|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.