Low prices can mean low settlements
The insurance company with the lowest price may not be the most generous in settling claims. "Likely one of the reasons it can afford to be priced so much lower than its competitors is that it takes a very tough stance at claims time," Praskey says. Ask your friends and colleagues who've had a recent claims experience how they were treated and whether their claim was settled promptly and without hassle.
A Star reader who's an insurance broker offers this advice to clients: By all means shop around, but make sure your prospective company won't cancel you or penalize you for an early accident. Get it in writing. If it won't do that, consider at length the accident forgiveness benefits you're giving up for the money saved.
You can also check the Financial Service Commission of Ontario's Web site, (www.fsco.gov.on.ca), a helpful resource even if you live in another province. There you will find an annual survey, which asks customers of 46 insurance companies and the Facility Association how happy they were with the claims settlement procedure. While the overall satisfaction rate is 86 per cent, the satisfaction rate for individual companies ranges from 61 per cent for Kingsway General (a company that insures high-risk drivers) to 95 per cent for State Farm Mutual.
Switching firms
Alas, my own record is a tad tarnished. I had a minor collision, a fender bender, in 1999. It was my fault, since I failed to notice a car coming through an intersection when I was at a stop sign. My insurance company paid $889 to fix my car's front bumper (over and above my deductible). As a result, I lost my preferred rating, given to drivers who have been licensed for 15 years or more with no claims or accidents. It cost me about $200 a year in higher premiums.
But when I started comparison shopping with the help of Lee Romanov, who runs the Consumer's Guide to Insurance, I found that 1999 claim would hurt me much more if I switched. She told me I already had a decent rate with Liberty Mutual Insurance Co., which charged $2,554 to insure our 1998 Toyota Sienna van and a 1997 Ford Escort. (We get discounts for having our two cars, plus home insurance, with the same company.) She promised to get me a slightly cheaper $2,300 annual rate from Lombard Insurance. But that soared to more than $4,000 when I mentioned the 1999 accident claim.
My next stop was Kanetix, whose Web site I found very easy to navigate. But I was disappointed to get only three quotes-ranging from $3,979 with Direct Protect to $6,625 with York Fire & Casualty-all much more than my current rate.
Later I did an experiment to see the dollar impact of my single accident claim. When I said I had a claims-free record, Kanetix gave me insurance quotes for the Toyota from 10 companies, ranging from $1,277 with Lombard to $2,272 with Direct Protect. But when I included my accident claim, just four companies wanted my business. And their quotes ranged from $2,702 with RBC Insurance to $4,517 with Allstate Insurance Co. of Canada.
Of course, I didn't go elsewhere after finding out how good a deal I had. This is a tough time to be switching companies. Insurers blame the terrorist attacks of Sept. 11, 2001, for making them skittish about accepting new customers with spotty records. But, in effect, they're penalizing frequent users-those who try to collect on the insurance for which they've paid premiums for years. It's the opposite of a loyalty program.
If you have multiple claims, forget about shopping around. In the current tight insurance market, no one will want your business. One Toronto Star reader told me he couldn't get a single company to quote him a rate when he tried to shop the market. With four vehicles insured, he and his family had made seven claims in the previous five years (two at-fault accidents, three not-at-fault accidents and two comprehensive claims). That's the kind of record insurers don't like to see.
Shop early
Make sure you get an early start on your insurance shopping. Don't wait until a week or two before the policy's renewal date. Give yourself three months, since that's how long it can take to get several quotes and do the paperwork.
You may have to shop around for brokers until you find one who can place your business. Many are so busy that they're not quoting rates over the phone. You have to see them in person in their offices. Don't agree to pay a fee for a broker to quote you a rate. If they don't find insurance for you, they may keep the fee (say $50) for their efforts.
If you can't get coverage from private insurance companies and you live in a province without a public insurance system, you have to go to non-standard insurers (companies that specialize in insuring high-risk drivers) or to the Facility Association, an industry-sponsored pool of last resort. The Facility's rates are very high, reflecting the degree of risk.
Take, for example, a 19-year-old male who's had one accident. He's the primary driver of a Chevrolet Cavalier and lives in Ajax, Ontario (outside Toronto). The lowest rate we found after shopping the market was $4,648 with Lombard Insurance. The highest rate was a whopping $16,470 with the Facility Association. For a 19-year-old female driver with one accident, the lowest rate we found was $3,365 with Lombard and the highest was $8,564 with the Facility Association.
