much of it ends up in the trash before any envelopes are opened. One industry-famous direct mail writer, Gary Halbert once said, “I am incessantly preaching the people of America sort through their mail while standing over a wastebasket?” Just think about how that makes the writer feel about their work.

Lots of Insurance Junk Mail

In 2007, according to the Direct Marketing Association (DMA), insurance companies spent $6.81 billion in insurance advertising through the mail. Not only that, but expenditures were expected to grow in the 7.6% per year through 2012. The few letters you saw was just a sample of the literal tons of paper, ink, and trinkets sent by insurance companies every year in an effort to gain your business.

So why do they do it? The DMA reported that insurance companies get back $8.15 for every dollar they spend through their junk mail campaigns. That means if Allstate sends out $1 million in direct mail, they expect to get back $8,150,000 in revenues from their efforts. That’s not a bad return on investment.

The Culprits, er, Insurance Direct Marketers

Most insurance direct mail comes from auto insurance companies. Think about it. For those of us who check our mailboxes, how many packages did you see from XYZ Life Insurance Company versus GEICO? If you think about it, auto insurance companies sent many more packages compared to any other type of insurance.

I’ve saved most of my insurance junk mail since starting this website (I know I’m a nerd). Granted, I’m only providing my anecdotal experience. However, from what I’ve seen, GEICO is the biggest direct mailer of the industry. I probably receive two pieces of GEICO mail for every one piece of mail from other insurance companies. I’m even getting stuff from GEICO after switching to their policy. (Someone needs to update their database.) Other companies I’ve seen in the mail were Progressive, Allstate, AAA, AIG, Farmers, and Countrywide.

What’s the Pitch?

There are several pitches insurance companies use in their direct mail campaigns. Typically, the value centers around price. After presenting the lizard or the cavemen, GEICO pushes savings more than anything else. The standby “15 Minutes Can Save You 15% on your Car Insurance” is always popular. Or the latest I saw from them “Millions of consumers will lose hundreds of dollars this year by failing to shop around for a better value on auto insurance.” also pushes their price over any other benefit.

Allstate recently sent this piece to me. “Your Enclosed Instant Access Savings Card Can Be Worth Hundreds of Dollars To You” was the teaser text on the front of the envelope. When I opened the letter, they enclosed a mock-credit card with a 1-800 number embossed on the front. Next to the attached card, a big font read “Average Annual Savings $353.00.” Again, price was the big draw.

Farmers tried a slightly different approach. Just under return address read the words “Do you love your agent?” But the primary teaser text was “The ‘Middleman’ could save you hundreds of dollars a year on your auto insurance.” Again, Farmers says I can save a few hundred bucks by going with them, but they pushed the agent relationship as well. They could be right. I haven’t received a Farmers quote for a few years.

Despite the success of the internet, direct mail is still alive and well. As long as insurance companies get an 8-1 return from their junk mail advertising, expect to see more lizards and good hands in your mailbox. As you recycle or chuck those annoying letters, keep this in mind. Those bold-lettered packages are subsidizing the relatively cheap letters you send via snail mail. See, junk mail is useful after all. Thanks, GEICO.

Do you have any thoughts about insurance junk mail? If so, leave a comment.

Some Insurers Face Problems In 2009

Written by Todd Clay. Posted in Related Stuff Last Updated: 03/18/2009

What S&P downgrades mean to auto insurance companies and what you should do about it

Will Some Insurance Companies Crash In 2009?

As we wrap up 2008, we look back at a horrendous year for the U.S. economy. The markets have suffered their worse declines in a generation. Unemployment is higher than any time since the early-Reagan Administration (and climbing), and businesses are folding left and right. Even gigantic insurance companies are struggling to keep business.

Economic Problems Will Affect Auto Insurance Companies

The insurance sector is not immune to economic turmoil. This year brought one of the worst hurricanes in recent memory when Hurricane Ike slammed into Texas. Insurance losses mounted for the major insurers. In addition, we’ve suffered through the most challenging market environment since the 1930s. Insurance companies are now looking forward to a dismal year in 2009.

Standard and Poors (S&P) rates financial services companies in the United States. They recently released their outlook for 2009. According to Insurance Journal,

“S&P notes in its report on North American insurers that in 2008 its outlook on several U.S. insurance sectors was revised to negative, meaning that over the next year to 18 months, more downgrades than upgrades are anticipated.”

These problems relate to the reserves held by insurance companies. Just like small businesses have cash in the bank for a rainy day, insurance companies exist for the rainy day. They must keep cash, bonds, and other securities on hand in case of claims. Most companies hold reserves in the stock market. As the market declined throughout the year, insurance companies’ reserves were depleted. This could pose some challenges for many insurers. Some could struggle – others could fail.

What Insurance Company Problems Mean To Consumers

These challenges are more pressing to those consumers who purchased annuities and other long-term insurance products. For instance, if an insurance company fails, the retiree who bought an annuity from them could lose everything. This is one risk many insurance agents don’t tell you about. According to Annuities for Dummies, 3rd Edition “If the company fails (a rare event, fortunately) and isn’t absorbed by another carrier, you can lose your money.” (p.137, 2008). That’s bad news for the person responsible for receiving benefits from the annuity, or annuitant.

However, I see a far less risk with a failed auto insurer. For one thing, you’re only out the money you paid in advance to the company. If you normally pay your premiums 6 months in advance, then the worst you could lose is 6 months of premium. Not painless, mind you, but still not as bad as losing $250,000 from a worthless annuity.

What To Do About Your Auto Policy

If you are concerned about the financial well-being of your car insurance company, then you should either switch to a monthly payment plan, or switch carriers. Don’t ignore the problem. At the end of 2008, we may not be through with the credit crisis. Keep an eye on the news to see if your carrier is having solvency issues.

Bear in mind: all of the bank failures in 2008 started out as rumors. We will see problems with more insurance companies in the coming months. The question is when and where they will arise. Thank you S&P for letting us know.

Any thoughts about troubled insurance companies?
Feel free to leave a comment.

Do Red Light Cameras Save Lives?

Written by Todd Clay. Posted in Related Stuff Last Updated: 12/06/2008

How those traffic lights cameras are making drivers think – and keeping down their auto insurance premiums.

Can running a red light jack up your car insurance rates with a simple picture?

Can running a red light jack up your car insurance rates with a simple picture?

Red light cameras can be an annoying invention. For those of us who grew up driving without these mounted traffic cops at every intersection, it can be unnerving for a ticket to show up in the mail a month after you drove down a particular street. No, I’ve never been ticketed this way (at least not yet), but I have fought a red-light ticket and won. But that’s another story. Today, it’s all about red light cameras.

Red Light Cameras

A red light camera is a complex camera system triggered by a car running a red light. The camera does not take continuous pictures, but begins capturing images when a car crosses a “red lit” intersection (is that grammatically correct?). Some cameras even allow a split-second grace period after the light turns red, but I wouldn’t count on it if you’re aiming to beat the system. Red light cameras have been around since the 1960s, but did not become widespread until more recently.

Do Red Light Cameras Make Streets Safer?

Which driver hasn’t thought twice about running a red light because of these cameras? I know I have. Evidently, I’m not alone. According to the Texas Department of Public Safety, red light cameras have reduced collisions by 30% in a sample of 12 cities. This means that more drivers stopped before dangerously rushing through intersections with a red light camera, than in those without a camera.

Whatever annoyances they may cause, I can’t argue with the numbers. Not only do the cameras seem to be reducing collisions, but they also may be reducing traffic related deaths. In 2006, the Insurance Institute for Highway Safety reported almost 900 people were killed in crashes related to running a red light. An estimated 144,000 were injured in the same sorts of accidents. If red light cameras reduce collisions, no doubt they are saving lives too.

Running Red Lights Can Affect Your Auto Insurance

If you get ticketed for running a red light after the camera caught you, your car insurance premiums could be affected. Insurance companies can count moving violations against you in the same way they count an at-fault collision against you.

Most of the time, it only affects drivers who are shopping for auto insurance. Companies pull driving records for shoppers and the prospective company usually finds red light violations. However, those tickets could also affect premiums with your current insurer. Sometimes auto insurers pull driving records at your renewal. If that’s the case, they could find a red light violation and rate you accordingly.

If you find yourself with a red light ticket, then take Defensive Driving to get it dismissed. If you can’t do that, then hope your insurance company doesn’t see it. You’re not obligated to report the violation to your company. Drive safer, keep a clean record, and that ticket will fall off the insurance company radar in 3 years.

But those cameras are not just about car insurance rates. Even if they seem annoying, they’re there for everyone’s safety. Who knows? They may have even saved your life.

Have you ever been ticketed for running a red light or by a red light camera? Leave a comment about your experience.

Gap Insurance

Written by Todd Clay. Posted in Definitions, Research Last Updated: 03/23/2011

What is Gap Insurance, how much does it cost, and do you really need it?

Bridging the Gap of Depreciation with Gap Insurance - The 360 Bridge - Austin, Texas

Bridging the Gap of Depreciation with Gap Insurance The 360 Bridge - Austin, Texas

Gap Insurance is unlike any other consumer insurance policy. Why? Because it covers the part of your car that only banks would think about: depreciation. That’s the part that goes down every month you own your vehicle. Still confused? Let me explain.

What is Gap Insurance?

You’ve probably heard it said, “once you drive a new car off the lot, it’s worth thousands of dollars less.” It’s true. Say you visit your local Nissan dealership. That new Altima is screaming your name, so you buy it. After handing over your down payment, the salesguy hands you the keys to your new ride. You just bought a $22K vehicle, but once you’re home, you could only sell it for $18,000. That missing $4,000 ($22,000 – $18,000) is the depreciation you incur by merely relocating the vehicle.

Unfortunately, a regular auto insurance policy does not cover a car’s depreciation. If, on the second day of owning your Altima you total your car, the insurance company would only pay you the actual cash value (ACV) for the car, or $18,000. But the bank still wants all the money you borrowed. Where are you going to come up the extra $4K? That’s why you need gap insurance, also called loan/lease gap coverage. If you want to cover the depreciation of your vehicle for the life of the vehicle, then get gap insurance. It sometimes even pays for your deductible.

How Much Does It Cost?

Since you’re not paying to insure your entire vehicle, a gap insurance policy is not as expensive as regular car insurance. However, since the policy is basically all-risk coverage, it’s not exactly cheap either. If you shop around, you can pay a one-time premium of $300 to $700. The price depends on the amount financed and sometimes the terms of the loan or lease. There are caps involved, but most new vehicles are eligible for gap insurance. Check with your finance company for an easy quote.

Do You Really Need Gap Insurance?

There are a couple of reasons why you might want gap insurance. For one, if you owe a significant amount on the car you should consider it. How much money? Dave Hurt, who sells gap insurance with Car Select, says, “Anyone who buys a car and finances 80% of the purchase price should buy Gap Insurance.” That’s probably a good guideline.

Second, you should consider gap insurance if it’s early in the life of your loan or lease. If you owe more money than your car is worth, you’re considered ‘upside down’. Gap insurance could ease you out of an ‘upside down’ situation if you total your car. It may not be required by your finance company, but it’s not a bad decision in certain circumstances.

It’s worth mentioning that gap insurance is not for every car. If you have an older vehicle, gap insurance may not be available for it. Check with the company who writes the gap insurance policy if you’re curious about your particular vehicle.

Finally, check to see if your finance company already includes gap insurance with the auto loan. When I worked with State Farm, their bank automatically included a gap insurance policy for new car purchases. True, their auto loan rates could be higher than dealer financing, but it was an added benefit of their auto loans.

If you have an experience with gap insurance, feel free to leave a comment.

How to Shop for Car Insurance

Written by Todd Clay. Posted in Research Last Updated: 04/10/2012

4 Easy Steps to Getting the Best Rate With The Best Company Every Time

How to Save Hundreds When Shopping for Auto Insurance.

How to Save Hundreds When Buying Auto Insurance.

Finding out how to shop for car insurance isn’t hard. But if you do it wrong, you could waste time, get frustrated, or worse, lose money. When I say a lose money, I’m talking thousands of dollars a year. It’s worth taking some time to learn the process. If you do, you’ll shop smarter, save some cash, and get peace of mind knowing you did it right.

Stop Wasting Good Money

In case you don’t think it’s worth your time, consider a normal driver in Texas. (Your state will be different, but the example still applies.) The Texas Department of Insurance publishes auto rates from all the insurers in the state. In 2008, a married 35-yr old driver in Dallas County with no accidents or tickets could pay anywhere between $243 and $1128 for a 6 month policy. The same driver with the same coverage could pay $1770 more per year because they didn’t shop their car insurance – almost two grand! Unfortunately, this is not uncommon.

That’s why it’s so important to make sure you’re getting a good deal. You may love your agent, but think about this: Your agent gets a commission from every extra dollar you waste with their company. If you don’t look out for yourself, your agent won’t do it for you. That money is yours – don’t just give it away. Here’s what you need to do.

Step 1: Pick Some Car Insurance Companies

Not every auto insurance company is worth your business. You need to find a few other companies to compare. How do you get a list of companies?

Ask around. Ask your friends who insures their cars. They’ll let you know if they’ve had a good or bad experience. Don’t want to ask around? Then check out some customer reviews. Collect a list of some auto insurance companies you want a quote from. I suggest you pick at least 3, but preferably 7 companies to compare. That way you get a healthy sample for the best possible savings.

Step 2: Narrow Your Choices

Once you have your list, check two other things. First off, financial strength. Various ratings agencies measure the financial stability of insurance companies. A.M. Best and Standard and Poor’s are the most prominent agencies. You can look up each company’s financial rating at your state’s department of insurance.

Second, ask the question: do those companies advertise? Companies that advertise are typically growth-oriented companies. This is a positive trait since you don’t want to send your premium dollars to a company that isn’t motivated to gain your business – how will they treat you when you have a claim. If you haven’t heard of one of the companies on your list, then it may not be a good fit.

Step 3: Getting Online Quotes

Go online for auto insurance quotes. Why? Because it takes too much time driving around, sitting in offices, or even jabbing on the phone with salespeople. The process takes long enough without any unnecessary steps.

The quickest way to get multiple quotes is to use a ‘quote aggregator’. It takes a few minutes to fill out a questionnaire. At the end, you can see quotes from several car insurance companies, and you’ve only filled out one form. I’ve included a link to make it easy for you: Online Quote Aggregator

After that, grab quotes from the remaining the companies on your list. Use a search engine to find the company websites. Auto insurance quote instructions should be very prominent at those sites.

Step 4: Confirm Online Quote Over the Phone

Now you have some quotes, it’s time to confirm the price. For your best auto insurance quotes, make a couple of phone calls to the general company number. Again, a search engine is helpful here. You can also call a local agency if that makes sense. Tell them about your online quote. If they can’t access it, answer the questions again.

There’s no reason to make 5 phone calls. You’ve already narrowed down the companies using the previous steps above. If you’re happy with the first quote on the phone, then buy the policy. Make sure it’s in effect before cancelling your current policy. Chances are you saved enough money to pay yourself a few hundred bucks for your time. After all, where else can you pick up an extra few hundred to a thousand bucks for a couple hours of work?

If these steps helped you shop for car insurance, leave a comment to help others in their search for a cheaper company.

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Car Insurance Guidebook Unravels the Car Insurance Mystery

Unless you work in the car insurance industry, the topic is probably a mystery to you. The words deductible, comprehensive, collision, liability, premium, loss of use and bodily injury are all gibberish when they reach your ears.

Unfortunately, insurance is something that you are required to have by law if you want to drive. Because of how confusing it is many people go around in almost an insurance daze while they get car insurance quotes from the auto insurance companies that they have heard of. In reality, they are completely lost as to what they are actually buying.

Instead of looking at what each insurance company offers in the terms of protection for both themselves and their car, they are instead looking for cheap car insurance. Finding the cheapest car insurance coverage makes having to buy the required product all that much less painful, but misses the whole point of having insurance.

Learning about insurance through your insurance agent or websites like Car Insurance Guidebook will give you the upper hand when you looking for car insurance. You can take your knowledge and not only find the best price for insurance, you can use it to find really great insurance to protect you and your assets. Then you aren’t stuck settling for just average car insurance that can hurt you financially if you ever need it because there isn’t enough protection.

For example, when looking for insurance the car insurance rates are just the first of many factors that need to be taken into account when you are shopping around for car insurance. You also need to take into account the type of vehicle that you are driving. Many people don’t know this.

Are you driving around a vehicle that is a new sedan and can be protected under any blanket insurance policy? Or do you have an old car that you fixed up that needs special protection and could be better covered under classic car insurance?

Don’t just assume that when you compare car insurance that it will be a one-size-fits-all policy. This is where the insurance knowledge will come in handy; you will know what you need to protect yourself and your vehicle.

You will understand what your insurance agent is talking about when they use insurance terms and you will actually be able to make an informed decision. This is much better for you instead of the “nod and smile” approach people take in their insurance agent’s office.

Also just like your life changes your insurance needs will change. This year you may just need to learn about the best deductible to have. Next year you may need to educate yourself on car insurance for young drivers. As the years pass, motorcycle insurance may be something you will need to know.

Many wise people say that you never stop learning, so take their advice and educate yourself on the insurance that you spend a lot of money on and can’t get away with not having.