Dear Lee,
I have been with an independent broker for years who supposedly gets the best price and offers the best coverage for my needs. However, I wonder, if there were less expensive alternatives would they provide the same ease of access and support in a claim, etc.?
We all know that when you are buying insurance for cars or your home that the world is a wonderful place according to the 'sales person'. And here comes the inevitable 'but' when you have to make a claim (I never have although I do hear anecdotal evidence from others) the people handling that process seem to come from another planet. Unexpectedly raising the small print about what's not covered, and what should be good support and assistance are almost always less than desirable from what I have heard.
Would you please provide some insights about this in a future column?
Mr. Suspicious
You are about to get me into trouble with the insurance industry again, but here goes.
Every auto insurance policy is identical, word for word, within each province. But home insurance policies and their coverages can differ considerably between insurance companies within the same province.
Let's compare insurance to travel. When you need to get out of the cold, a travel agent can give you a quote from any airline. Unfortunately, auto insurance is mandatory, travel isn't.
When you're getting an insurance quote, a broker can only quote you from the insurance companies they represent. For example, if your broker only represents Aviva, AXA, and the Royal Insurance Company, they can't quote you a rate from Pilot Insurance even if that rate was lower.
If you're dealing with an insurance agent or direct writer it's like booking directly with the airline. Simply stated; a State Farm agent would not quote you a rate from TD insurance, just like Air Canada won't quote you a Westjet fare.
Neither brokers nor travel agents are morally obligated to quote you the lowest rate available to them. They both operate on commissions with targets to meet and year-end overrides to consider. The biggest difference being travel agents can reduce their commission to lower the price for you where as brokers or direct writers cannot. Even if your broker says you have the "best price," it may simply be the best they can offer or quote you from the insurance companies which they represent.
Never ask the person sitting beside you in a plane how much they paid for their ticket. That's where air sickness comes from. To get the best price when buying an airline ticket, it mainly depends on who you buy it from and when you buy it. And it's the same for car insurance. However, imagine what the prices of an airline ticket might be if the airlines considered how old you were, how many years you've flown, your postal code and if you've ever gotten any tickets or had accidents when driving to the airport.
The Ontario government did a rate comparison guide of 52 insurance companies to show the thousands of dollars in rate differences between companies for the same car, driver, and insurance policy. You can view this at RomanovReport.com.
When settling an auto claim insurance, companies use the same Fault Determination Rules in deciding whose fault it was for the accident. Many companies use outside adjusters, so there's not much difference in the manner in which claims are handled between different insurance companies. It's the Fault Rules that, in my opinion, are the problem and make the claims handling seem unfair. An example of this would be parking lot fender-benders that are generally considered to be the fault of both drivers. ( Click here to read a story about this issue)
As far as coverage goes, limits vary from province to province, but you can increase them - for example, liability insurance, which is mandatory but can be increased. The minimum limit is $200,000 in Ontario and covers you for Accident Benefits, Uninsured Automobile and Direct Compensation Property Damage.
Accident Benefits provide protection to those injured or killed as a result of a motor vehicle accident. It provides such things as income replacement, caregiver support, medical rehabilitation and funeral expenses. These vary wildly across Canada: for example, with income replacement, the standard policy limit is $400 a week in Ontario, whereas in PEI it is $140.
You also have coverages like collision and comprehensive coverage, which have no limits. These are optional coverages which you can exclude if you're trying to save money.
Other differences to consider are the insurance company's cancellation rules. In other words, how many or what combination of tickets and accidents will initiate a cancellation? Do they increase their rates after one ticket or one accident, and if so by how much? Can you buy claims protection to protect your driving record from increased premiums due to an 'at-fault' loss?
This is all pretty trippy stuff, but will help you down the road.