Are you paying too much for car insurance?

by Alice Patel  4 minute read

by Alice Patel

4 minute read

If you’re like most people, shopping for a better car insurance rate probably ranks somewhere between doing your taxes and making sure your Tetanus shot is up to date. Car insurance is important, but shopping for it can be confusing and tedious. Ignoring it is easy but it’s not smart.

I know because that was me - only vaguely aware of my monthly payments and coverage terms. Emphasis on the vaguely. I lived in this blissfully ignorant state until I joined Clearcover last year. Suddenly, I became acutely aware of my insurance rate and terms like ‘property damage liability’.

My awareness was immediately followed by outrage at how much I overpaid and why. It’s part of the seven stages of working at a car insurance company.

During my first week, our Chief Actuary showed me a massive Excel document analyzing the ten largest insurance companies’ 2016 public filings. The analysis illustrated their budgets for technology, advertising, salaries and so on. We used it as a benchmark to base our newly founded company’s budget. We also looked at our research on their average rates for 50M simulated customers across California.

We discovered these big insurers were doing some things well, which makes sense, since most of them had existed for over 90 years.¹  But the data also revealed the staggering annual costs of things like legacy systems, technical debt and outdated IT processes - $73B² a year if we’re counting.

In looking at that spending, the problem for customers became obvious. These costs are passed along to their customers in the form of higher insurance prices. They can represent 30-40% of people’s total cost of insurance.

After sifting through all the data, it made me think about how most people don’t realize how much money they’re losing by ignoring their monthly car insurance bill, myself included.

Do you know how much you might be overpaying?

Auto costs are the second highest monthly expense for most Americans with insurance accounting for a large chunk of it.³

Probably a lot. Auto costs are the second highest monthly expense for most Americans with insurance accounting for a large chunk of it.³

Why is that?

The infographic below can help answer that question.

We took the main takeaways from the massive Excel sheet to highlight the major areas that big insurance companies are overspending, how much it affects the average California driver’s wallet and a few tips to save money on car insurance.

Unfortunately, the odds are you’re overpaying. But you can do something about it.