The word low-cost has fully entered our vocabulary, we find it associated with flights, hotels, vacations, telephony, or insurance.
It’s been a few years since the crisis began and since then we don’t know where to scratch to save on expenses. In this economic environment, any savings are important, the insurance sector knows it and the offer of low-cost insurance is increasingly attractive and tempting.
This insurance offer is linked to insurers that have made direct sales, using new technologies, their only distribution channel. These offers, car or home insurance at half price, have surely surprised you.
How is it possible that there is so much difference between some insurance and others?
I will try to explain it to you.
Internet and low-cost insurance
Earning money is the goal of traditional and low-cost insurers. Do not think that the latter do charitable work and that is why their prices are cheaper.
But how can they lower the price and offer adequate services to their customers?
The answer is that they take advantage of technology to maintain a direct relationship with the customer. The telephone and the Internet are the channels through which they operate in the market.
With this, they do not need to maintain a network of offices, commercials, or intermediaries that traditional insurers have. This represents a significant saving.
But, in addition, it is you as the policyholder who is going to manage the insurance. You do it at the time of hiring, during maintenance, and after-sales service. All this represents more than 40% savings for the insurer.
There are still many consumers who value direct treatment, the advice of an expert professional, or the possibility of going physically to the company’s offices. But it is no less true and the figures indicate it, that there are many customers, including the youngest, millennials, who have become used to using technology in almost all aspects of their lives and for whom these products are specially designed.
One piece of information: in 2015 Internet insurance sales have exceeded 500 million dollars.
Who is behind the low-cost insurers?
The direct insurance market in this country is made up of mutual insurance companies, which are unfortunately fewer and fewer, and insurance companies.
What advantages do these insurances have?
You may have noticed that low-cost insurance is designed for a certain group where the price is the first reason for choosing.
In the case of car insurance, the price difference is due to a lower number of guarantees contracted. Because the insured capital is lower compared to the traditional product. And benefits are limited to a certain number in each insurance annuity.
If you drive your car little, your exposure to having an accident is less. In that case, with little more than the mandatory insurance, you will have enough and you will not need accident insurance for the driver. You only move around the city, you hardly go out on the road, you may be interested in dispensing with travel assistance.
This only fits inflexible products such as these. In them, the policyholder can expand the basic coverage with those that interest him most in each case.
Almost all insurers, for years, have tried to facilitate payment by dividing the insurance premium, but it is the low-cost insurers who do it in a more affordable way. You also have the possibility of paying it using your credit card.
Not all that glitters is gold
So far everything seems advantageous. On paper, there seems to be no reason not to take out insurance with a low-cost carrier. But as is often the case, all that glitters is not gold.
Paying a lower price for insurance cannot be linked to having worse coverage.
The savings you get when you hire the same coverage at a cheaper price.
And this is where low-cost insurance can play tricks on you.
It is very important to read the insurance policy before signing it to check that it complies with the contract. Compared to the traditional policy, you can find yourself with much lower capital in guarantees such as driver accidents, glass or legal defense, and important limitations in travel assistance or repairs in non-arranged workshops.
You should also say that you will not have an office to go to. Not a physical interlocutor to contact. Your problems and claims will be dealt with.
Be very careful because the flexibility in contracting these policies have can make you pay much more for your insurance than if you had contracted it in a traditional way.
To make online contracting more attractive, insurers use commercial hooks. They use discounts the first year that disappear with the renewal of the insurance. And then comes the surprise, the price has skyrocketed.
The ease of contracting by paying with a card can turn into a nightmare with renewal. They have raised your insurance but you cannot return the charge because you did not request the cancellation on time.
It’s your turn, leave us your answer to the question in the comments, we are waiting for you to discuss the matter.
Have you ever taken out low-cost insurance, are you happy with the service it provides you?