The way insurance companies barrage you with television ads promising
to save you money, you might think they were paying you instead of the
other way around. In the case of the GEICO googly eyes or actor Dennis
Haysbert hawking Allstate policies, at least it’s private companies
pitching their wares. But then there are the auto insurance ads touting
the $388 saved, on average, by people who switched to plans offered
through AARP by The Hartford Financial Services Group. The ads also say
that AARP members who own homes might save an additional $148 by
switching their homeowners coverage. In this case, the trusted nonprofit
is lending its name to a commercial venture. Pay less, get the AARP
imprimatur … What’s not to like? Read on to find out.
As part of our continuing analysis of AARP’s financial services products
earlier stories covered AARP mutual funds and AARP life insurance and
annuities), we wondered how well the huge organization was treating its
40 million members with the homeowners and auto policies it sells. So we
examined the coverage and compared AARP/The Hartford prices with those
of Allstate, State Farm, GEICO, and Progressive in three zip codes to
answer the question, Should you put AARP on your policy shopping list?
Our answer: If you are shopping on price alone, no. You can save money —
in some cases a lot of money — by taking your business elsewhere. But
the policies do offer a few appealing features that you might find are
more than worth the extra cost. And The Hartford has an impressive
customer service record.
AARP has marketed The Hartford’s homeowners and auto policies for 25
years and deserves credit for choosing a quality partner. The Hartford
was among the top five insurers in J.D. Power and Associates’ 2008
homeowners and auto insurance customer service surveys. “They have a
reputation for working with their customers and trying to solve problems
without litigating claims, compared to some of their competitors,” says
Amy Bach, executive director of United Policyholders, a San
Francisco-based organization that advocates for consumers on home and
auto insurance. The number of complaints filed against The Hartford, as
tracked by the National Association of Insurance Commissioners, is below
the industry average and has been declining for the past several years.
Middling Marks for Prices
AARP’s homeowners and auto policies are often not the least expensive,
however, which echoes what we found with its life insurance offerings.
“There is a cost to having some of the features in the program,”
acknowledges Richard Hisey, president of AARP Financial, the for-profit
arm of AARP. “We believe that if you’re comparing apples-to-apples
features, we will be cost-competitive.”
For our price-shopping survey, we asked AARP/The Hartford, Allstate,
State Farm, GEICO, and Progressive for quotes for a 53-year-old AARP
member driving a 2008 Nissan Rogue and living in a $250,000 wood-frame
house. And since the cost of the same insurance can vary by zip code, we
requested quotes in Charlotte, N.C.; Scottsdale, Ariz.; and Schaumburg,
Ill. We told the insurers to apply any standard auto discounts
available based on his driving record and profile. Since AARP’s auto
rates were for 12 months and the others were for six months, we divided
AARP’s figures in half.
For auto insurance, AARP/The Hartford was the priciest insurer in
Scottsdale and Schaumburg and in the middle of the pack in Charlotte.
Progressive was the least expensive in Scottsdale, costing a whopping 42
percent less than AARP/The Hartford. GEICO was the cheapest in both
Charlotte and Schaumburg, charging 28 percent less and 15 percent less,
respectively, than AARP/The Hartford.
Auto Insurance Six-Month Premium
The Hartford Progressive GEICO State Farm Allstate Scottsdale, AZ $486 $284 $328 $352 $445 Schaumburg, IL $325 $311 $276 $314 $306 Charlotte, NC $445 $480 $319 $458 $331
For 12-month homeowners policies, AARP/The Hartford was in the middle in
Charlotte $686), but again the most expensive in Scottsdale $1,467)
and Schaumburg $1,075), charging more than double Progressive’s $706
Homeowners Insurance 12-Month Premium
The Hartford Progressive GEICO State Farm Allstate Scottsdale, AZ $1,467 $706 $861 $963 $1,123 Schaumburg, IL $1,075 $504 $513 $831 $587 Charlotte, NC $686 $674 $902 $729 $655
When it came to bundling homeowners and auto insurance, AARP/The
Hartford was the second least expensive in Charlotte $1,452 a year),
but was once more the highest in Schaumburg $1,675) and Scottsdale
Auto/Homeowners Insurance Bundle 12-Month Premium
The Hartford Progressive GEICO State Farm Allstate Scottsdale, AZ $2,386 $1,159 $1,517 $1,365 $2,013 Schaumburg, IL $1,675 $1,083 $1,066 $1,219 $1,199 Charlotte, NC $1,452 $1,635 $1,538 $1,462 $1,318
So what about AARP’s claims about saving customers hundreds of dollars?
Insurance advisers, who say other insurers make similar boasts,
recommend you ignore them. While the comparisons typically represent the
average savings of all customers who switched insurers over a given
period of time, people often reduce their coverage when they swap
companies. So the savings figures are somewhat specious.
This survey makes a strong case for the need to shop around for auto and
homeowners insurance, since none of the five insurers was the cheapest
in all three locations. And the savings could be substantial: In our
Scottsdale example, a homeowner who bundles his auto insurance would
save more than $1,200 a year by choosing Progressive over The Hartford.
Keep in mind that even if you live in one of the survey’s three cities,
your rates could be vastly different from what we found. Since auto and
homeowners policies are underwritten individually, your rate quote could
be much higher than your neighbor’s, even if you drive identical cars
and live in similar houses.
AARP Auto Insurance
AARP/The Hartford’s auto insurance policies have many of the same
provisions as their competitors but also offer three unique features
tailored to older drivers.
* 12-month rate guarantee: Most auto insurers can
raise rates after six months, but AARP/The Hartford locks in prices for
12 months. This may be useful to older drivers with fixed incomes who
want to keep their expenses predictable.
* RecoverCare: Since an older driver in an accident
may need a hand getting back on his feet, AARP/The Hartford policies
include a $2,500 RecoverCare benefit to pay for necessary help up to six
months after an accident. You shell out the cost of things like a cab
to the doctor’s office or hiring the neighbor’s kid to mow your lawn.
Then you submit the charges to a customer service rep from The Hartford
* Lifetime renewability: Once you’re an AARP/The
Hartford policyholder for 60 days, you generally needn’t worry about
losing your coverage just because of a fender bender or two. But
although AARP’s TV ads say its auto insurance will never be canceled,
the fine print has exceptions: You can be canceled for not paying
premiums on time, for losing your license, for getting convicted of
driving under the influence, or if a doctor says you’re not capable of
driving. What’s more, this provision is not offered in the five states
that require elderly drivers to take tests to renew their licenses. And
there’s no guarantee that rates won’t increase, of course.)
Bach thinks these features are “nice to have,” especially RecoverCare.
“Out-of-pocket expenses after an accident are always higher than anyone
anticipates, so I like that feature,” she says. But she wouldn’t pay
extra for these extras. “The auto insurance market is so competitive, I
would shop around to see if I could get good service and a better rate
before I paid more for those features,” she says.
AARP Homeowners Insurance
Homeowners insurance is a fairly generic product. And there’s
very little someone in AARP’s age group over 50) would want from a
policy that someone younger wouldn’t. The only unique feature is
AARP/The Hartford’s Lifetime Continuation Agreement not available
everywhere, however). It guarantees that the insurer won’t drop you if
you’ve had the coverage for at least 60 days and paid premiums on time,
as long as your home is insured for at least 80 percent of the cost to
rebuild. Bach says this provision could be worth a higher premium,
because a policyholder wouldn’t need to fear that filing a claim could
lead to cancellation. Guaranteed renewability can provide peace of mind
to retirees in hurricane-prone places, where many insurers have stopped
renewing policies. Caveat: This feature isn’t available in Florida,
where AARP/The Hartford has stopped writing new policies.
How to Buy It
can buy AARP/The Hartford homeowners and auto insurance online,
over the phone 888-808-5254), or through the mail. Residents of
Arizona, Illinois, Tennessee, and Minnesota can also buy policies
through authorized Hartford insurance agents. By the end of 2009, agents
will also sell the policies in 16 other states.