The insurance industry in the U.S. is pretty convoluted, to say the least, and there’s no reason to think that auto insurance will be any different — especially now that the car insurance marketplace has been proposed as an alternative to the current system of auto insurance companies.
Here are five reasons why this new idea will actually be worse for consumers than what we have now, and how this could impact your car insurance coverage going forward.
You Could Be Paying More for Your Car Insurance
A car insurance marketplace is an online platform that connects people who want to buy auto insurance with insurers looking to sell it.
The idea is that through competition, insurers will offer better prices.
But there are two major problems with this first, it’s difficult for customers to get quotes from multiple companies on one site because they have to start over each time they change their zip code or other information.
Second, any customer can see all of the rates from every insurer on the site – which means that any insurer’s rates could be inflated in order to lure customers away from competitors by pricing themselves as the best.
The Car Insurance Marketplace Is Unregulated
The problem with the car insurance marketplace is that it’s completely unregulated.
This means that there are no requirements for how much coverage drivers need to buy and how much they should be charged.
The only thing you’re required to do is provide your driving record, which is already public knowledge.
In fact, it doesn’t even matter if you have any driving history at all, so you could technically buy insurance on someone else’s behalf without them even knowing about it.
There Are Fewer Consumer Protections in Place
The car insurance marketplace idea isn’t a new one, but it’s been floating around for many years.
It is a bad idea for many reasons. The most important reason is that there are fewer consumer protections in place when purchasing through an online marketplace.
One of these protections is that you’re protected under your state’s law if you buy from an individual who sells their own car through the marketplace and you end up with any problems with your car.
You May Not Be Getting the Coverage You Need
The car insurance marketplace is an idea that sounds good on paper.
The problem is, it’s not all that practical in reality.
It might be cheaper to buy your own car insurance, but you may not be getting the coverage you need for certain situations or circumstances.
For example, if you’re in an accident and need roadside assistance, or if your car needs repairs, who will cover those costs?
If you don’t have a contract with your provider, then they’re not responsible for covering anything outside of their agreement.
If you do have a contract with them, then they’re only liable up to what’s agreed upon in the contract.
The Car Insurance Marketplace Is a Gamble
If you’re looking to save some money on your car insurance, you may have seen advertisements for a marketplace where you can comparison shop and find the best price.
It sounds like a great idea, but unfortunately it’s not as simple as it seems.
First off, if you think that prices are going to be lower than what they already are at your existing insurer, think again:
A study by J.D. Power found that customers who shopped around were paying more in premiums than those who stayed with their existing company.
Plus, these new marketplaces don’t provide protection against things like natural disasters or driver responsibility incidents.
In fact, they won’t even offer collision coverage unless you purchase additional coverage–which is ironic considering one of the purposes of this type of coverage is protecting against damage from accidents.
The bottom line is that while shopping around may seem like a good idea at first glance, ultimately it could end up costing you more than what you’re currently paying for an insurance policy.
Conclusion
The car insurance marketplace is not good for consumers because it increases their confusion and anxiety when purchasing car insurance.
It also removes much of the incentive to shop around, leading to higher prices.
If we want lower-cost car insurance that’s easy to understand and purchase, then we need to protect our existing marketplaces by preventing them from being manipulated.