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Don’t all of the agents have the same prices? Have access to the same companies? Offer the same customer service? Aren’t they cut from the same gray, boring cloth? Isn’t the whole thing one big scam?

Well, believe it or not, sometimes the answer is yes but most times it’s no and you need to be careful because the agent you choose is just as important as the company you are with.

Now, I’m not talking about the type of agent you work with but more importantly, the quality of the agent you choose to work with.

But it is worth a brief discussion on the different types of agents out there;

First, you have your Direct Writers. These are companies like the “Gecko” and “Flo” who cut out the agents and use the internet and call centers. This may work for somebody with just basic needs who don’t mind being 12th in line on the phone and working with different people who generally don’t have a lot of insurance experience and the employee turnover rate is high but hey, people have to start somewhere! And have you noticed that the lizard has opened up a few retail shops (I guess after dissing the independent agents for years, they finally realize the value of an agent). Even Progressive plays both sides of the fence by having Progressive Direct and working with independent agents. We call these “Pigs at the Trough”.

Next, you have the Captive Agents.  These are companies like State Farm, Allstate, and Farmers. I know many great captive agents but because they can only sell insurance through their company (thus the reason that they are captive by these companies), I have seen numerous times where a captive agent will cut coverages to dangerous levels to be competitive with independent agents on price, primarily in the homeowners market. This is a very dangerous practice for the consumer which goes against what being an agent is supposed to be about. 

Finally, you have your Independent Agents. These are agents like us (though many of our clients believe that we are owned by Mercury Insurance) who have many companies to choose from to be able to tailor your needs to the right program. Among the Independent agents you have preferred agents and non-standard agents. Non-standard agencies insure a lot of high risk or young drivers while preferred agents insure many of the low risk drivers who will usually have multiple policies with the same agent. Non-standard agents do not have access to many, if any, preferred companies while the preferred agents can insure both the preferred drivers and preferred property risks as well as the high risk drivers and property risks. Ken May Insurance Services is a preferred independent insurance agency who can cover the clean, preferred risks as well as the high risk clients. It’s all a matter of having quality programs in which to place each risk.

Why do some agents resort to cheating?

It’s simple really. It’s because they don’t have the experience, the expertise, or the ethical standards to be appointed with preferred companies so they feel that they have to cheat and cut corners to compete with agents who have years of experience and have shown the ability, professionalism, and ethical standards to have earned appointments with the top companies. They don’t have the client’s best interest in mind and will do almost anything to get the business even if it means engaging themselves and the unwitting client in insurance fraud and the real possibility of having a future claim denied. After all, the client signs the application which means that he states that the information on the application is true to the best of his knowledge.

Let me give you a real-life example!

Years ago, I briefly worked at an agency in Texas that I’ll call “The Cowboy Agency”. This agency wrote mostly high-risk and/or young drivers. One morning, a young lady called for an auto insurance quote. She was 16 years old and had already had 4 at-fault accidents! And of course, Daddy just bought her a brand new Ford Mustang GT convertible (Daddy wanted to be popular and cool instead of being a parent). The best price I could come up with was $800 every month! And you thought your payments are high!

I showed the quote to a co-worker (it’s not every day that a risk like this comes along) and she asked if she could take a look at the quote on my computer. I agreed and then she asked if she could call the young lady. Now I’m getting really curious so I agreed again. My co-worker then requoted the young lady a price of $450 per month. Incredulous, I asked how in the world she was able to come up with a price almost half as much as the one I came up with. First, she said that the girl is no longer 16 but she is now 26 because the company doesn’t ask for a copy of the drivers license. And, she now has a clean record because the company doesn’t look up driving records. And, she is now married with the name of a fictitious spouse on the excluded drivers list. Finally, for a final touch, she made a forged copy of prior insurance for the young lady to get an additional discount. With my mouth gaping wide open, I watched a single 16 year old with a horrible driving record (and a shiny new sports car from her Daddy) become a 26 year old married woman with a clean driving record with a long history of prior insurance. I left “The Cowboy Agency” shortly after this. 

How do “bad apple” agents get away with this?

The sad truth is that the California Department of Insurance (DOI) simply does not have the resources to combat this type of fraud effectively. Even though the DOI tripled in size when prior insurance commission John Garamendi was in office, the department can’t go after the minnows when there are so many whales out there. And, many consumers don’t see the harm when they have a much lower rate so they don’t complain to the DOI. It’s like swimming in the pretty ocean not paying attention to the sharks lurking below.

How can I protect myself and my family from unscrupulous agents?

- Find out how long the agency has been in business.

- Find out how long the agent has been a licensed insurance agent (as opposed to his prior job of being a mortgage broker or real estate agent).

- Go onto the Department of Insurance web site and look up the agent, either by name or license number which should be on his business card or most any other correspondence. Does the site list any actions against the agent? Check out his continuing education hours.

- Ask about the coverages being quoted and the company being offered. An insurance company has a rating through AM Best which can easily be found online. Don’t settle for anything less than an A-.

- Carefully look at the application before signing it.

- Ask about fees. Some agencies charge a broker fee as well as service fees when you make payments through them or make changes on your policy through them. Most of this is gouging unsuspecting customers and is a repulsive act.

- If the broker charges a broker fee, was the amount fully disclosed both verbally and in writing? Does the written broker fee agreement clearly state the amount of the fee?

- If you are at a car dealer and can’t connect with your regular agent, does the agent that the dealer recommends actually show up to complete the transaction (which he must by law)? Or does the nice dealer just “take care” of the insurance too? Remember that while you are in the throws of car lust, the nice agent is probably getting half the broker fee paid to him under the table.

- Ask your friends if they know anything about the agency.

- Check out the agency’s web site and look for comments about the agency, both bad and good.

Ken May has been serving the North San Diego County insurance community since 1982 except for that brief 3 ½ year stint in Texas. He is also the president of the American Agents Alliance, a non-profit professional insurance agents organization that originated in California in 1963. And over 60% of those that leave Ken May Insurance Services for any reason come back later.
Posted 12:06 PM

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