Editorial: A Need for Transparency in Car Insurance

magnifying glass and insurance quotes show transparency in car insurance pricing

By Alyssa Connolly, The Zebra

We have exciting news on The Zebra front! Today we announced that we closed $17 million in Series A funding, which is such a thrill and an honor to share because it means we get to keep accelerating what we’re doing: disrupting the car insurance industry. (Read more about the funding news here). We have big plans for The Zebra, and key to all of those plans is expanding our team, strengthening our partnerships, and improving our product with two objectives in mind:

  • Making car insurance transparent (the coverage, the pricing, the service — all of it)
  • Matching every driver with the right car insurance provider

We’re not making light of these challenges. The auto insurance industry is enormous and certain long-existing practices have become accepted as the norm by drivers and insurance companies alike. But we aren’t an insurance company, so we can offer folks independent advice. And we think it’s time things got easier for everyone.

We are fighting against the lack of transparency in the insurance industry.

There are over 250 million cars on U.S. roads, and almost all of them legally require insurance. Each state regulates insurance independently, affecting minimum coverage limits and what factors insurers can use to underwrite risks. For U.S. drivers, car insurance is the second greatest cost of car ownership after gas (and with the rise of electric vehicles, it’s often the primary expense). If consumers don’t understand insurance policies and pricing, how can they find the right ones?

The term “insurance” often confounds people, but in simple terms, it’s a promise. You’re paying for a promise from the insurer to indemnify you (make you right) in the event of a loss caused by defined perils. But since you’re an individual and future events are unknown, insurers have to make “educated guesses” as to the likelihood of you filing a claim if or when one of these costly events occurs. This is underwriting.

Insurance pricing is pretty darn murky.

Insurers evaluate hundreds or even thousands of factors to assess risk and price insurance products. Most people understand that their driving records, vehicles, locations, and other straightforward factors affect their premiums. Some of the lesser known (but still very commonly used) ones: credit score, how long you’ve worked at your job, even whether you have roommates.

graphic showing magnifying glass and potential 2 billion insurance quotes

Insurance agents or the Internet? Consumers don’t know where to turn.

Once upon a time, insurance was all about the agent, but nowadays, technology has enabled new methods of pricing and distributing insurance, though few consumers are familiar with all the options. Consider, for example:

  • Insurer distribution: Insurance companies might interact directly with consumers online without an agent (direct), insurance agents/brokers might sell a single insurance company’s coverage to consumers (captive), or insurance agents/brokers might sell multiple insurance companies’ coverage to drivers (independent).
  • Underwriting strategies: Designated “non-standard,” “standard,” and “preferred,” these are strategies which differentiate insurers’ focus on consumers. Some insurers specialize in drivers with multiple accidents, poor credit, and DUIs, while others target drivers who live in rural areas with multiple cars in a garage. It’s not well understood among consumers that shopping for car insurance is closer to a credit card or mortgage application process — you may get declined by certain companies or offered different rates based on your profile.
  • Pricing methods: Technology has brought about usage-based insurance (drivers can pay per mile driven), peer-to-peer insurance (a certain group of policyholders collaborate either to support each other financially in the event of a claim or see reduced premiums if there is no claim among them), and even telematics (vehicle plug-ins to gauge your driving habits).

So hooray for options! What’s tough is aggregating all of them so consumers have a world of variety to choose from and match with the right insurance companies — with minimal effort or research on their end. For plenty of consumers today, the expectation is that they can tap a finger on a phone a few times and a car will pick them up, or groceries will arrive at the door, or a flight will be booked. In car insurance shopping, this simplicity of process has been missing.

Insurance is an enigma, you say? We’re not freaking out.

Because of the murkiness of underwriting practices, complex and varying pricing models, and stories of insurers refusing to pay claims, there exists a natural distrust of insurers. The real problem, however, is a lack of understanding of car insurance and a lack of transparency into how it works.

Insurance is a product, so consumers should maintain a shopping mentality. Some versions of a product are basic, others have all the bells and whistles. Some have a figure-it-out-yourself manual, others have a service tech on call. For car insurance, the differentiators (beyond price) might be customer service, claims satisfaction, or even financial solvency (after all, when you get in an accident, you need to know that the company will be able to pay).

But insurance, by definition, is meant to protect you. Insurance companies are here to help. There are a lot of them out there, though, so we’re stepping in to match people with the right ones. We believe people deserve the power to make informed decisions. And so does the economy, for that matter. Consumers can compare pricing, features and other variables before purchasing flights, houses, cars, banks, credit cards — and now car insurance, too.

Deciding where you transact your business is your vote. By shopping for car insurance through a channel like The Zebra, you’re voting for increased transparency, which we think — as is obvious from the length of this editorial — drives the market to where it should be.

  • lindsey shaker

    you guys are really doing a wonderful job giving the information that just ISN’T out there, and in a way that’s so desperately needed.

    • The Zebra

      Thanks so much, Lindsey!