Spend enough time around the insurance business, and you will hear some sweeping declarations about the people in it. All insurance defense attorneys overbill and overwork their files. Claims managers only care about paying as little as possible. All public adjusters cannot be trusted. Apparently, everybody has figured out everybody else’s motives, usually without having met most of the people they are talking about.

My observation is that insurance makes a lot of people skeptical of one another. Sometimes that skepticism is earned. The trouble starts when a bad experience becomes our explanation for an entire profession. I represent policyholders and litigate against insurance companies. I also bring negligence claims against insurance agents when the circumstances warrant it. That gives me considerable experience with what happens when insurance goes wrong. It does not give me a window into the daily operations of most insurance agencies.

With that in mind, a post by Carl Madden on Quora caught my attention. The author says he spent eight years as an auto insurance agent and offers what sounds like an insider’s confession. I have not independently verified his employment history or the specific incidents he describes. Here is the text:

Oh boy, where do I even start? After 8 years as an auto insurance agent, I have zero loyalty left to protect these companies.

We Had ‘Loyalty Lists’[.] Every month, I’d get a report of customers who hadn’t shopped around in 2+ years. These were our golden geese – we could raise their rates aggressively because they’d proven they wouldn’t leave. One customer I remember was paying $3,200 annually for coverage that should have cost $1,800. She stayed for 5 years.

The ‘File and Use’ Scam Here’s something most people don’t know: in many states, insurance companies can raise your rates immediately and justify it later. We’d implement 15-20% increases across entire ZIP codes, knowing regulators would take months to review. By then, we’d collected millions in extra premiums.

Claim Frequency Was Irrelevant Your rates weren’t really based on how often you’d claim – they were based on how likely you were to shop around. A customer with 3 claims who got quotes every year paid less than a claim-free customer who never compared rates. It was pure price discrimination.

We Loved Policy Confusion Complex policy language wasn’t an accident. The more confusing your coverage, the less likely you’d comparison shop effectively. We’d change terminology between companies deliberately to make apple-to-apple comparisons nearly impossible.

The Real Game-Changer Tools like ComparisonAdviser absolutely terrify insurance companies because they eliminate our biggest advantage: information asymmetry. When customers can instantly see what competitors charge with identical coverage and discounts applied, our whole ‘loyalty tax’ model collapses.

I’ve watched too many good people get fleeced by an industry that profits from customer ignorance. Use ComparisonAdviser religiously – it’s the only way to beat a system designed to exploit your trust.

The truth? Every year you don’t comparison shop, you’re probably donating $500-1,500 to your insurance company’s profit margins.

If an insurance agency knowingly treats a trusting customer as someone to be milked rather than someone to be helped, that deserves scrutiny. But one online confession is not a census of the insurance business. Before deciding that this explains how most agencies operate, I would want to see the reports, the rating practices, the companies involved, and evidence of how widespread the conduct actually is.

I would also want to know more about the sales pitch embedded in the confession. The post twice promotes a particular comparison service, Comparison Advisor, through tracking links. That does not establish that the author is being paid or that his allegations are false. It does give readers a reason to examine the source carefully. I am reproducing his words, including those links, so that readers can evaluate the entire message. I have not evaluated or endorsed that service.

There is a documented issue behind the concern about penalizing loyal customers. The National Association of Insurance Commissioners examined price optimization in its 2015 white paper, including the use of models to predict how customers will respond to premium increases. Those regulatory actions make this a legitimate subject for inquiry. They do not verify this particular post or establish how most agencies operate.

The post also moves rather freely between what an insurance agency does and what an insurance company does. In the ordinary auto insurance market, the insurer develops and files its rates. An agent generally does not sit at a desk deciding to raise an entire ZIP code’s rates by twenty percent. The agent’s role in explaining a renewal, checking available discounts, and discussing other coverage options is a separate matter. We should identify who made the decision before assigning responsibility for it.

Calling File and Use a scam also skips over an important distinction. It is a lawful regulatory framework. Texas, for example, explains that insurers may use filed rates on their effective date, while those rates remain subject to legal standards and regulatory review. Whether the oversight is sufficiently rigorous is a fair question. The existence of that filing system does not, by itself, establish misconduct. Likewise, the post’s statement about claim frequency should not be accepted as a general rule.

For policyholders, I think the useful response is to ask better questions. Ask your agent to explain a substantial renewal increase and whether your coverage still fits your circumstances. Ask which insurers the agency can actually approach and whether a fresh comparison makes sense. If another proposal costs less, ask what changed in the deductibles, limits, exclusions, and endorsements. A lower number on the quote deserves a closer look at the policy behind it. On the claims side of this business, I get to see how expensive an overlooked coverage difference can become.

A great insurance agent brings real value to that conversation. A good agent learns enough about your home, business, or family to recognize exposures you may never have considered, explains the available choices, and makes recommendations you can understand. That work deserves respect. It also deserves to be distinguished from simply letting a renewal arrive and assuming the customer will pay it.

So, are most insurance agencies run the way this post describes? I don’t have the evidence to say that they are. I would particularly welcome hearing from agents about what happens inside their offices when a longtime customer’s renewal premium climbs. What review takes place? What alternatives are considered? How is the customer advised? Those answers would help policyholders far more than another round of accusations about an entire profession. The question raised by this post is worth investigating, and excellent agents should have a prominent voice in that discussion.

Thought for the Day

“A great insurance agent helps you understand what you are buying before you have to discover what you bought.” 
— Chip Merlin