You pull up to the dealership anxious to see, touch, feel, smell and drive the new vehicle you have your heart set on buying, only to learn that you can no longer do any of these things. Yes, the famous test drive is out the window, you can’t even see what you’re about to buy.
Well, let’s move on to the specifications. You know this is the best, and just want to confirm. You ask if the car gets at least 35 miles per gallon city and 50 on the highway, only to learn there are no independent agency ratings for miles per gallon. Nobody knows. How’s this possible, you wonder? There are over 250 million cars and trucks on the road, and nobody knows the gas mileage of any of them?
All right, well the warranty must be good; otherwise the company wouldn’t spend so much money on TV ads telling consumers how safe and reliable they are. You proceed to ask if it has a 4-year 50,000-mile warranty, or if it’s better than that. The answer that comes back is shocking. The only guarantee is that there is a maximum amount that will be paid — in insurance terms, the warranty has a face value. You also learn there is a list of exclusions buried somewhere in the paperwork that necessitate hiring an attorney in order to fully understand them. Worst of all, it is the automobile company, at its sole discretion, that decides if whatever you report wrong with the car in the future is covered by the vaguely worded contract you’ve been handed. Furthermore, if the cost to fix the car is more than the maximum limit of the warranty, the additional cost is on you.
Fortunately, Buying a Car Isn’t Like Buying Insurance
This of course is exactly how we buy insurance. Such a business model obviously would not work for any discretionary purchase and is only possible because consumers are mandated to buy insurance, and transparency is not yet demanded of insurance companies.
If ever there were an industry in desperate need of a grading system, helping consumers understand what they are buying and agents to understand what they are selling, it’s insurance. The industry needs technology companies to revolutionize the consumer insurance experience. Developing systems that help consumers is what companies like ValChoice are doing. For the good of both consumers and insurance companies, buying insurance should be like buying a car.
Dan is the founder and CEO of ValChoice, an insurance analytics company.