Making Life Affordable: Online Auto Insurance
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UPDATED: Apr 16, 2019
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Over the last decade, the Internet has revolutionized the retail sales and service sectors of the U.S. economy. E-commerce continues to grow at rates in excess of 10% each year.
Auto insurance is no exception to this explosive growth, with tens of thousands of consumers taking advantage of the speed and convenience of Internet shopping each and every day.
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The growth of e-commerce brings about more and more online competition. Through Internet commerce, retail concerns can now reach into every corner of the U.S., giving budget-weary American consumers more competitive pricing on all retail goods and services, including auto insurance.
Auto Insurance Is More Affordable
More competition, primarily Web-based, is having a significant effect on auto insurance pricing across the country. Consumers have seen gains in several important areas.
First, the overall price of auto coverage has been dropping steadily since 2005.
Secondly, because of increased availability on the Internet as well as greater affordability, economically priced auto insurance can reach a larger percentage of consumers.
One study, conducted by the Consumer Federation of America, asserted that the insurance industry rating procedures were actually causing auto premiums to rise for lower and moderate income households.
The Insurance Information Institute (III) vigorously denies that the CFA study has any merit, citing a recent report released by the NAIC, National Association of Insurance Commissioners. This report shows that auto insurance premium rates have in fact dropped each year between 2005 and 2009.
According to this report, in 2009, drivers were able to insure a passenger car for just $785 per year.
This was a drop of $4 from 2008 and continued the downward trend from the 2005 cost per year of $832. The rate decreases included collision and comprehensive coverage, as well as required basic liability coverage.
In other positive news, according to the III, the average American family spends a smaller portion of their total income on car insurance. This number decreased from 1.27% in 2004 to 1.05% in 2009; a decrease of 17%.
The number of drivers stuck with the highest insurance rates–those in their state’s assigned risk pools–has also dropped steadily in recent years, falling from 4% of motorists to just 1.6%.
This decline was measured over a ten-year period from 1994 to 2004.
More Consumers Shopping for Auto Insurance Online
According to research giant J.D. Power and Associates, more than a third of car insurance shoppers–34%–now prefer to shop and buy their new auto policies online. Based on this knowledge, J.D. Power recently concluded their first ever insurance website evaluation study.
The report, released in May 2012, concludes that more than half of consumers will be unlikely to shop with an online insurer if they are disappointed in their website or have a poor online shopping experience.
A negative online experience will also make consumers far less likely to recommend the company to family members or friends.
The new J. D. Power study considers five important factors in evaluating online insurance providers. First is the ease of navigation, followed by the overall appearance of a company website.
Then shoppers will take into account how clearly the information they are seeking is presented. Finally, Web shoppers evaluate the range of services offered online and the speed of the company’s website.
Auto insurance companies that did well on the J.D. Power survey included Allstate, Geico, and Travelers. The newest company among the competitors this year is esurance, a fully online subsidiary of Allstate Insurance.
Esurance did particularly well on the J.D. Power survey and has earned a superior A+ rating from A.M. Best, as well as praise from its many thousands of customers.
More than half of consumers now begin insurance shopping online and nearly three quarters visit the website of at least one insurance company. Thirty-two percent of consumers obtain insurance quotes solely online and 34% indicated their preference to purchase new policies online.
Consumers expect to shop and complete an auto insurance purchase in a single visit. They’ll compare prices online, narrow down the field, and select the final contenders for their car insurance, all by using new e-commerce self-service tools.
Before making their purchase, online shoppers will always have the option to chat with a live agent, online or by telephone, if the need arises.
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Many Consumers Prefer to Switch Insurers
Another J.D. Power study, ongoing for the past six years, monitors insurance shopping habits in the U.S. Results of the 2012 study indicate that car insurance shopping, in general, has dropped to a five-year low.
Only a quarter of consumers indicated that they had shopped for new insurance in the past year. This figure is 8% lower than in 2011.
Shoppers are influenced by three major factors when choosing a new insurance provider: the price of the policy; the policy offerings of the company; and the distribution channel through which the policy and coverage flow.
While only 25% of Americans were shopping for new coverage in the past year, close to half of those shoppers–43%–chose to switch auto insurance providers. This is three points higher than in 2011, according to industry analysts.
Those consumers who did switch to a new company in 2012 saved less than in years past: an average of $359 in comparison to $412 in 2010.
Before Getting Online Quotes
To help make the online auto insurance shopping process quick and simple, there are a few things consumers should bear in mind when getting started. First, because insurance coverage requirements vary from state to state, it is not always possible to get quotes from all insurance providers in all states.
Websites operate differently, depending on the company and the state in which you live. Some websites will avoid giving direct online quotes, preferring to send information to a licensed agent in your area who will then contact you.
Make sure you receive quotes for similar coverage options with each company you contact.
Again, because of varying state requirements, not all policy options may be available in all areas of the country. That is why it’s important to give insurance providers accurate information as to your location and your specific car insurance needs.
Once you make a final selection for auto coverage, and make at least a down payment, you should have immediate access to a temporary ID card to keep in your vehicle.
A copy of the policy you’ve ordered and permanent insurance identification cards should appear within 60 days of your order.
Some car insurance providers will even issue an electronic version of your policy, eliminating bulky files and clutter on your desk. Make sure to read and review your policy and download a copy of the electronic document to your computer’s hard drive.
U.S. Census E-Commerce Figures
According to reports prepared by the United States Census Bureau, revenues for selected service industries, which includes auto insurance, increased by almost 7% in 2010. During that year, e-commerce accounted for 2.3% of total sales in the service sector, amounting to $255 billion.
As a portion of all retail sales in the United States, e-commerce accounted for 4.4%. This was an increase of 10%, from $145 billion in 2009 to a total of $169 billion a year later. According to published reports by Internet Retailer, e-commerce is growing at a consistent rate of 10% per year.
In 2011, the total amount of money Americans spent online increased to $202 billion. The estimate for Internet-based revenues in 2012 is $226 billion.
Internet Retailer expects the expansion of e-commerce to continue growing in the next four years, to a new record of $327 billion by 2016.
In 2016, e-commerce will comprise more than 9% of all retail sales, an increase of 62% over 2012 levels! This e-commerce forecast was prepared for Internet Retailer by Forrester Research.
Forrester Research is an independent market research and technology concern. It provides its clients with expert advice on the present and future impact of technology in the global marketplace. Forrester maintains nine research centers, five in the United States and four more in Europe.
Online Retailers Spend Big Bucks for Advertising
According to industry sources documented by the U.S. Census Bureau, the sales of online advertising sales reached an all-time high of $31.74 billion in 2011. This represents an increase of 21.9% from the previous year’s $26.04 billion.
This was good news for consumers who hadn’t seen such an increase since 2006 and 2007, the years immediately preceding the strong economic downturn and global recession.
Retailers accounted for the single largest portion of Internet ad spending with $7.1 billion, or 22.4% of the total.
This spending was a marked increase of 29.1% from the previous year’s figure of $5.5 billion. The report is prepared annually by the consulting and accounting firm PricewaterhouseCoopers who accumulates public information as well as sales data provided directly by national advertising companies.
With more companies spending more advertising dollars, consumers have more online car insurance shopping choices than ever before.
Insurance shoppers can easily find the best coverage and rates available in their area by using comparison websites and then checking out the website of each individual company they are considering.
Find the best auto insurance rates and coverage available by putting your ZIP in the FREE box provided on this page!