Eli Lehrer: Consumer Federation of America’s ‘Shocking’ New Study

When one strips away the posturing and insinuations of sinister corporate conspiracies contained in the new report on auto insurance rates from the Consumer Federation of America, you’re left with a pretty simple conclusion: If you shop around for things on the Internet, you can often find a better price than the one you’re first offered.This isn’t a cause for investigation, more regulation, worry or anything else, but rather, a statement of pretty simple fact. Just about everything differs in price, depending on where you buy it.The report itself is pretty simple. Using insurance company websites, CFA staffers obtained automobile insurance quotes for minimum required coverage in a variety of cities for two pretty typical lower-middle income drivers. The quotes they got differed a great deal, sometimes by more than 300 percent.The obvious response to all of this is…so what? As I write this post, the prices on Amazon.com for copies of George R.R. Martin’s Game of Thrones range from $3.23 for a used paperback to (no joke) $515 for a leather-bound limited edition copy that, given its price, probably includes a round-trip ticket to Westeros. Ordinary new copies, the kind most people would probably want to buy, range in price from $4.71 to $18.25.

Within walking distance of my office, you can buy 12 ounces of Coca-Cola for anywhere from 50 cents (on sale at a drug store in a multi-pack) to $7, plus tip, at a hotel lobby bar. Both are much bigger gaps than CFA found for automobile insurance.

Insurance, of course, is different from these products. Unlike a serving of Coke or the text of a book, it’s not a commodity. While minimum required coverage, by definition, is the same from each carrier, each carrier differs in service, pricing strategy, financial stability, brand identity, and extra perks and discounts. All of these things matter to some people.

Of course, given that automobile insurance is more-or-less mandatory in all 50 states, there’s some chance that these huge differences in price could lead to some naive or super-busy customers getting ripped off. Furthermore, while the overwhelming majority of people looking for simple auto insurance are best off doing their own shopping on the Internet, this doesn’t suit everyone.

Indeed, people who don’t or can’t do their own shopping would be really well-served if there were a class of licensed professionals whose job it was to help others shop for insurance, didn’t charge anything directly to their customers, and could be simultaneously appointed to sell products from more than one insurance carrier. If only such people existed. Maybe one day…in the future.

About Eli Lehrer: Eli Lehrer is president of R Street Institute, a national think tank that supports free markets, effective government and responsible environmental stewardship.  For more information on R Street, visit www.rstreet.org.  

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One thought on “Eli Lehrer: Consumer Federation of America’s ‘Shocking’ New Study

  1. Mr Leher:
    With all due respect I submit over 40 years of experience for your review.

    Insurance is unlike any other product or service on earth. Most of your article is spot on. With one exception. You never mention the “claim” process.

    In a recent documentary one of the richest men in America disclosed that the smartest investment he ever made was an insurance company (GEICO) because you get to play with interest FREE money until you are forced to pay a claim. Nice! Insurance is such a profit center that competition is viscous amongst the Titans.

    Today, consumers are bombarded to the tune of billions of dollars in TV, RADIO, WEB, PAPER, BILBOARDS and everywhere wall space is available being brainwashed to SAVE money on insurance.

    Having been on both sides and in the middle of the insurance industry since 1966 I possess a lot more than just an opinion on what is truly The GRIEF INDUSTRY.

    The purpose of auto and home insurance is to recompense accident or disaster victims for the losses they incur as a result of a covered loss to the limits of the contact.

    Almost all consumers have fallen into the insurer’s trap which is to distract Americans from knowing the true reason they are buying insurance. Insurance is an important finance tool to finance disasters.
    Insurance is not to FEEL better and has nothing to do with Peace of Mind. To the contrary there is no Peace of Mind in The GRIEF INDUSTRY. The word feel has never appeared in any contract I have read. And it should never be to only SAVE money. Lost personal time can never be paid for or recovered.

    The only purpose for insurance of any kind is “THE CLAIM”

    The difference between insurers his how and when they pay their claims and moreover how they treat the victims in the claim process.

    In most cases, the alleged discount companies provide discount recovery services or collision repairs along with phony imitation parts for name brand cars etc.

    Your article never mentioned the Claim process and that is the only thing that matters when one becomes a victim and does not have a car to drive to work, a leg to walk on, a desk or bed to sleep.

    When victims are in that condition, insurers rule! They rule victims time, money and aggravation that they can produce to induce a lower settlement.

    The purchase of insurance is as simple as writing a check. Collecting your due can be a daunting task especially when the claim is anything above a nuisance claim of $5,000.

    As such, you were right on target as there is not ONE source anywhere that teaches consumers how to buy and manage any kind of insurance that is better for the consumer than it is for the seller.

    The only education one gets in insurance is handed down from parents who have been TRANED and brainwashed by commissioned licensed insurance Agents, consumers are never educated, on the purchase and management of insurance contracts.

    To make matters worse for consumers, insurance Titans have changed the words and language of their contracts, They have renamed a legal contract with “policies” so that insurance companies can sell them. Consumes do not like to enter into Contracts without a lawyer. Yet, The GRIEF INDUSTRY employ more lawyers than any other industry.

    The purpose of insurance is a financial parachute to save your ass when perils happen. Consumers have been trained not educated to do certain things to benefit insurers only. Never the consumers.
    Example. Consumers have been taught to call the insurance company immediately following a loss. This act only benefits the insurer so that they can mange the victim via misinformation to delay, deny or at least reduce the cost of this one claim.

    The BOTTOM LINE
    Warren Buffet alleged in the documentary, Insurance is the taking of money from millions of people, and then having to pay them only one at at time.

    End

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