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Car Policy for Less, but Only If You Call

After you hear the tale of Thomas Mitchell, a retiree living in Arizona, you may suddenly have the urge to run to the phone and call your auto insurer. And perhaps even your life insurer. And your cable company. And anyone else you may do business with.

Erik Von Weber | Stone | Getty Images

Most consumers know that they aren’t going to get a courtesy call from their service providers telling them they qualify for a better deal. Yet they still fail to review their policies or contracts each year to make sure they’re getting the lowest rates possible.

Well, Mr. Mitchell’s accidental victory may provide just the needed incentive.

After retiring last summer from a long career as a programmer, Mr. Mitchell said he knew he should review his expenses and try to trim whatever he could. His hefty auto insurance premium on his two cars — he was paying $2,537 a year — seemed a juicy potential target. But he said he “dillydallied,” and didn’t call his insurer, Liberty Mutual, until a couple of weeks ago, shortly after AARP contacted him by mail and urged him to call The Hartford for a free quote on his auto insurance.

And it was a good thing he decided to call. The Hartford told him it could offer him a policy with the same coverage for just half — yes, half — the amount he was paying Liberty Mutual, or about $1,267. Mr. Mitchell said he contacted Liberty Mutual with the news. And wouldn’t you know, the representative told him that it had revised its underwriting standards and he would now qualify for a premium of $1,207.

“I was happy to get the reduction, but I was dismayed to learn that the burden was on me, which means there are probably thousands of policyholders who are eligible for this but don’t know what they don’t know,” said Mr. Mitchell, who was insuring a 2002 GMC Envoy and a 2010 Toyota Prius. “It is a rip-off.”

Even more maddening, he said, was the conversation that ensued with a Liberty Mutual branch manager. Mr. Mitchell said he was really irked that the company was perfectly content to let him continue paying twice as much as he needed to, so he asked the manager if the company would have bothered to notify him of the “underwriting changes” when his policy came up for renewal this summer. “To my astonishment, he admitted that the premium reduction would not have been brought to my attention unless I asked for it,” he said.

Mr. Mitchell, who lives in Cave Creek, Ariz., is exactly the kind of customer you would expect Liberty Mutual would want to keep. A loyal client since 1973, he said he had a clean driving record with no accidents — just a few broken glass claims — and a credit score above the enviable 800 mark. Besides the auto coverage, he also has a homeowner’s insurance policy with the company, which Mr. Mitchell thought might have worked in his favor to secure the reduced rate, since insurers often offer multipolicy discounts.

Liberty Mutual, not surprisingly, declined to get into specifics with me about Mr. Mitchell’s situation, and provided a corporate-stamped response: “We continually refine and enhance our ability to most accurately price each customer to reflect their individual risk, based on a large number of factors, and as a result a customer’s price could move up or down,” Glenn Greenberg, a spokesman for Liberty Mutual, said in an email. “We regularly advise our customers upon policy renewal that they may call us to discuss their coverage, benefits and discounts.”

And that drives home the point: The onus is always on you, the consumer, to do the heavy lifting, whether it’s a big-ticket item like auto insurance or smaller bills from your cellphone or cable provider. It’s a simple lesson, yes, but one that is worth remembering every so often. Of course, even when you make the time, finding the best deal isn’t necessarily easy.

J. Robert Hunter, the director of insurance for the Consumer Federation of America, an advocacy group, said he wasn’t at all surprised by Mr. Mitchell’s experience. After all, insurers aren’t required to let you know when you’re eligible for a lower rate, and it’s hard to know if you’re getting the best deal (though in California, insurers must sell their lowest-priced policies to those deemed “good drivers,” or people who have been driving for at least three years and have no more than one violation and no serious accidents on their record).

“If you shop for insurance, it is quite easy for one insurer to be half the price of another, even in the same group of insurers,” Mr. Hunter said. “It is very difficult to be sure you have the best price,” he added, noting that many agents are working on commission, where higher premiums might translate into more income for the agent.

(Sales people typically collect roughly 8.5 percent of the premium, on average, said Robert Hartwig, president and economist at the Insurance Information Institute, an industry group, but noted that direct-to-consumer companies often spend much more on advertising).

With the exception of New Hampshire, all states require drivers to have liability insurance, which pays for the other driver’s medical expenses, car repairs and other costs when the policyholder is at fault. (Florida requires drivers to buy insurance that covers the occupants in the driver’s car.) The minimum amount you must carry is set by state law, but many drivers choose to buy more coverage to protect their assets in the event of a costly accident.

Still, about 14 percent of drivers went uninsured in 2009, according to the Insurance Research Council, at least in part because some drivers cannot afford the insurance (Mississippi takes the prize for the state with the highest estimated rate of uninsured drivers at 28 percent, while Massachusetts and Maine have rates of only 4.5 percent. New York doesn’t trail too far behind, at 5 percent).

Your insurance rate is probably based on a variety of factors, including your age, gender, marital status, education level, occupation, the type of car you’re driving, where you live and your credit score. Of course, your driving record is also taken into account, as well as how much you drive. (A recent report, co-written by Mr. Hunter of the consumer group, contends that these pricing methods often work against lower-income drivers.)

As you shop around for a new (or better) quote, you should also consider factors beyond price alone, including the insurer’s rating and responsiveness to claims, Mr. Hartwig said. You can typically find that information, including price comparisons and local consumer guides, on your state’s insurance commissioner’s Web site. New York State’s Department of Financial Services, for instance, ranks 40 insurance companies by the number of complaints upheld against them as a percentage of their premium.

The average premium paid per car — for liability, comprehensive, and collision coverage — was about $901 in 2009 (the latest figure available), according to the National Association of Insurance Commissioners. But judging from Mr. Mitchell’s situation, you’re likely to encounter a wide range of prices.

Mr. Hunter said that consumers should specifically ask the insurer — not the agent — whether they were being offered the lowest rate they qualify for, or they should ask the agent to ask the insurer. And he suggested asking for it in writing.

“I was working on the assumption that they were all the same,” Mr. Mitchell said.

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