Study Says Most Americans Pay Too Much for Car Insurance

Gabi app analysis finds consumers can save big on their car insurance

None of us wants to pay too much for things, but it is very difficult to determine what too much looks like for services like car insurance. We know we need and want to be covered, but we also don’t want to spend hours and hours tracking down car insurance estimates and comparing costs. Isn’t there an app for that? Turns out there is.

Gabi is a free app that would like to take over the job of managing your insurance. When you sign up and share your current insurance information with them, the people behind the app, many of them long-time insurance industry professionals, review your current policies, try to find you a better deal and advise you on the right coverage. The app’s services are free to you, because Gabi hopes to become your agent of record, which means it will be eligible to collect commissions from some of the insurance companies whose rates it monitors.

Typical consumers are very likely to be overpaying

So how is the typical consumer doing in terms of managing her or his insurance? Not all that well, according to an analysis by Gabi just obtained by Driving Today. Consumers covered by every one of the top 10 insurers were more likely than not to overpay for their insurance, according to the company’s analysis. Just how likely and just how much were matters of degree.

The study found that an individual covered by USAA was 62 percent likely to overpay — the lowest level — while an individual covered by Farmers was 91 percent likely to overpay. In other words, by Gabi’s analysis, more than six in 10 of USAA policyholders are overpaying, while more than nine of 10 Farmers policyholders are doing the same.  The amount consumers overpaid per year varied from $238 (GEICO policyholders) to $741 (Nationwide policyholders.) See the charts for a look at information about all 10 companies.

Is the analysis credible? We asked Hanno Fichtner, CEO of Gabi, that question, and this is how he replied, “We based the analysis on the data we generated at, a personal insurance shopper that automatically looks for cheaper car insurance. People submit their current car insurance PDFs, and our algorithm analyzes the coverage, the discounts, drivers, cars on the policy and compares the price with deals offered by 25-plus other insurance companies. For this study we looked at over 10,000 current insurance payments of real customers and compared it with the cheapest rates we found for the exact same coverage.”

The results indicate that the typical American insurance customer is more likely than not to be overpaying for insurance as you read this. That’s a potentially troubling statistic, and it begs the question, how does Gabi define overpaying?

“Overpay is defined as paying more than necessary for the exact same coverage,” Fitchner said. “By switching to a different insurance company and keeping the same coverage you could save $X.”

Of course, insurance companies provide different levels of service. Some are known to pay claims quickly and hassle-free; others are not as easy to deal with. In its study Gabi didn’t differentiate by service level and customer satisfaction, but its analysis did make certain to match the exact same coverage the customer was currently receiving, ie. same collision, comprehensive, liability coverage and deductibles. Also roadside assistance and other insurance services were matched.

What does this imply to the typical insurance customer? Can you say shop around?

According to Fitchner, rates of insurance companies change every six months so what was a cheap rate at signup time could be expensive after six months. The same holds true for the personal situation of the driver, he added.

“Every change in the car that is insured, the points on the DMV record, the miles driven, etcetra, can impact which insurance company is the cheapest,” Fitchner told us. “So we believe people should shop around: either comparing rates themselves or using a tool like that constantly monitors the price and looks for better deals.”

In other words you can continuously shop for insurance coverage, or you can can sign up with Gabi and let the app do it. Hmmmm.

Data source for charts:

About Tom Ripley 54 Articles
Born in Boston, Tom Ripley has been writing about the automotive industry and the human condition for more than a decade. He's a frequent traveller but nominally resides in Villeperce, France.