How can one insurance company charge a significantly lower rate than another insurance company?

April 19, 2018

Why Are Insurance Rates So Different?

I was asked this question recently when I was presenting an insurance proposal to an owner of an apartment building here in Pennsylvania. They wanted to know how/why my rate was so much lower than what they were paying to their prior insurance company or phrased differently why their company had been charging them so much. I actually have had many clients express the same sentiments with regard to Auto Insurance and other insurances as well. Contact Definitive Insurance Solutions for your quote today!

The short answer is that if all variables are the same the only reason for the rates to be different between two companies would be because one company is profiting more than the other or the lower priced company is losing money. Yes losing money, this happens more than you might think.

Adjusting Variables and Rates

Insurance companies are often making good money in one area and losing money in another area. Eventually the insurance company will identify the area that they are losing money and will adjust the variables and the rates. In some cases an insurance company will purposely lose money on a specific line of insurance or in a specific territory in order to initially gain market share or gain knowledge.

Other variables that can affect pricing differences may include:

  • Company expenses,
  • Quality of account selection,
  • Ability to recommend adjustments that reduce future losses,
  • Ability to negotiate favorable pricing from service providers such as doctors, auto repair facilities, contractors, Etc.

Definitive Insurance Solutions

These are the majority of reasons that your auto insurance, business insurance or life insurance could vary significantly from one insurance company to another. If you have questions about your insurance in Pennsylvania, Ohio, and New Jersey feel free to give me a call at 1-717-537-1104. I will be happy to review your asset protection plan.


Joe Hershey