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How does insurance work? #4117320 06/06/16 09:40 PM
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motor_oil_madman Offline OP
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Do big companies like allstate use smaller no name insurance agencies and then jack up the price and sell it to the customer? Everytime I get insurance through a company like geico or allstate, all the paperwork I get is a completely different company then the one I went through inititially. School me on insurance guys? Can't I just cancel my policy and go directly to through that that agency?


2007.5 dodge cummins 6.7 liter. Chevron Delo400 15w40. 7000 mile or 250-300hr intervals.

Re: How does insurance work? [Re: motor_oil_madman] #4117344 06/06/16 10:15 PM
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Brybo86 Offline
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I think you are paying $$$ for them to show you cheesy commercials during the superbowl.
I have never seen Allstate within $200 of any other quote, auto, home etc


08 Honda Accord EX-L 2.4L M1 EP 0w20 153k
01 Kymco People 50
95 Lexus LS400 M1 AFE 0w30 199k
95 Yamaha Jog
Re: How does insurance work? [Re: motor_oil_madman] #4117352 06/06/16 10:33 PM
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Rand Offline
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sometime if you have [censored] driving record they will insure you through a second tier company.

One example of this in the past is

Farmers insurance--->>>21century insurance
(Good record) (not so good record)


2019 Jeep Cherokee Trailhawk 2.0T
Re: How does insurance work? [Re: Rand] #4117356 06/06/16 10:43 PM
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motor_oil_madman Offline OP
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How do they make money then if they give the business to another company? I mean I know insurance works by collecting premiums from people in hopes they will never have to pay out anything and the amount they payout is always less than what they collect. So when they give it to a third party insurance company, how do they make money then?

Last edited by motor_oil_madman; 06/06/16 10:45 PM.

2007.5 dodge cummins 6.7 liter. Chevron Delo400 15w40. 7000 mile or 250-300hr intervals.

Re: How does insurance work? [Re: motor_oil_madman] #4117374 06/07/16 12:01 AM
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Kuato Offline
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Originally Posted By: motor_oil_madman
Do big companies like allstate use smaller no name insurance agencies and then jack up the price and sell it to the customer? Everytime I get insurance through a company like geico or allstate, all the paperwork I get is a completely different company then the one I went through inititially. School me on insurance guys? Can't I just cancel my policy and go directly to through that that agency?


Yes, you can go directly with the actual company. I used to work as a claims liability adjuster, and during the time I was there they offered motorcycle insurance. Our company only provided auto insurance(at the time), so they had a deal to basically sell insurance for Company "B", which actually provided the coverage.

The bottom line here is that if Company A can't sell a policy, they may allow Company B to sell a discounted rate policy in in order to get some money instead of no money. There's a complicated system of underwriters, risk assessment and numbers crunching involved in the process.

Hope that helps.


Thick vs Thin test: 15k / 43k miles complete
Re: How does insurance work? [Re: motor_oil_madman] #4117375 06/07/16 12:02 AM
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user52165 Offline
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Originally Posted By: motor_oil_madman
How do they make money then if they give the business to another company? I mean I know insurance works by collecting premiums from people in hopes they will never have to pay out anything and the amount they payout is always less than what they collect. So when they give it to a third party insurance company, how do they make money then?


They invest $$ in other ventures that make $$. I remember some years ago Northwestern Insurance bought $400,000,000 in gold when gold was on an upward trajectory. But they are serious investors in all things money related.

Re: How does insurance work? [Re: Kuato] #4117396 06/07/16 01:07 AM
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NMBurb02 Offline
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Originally Posted By: Kuato
Originally Posted By: motor_oil_madman
Do big companies like allstate use smaller no name insurance agencies and then jack up the price and sell it to the customer? Everytime I get insurance through a company like geico or allstate, all the paperwork I get is a completely different company then the one I went through inititially. School me on insurance guys? Can't I just cancel my policy and go directly to through that that agency?


Yes, you can go directly with the actual company. I used to work as a claims liability adjuster, and during the time I was there they offered motorcycle insurance. Our company only provided auto insurance(at the time), so they had a deal to basically sell insurance for Company "B", which actually provided the coverage.

The bottom line here is that if Company A can't sell a policy, they may allow Company B to sell a discounted rate policy in in order to get some money instead of no money. There's a complicated system of underwriters, risk assessment and numbers crunching involved in the process.

Hope that helps.

It is likely this. Company B writes the policy while Company A gets a commission, just as if you used an insurance agent.

Or it could be that the parent company has subsidiaries that are licensed in various states. So Big Insurance may be the parent company's name but the policy in California is underwritten by Joe Blow Fire Insurance Company whereas in Arizona it is No Name Casualty.

Last edited by NMBurb02; 06/07/16 01:09 AM.

2002 Chevy Suburban 1500, Rotella T6 5W-40, Fram TG3675
2006 Pontiac Grand Prix GT, G-Oil Syn 5W-30, Fram TG3387A
Re: How does insurance work? [Re: motor_oil_madman] #4117472 06/07/16 06:47 AM
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ET16 Offline
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Geico does this to diversify risk. They assigned us an unethical company named Arrowhead for our home insurance that tried to trick us into canceling the policy after a death in the family even though the policy was valid for another three months. They lost me as a customer.

Re: How does insurance work? [Re: motor_oil_madman] #4117478 06/07/16 06:55 AM
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eljefino Offline
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I noticed when I got "Progressive" I actually had "Progressive Northern" and there were about 40 flavors of "Progressive" I could have been assigned.

Seems if one gets sued into oblivion, the Hydra lives.

Re: How does insurance work? [Re: motor_oil_madman] #4117506 06/07/16 07:33 AM
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Donald Offline
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Sometimes it depends upon what state they are licensed in. Geico for example will handle my auto insurance but will send me to Travelers for homeowners. But I believe you get credit for a multi-line discount.


2015 Subaru Forester 2.5 engine/CVT
2015 Ford F250 w/Powerstroke
2016 Subaru Crosstrek CVT (wife's)
Re: How does insurance work? [Re: motor_oil_madman] #4117513 06/07/16 07:43 AM
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Al Offline
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OP..You are trying to re-invent the wheel. Companies have re-insurers and investments/options to stabilise risk which is based on statistics. The best you can do is shop around frequently.

State Farm (for now) has some of the best rates. But all things change. Also think through your options some can be low risk for the insurer but high cost to you.


Re: How does insurance work? [Re: motor_oil_madman] #4117514 06/07/16 07:46 AM
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deanm11 Offline
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The most common device I've seen is carriers having subsidiaries. The regulation of insurance companies requires them to have consistent premium rates, subject to their evaluation of demographics, risks, history, etc., but whatever they come up with for their company has to be consistently applied to customers. They can get away with 'longevity discounts' (not sure about the reverse!) and few tweaks, and maybe a bit selectively applied. For broadly different rates, they'll use a subsidiary. When my son went away to college and was getting a car part way in, as a 20-year old, I was balancing on saving the dough and keeping him on my insurance. Then I decided, why not try one of those companies that claims to check everyone else's rates. I forget now who it was but it led to their affiliated insurance broker, Answers Financial, who got me Progressive at nearly 50% savings to all the quotes I had been getting, so I got him independent insurance. When I called Progressive directly, I got rates like all the other carriers- nearly double. What gives ? The Answers Financial broker coverage ended up being written Progressive Hawaii, who they must set up for higher risk, younger drivers and they offer, at least a few years back, much better rates. After about 1 year, "Progressive Hawaii"'s rates jacked a good bit and I was able to put him with a mainstream carrier for a decent rate. I never could confirm it, but I suspect that Progressive may have rewarded Answers Financial with an exclusive or semi-exclusive on writing the Progressive Hawaii policies because of the amount of business they do for Progressive.

By the way, I highly recommend this Answers Financial broker. They sell coverage for tons of carriers and can check them all for you. (Homeowner's too) My reps from these firms have typically been from west coast but I think their reps work from around the country. If you PM me, I can give you the current guy I've used who seems very good. My carrier for over 20 years has been Amica Mutual (great company all around if not the very cheapest.) When I got the Challenger, they were just a bit higher than I was willing to tolerate so my Answers Financial broker found me Plymouth Rock Assurance and I separated off that car only to them. (Amica said please don't do that (multiple policies for different cars I own), but admitted they can't prevent it)

Last edited by deanm11; 06/07/16 07:47 AM.

2012 Subie Impr 2.0 142k M1EP 0w20 7.5k
2002 Tahoe 5.3 171k 5w30 syn 7.5k
Re: How does insurance work? [Re: Al] #4117548 06/07/16 08:43 AM
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itguy08 Offline
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Originally Posted By: Al
State Farm (for now) has some of the best rates. But all things change. Also think through your options some can be low risk for the insurer but high cost to you.


Not necessarily. We left State Farm after 10+ for almost all our insurance as they were crazy expensive. We had our new credit union run the insurance and we saved over 1/2 on our homeowner's (same coverage) and about the same amount on the car insurance too. Even our camper policy was cheaper than SF. And we're not high risk - 3 cars, no accidents, no tickets, live in Central PA.

When I told our agent and sent him the quote he said there was no way he could come close.

It pays to shop around. As far as companies, I'm loyal to no company and just go with the lowest rate.

Re: How does insurance work? [Re: motor_oil_madman] #4117555 06/07/16 08:58 AM
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madRiver Online Content
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Some questions on you:

1) any accidents?
2) any moving violations
3) how is your credit/score

They may be selling your lead off as you don't fit into their business model. I have insurance with a company who takes high risk folks on. They want me to offset the high risk pool they insure so they offer really low rates to me.

Re: How does insurance work? [Re: motor_oil_madman] #4117567 06/07/16 09:11 AM
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cjcride Offline
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It's a bit like Tax we all pay and some collect.

Last edited by cjcride; 06/07/16 09:12 AM.
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