What to consider when buying car insurance

Fifteen minutes could save you 15 percent or more. Okay, everyone knows that. But here’s something that little gecko isn’t telling you: Price is not the only consideration that does or should matter in the selection of a car insurer. Don’t take my word for it. Listen to what nearly 20,000 Consumer Reports subscribers told us about their insurance comparison-shopping experiences in our 2014 Auto Insurance Survey.

From our survey of nearly 65,000 subscribers, we dug into the minds of the 19,608 who had compared their insurer with other companies within the last 12 months. Our survey questions allowed us to drill down to determine the two insurance companies that individual consumers considered most seriously in the selection process. We then listed a number of possible reasons that might influence consumer decisions and invited the consumers to select all of the reasons that mattered in their selections

We’ll grant the gecko this: The little green guy does know that price matters most to the majority of consumers. Here is a breakdown of the reasons selected (numbers don’t add to 100 percent because consumers were allowed to select multiple reasons).

• Price: 72%

• Agent Access: 33%

• Service: 32%

• Reputation: 32%

• Too Much Hassle to Switch: 20%

• Personal Recommendations: 6%

• App or Web site: 4%

Read about how to pick an insurer in our car insurance buying guide

But did you know that just 30 percent of all consumers in our survey selected only price as a factor that mattered in their choice of an insurer? For two-fifths (42 percent), price was considered in conjunction with other criteria, and for more than one-quarter (28 percent), price did not even make it into the decision-making calculus. For them, those 15 minutes represent just wasted time and effort!

How might all of this play out, then, for a set of consumers considering the choice between one insurer and another? Let’s take one case to illustrate a real scenario—the choice between Geico and another incessant advertiser, State Farm. In our survey, we have 688 consumers whose final decision simmered down to a choice between these two insurance companies. In our sample, State Farm won this battle, 59 percen to 41 percent. But remember that the gecko’s entire appeal is based on price—the prospect of saving 15 percent. And among consumers who said their decision was based on price alone, Geico did prevail, as the graph below shows. Three-fifths (61 precent) of price-centered consumers selected Geico over State Farm!

This finding provides two important insights for consumers:

• Geico fares relatively well in those cases where consumers compare Geico to rival companies based on price alone.
  

• Consumers less motivated by price are less likely to find Geico appealing.
  

If you are a price-focused consumer, our data suggest that investing 15 minutes of your time may be a reasonable decision. If you’re not particularly price-sensitive, on the other hand, you may find better use for your time.

To that point, 65 percent of consumers who considered price in conjunction with other factors selected State Farm over Geico. The largest subset of those respondents told us they considered four factors in their decision: price, service, reputation, and agent access. Those consumers, as a bloc, selected State Farm by a margin of 91 percent to 9 percent. For those who considered price in conjunction with agent access, 93 percent selected State Farm.

Finally, 73 percent of those who discounted price altogether chose State Farm. Remember the State Farm ad where Jake in khakis with a hideous voice is speaking with a customer at 3 in the morning? Consumers who placed a primacy on agent access to the exclusion of other factors preferred State Farm by a resounding count of 92 percent to 8 percent.

We can break down the net marginal effects of State Farm’s 18.4 percent overall margin (59.2 percent to 40.8 percent) by taking into account the size or each consumer segment and its State Farm vs. Geico preference. Those net effect percentages, which collectively sum to State Farm’s 18.4 percent overall margin, show that Geico’s net gains from considerations of price alone were overwhelmingly offset by State Farm’s notable gains among all remaining segments of consumers.

The upshot of this analysis, then, is that consumers who are considering switching insurers should pay attention to the pitch being made in ads by insurers. Price is the main pitch made by Geico. If price is what matters most to you, Geico may well have a good deal for you. If you’re more concerned with service, agent access, reputation of the company, mobile access, or some other attributes beyond price, listening to the specific pitch made in car insurance ads may lead you to discover an insurance company that better suits your needs.

—David Gopoian

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