Author: Bill Wilson

As if I didn't get enough punishment via our "Ask an Expert" service :-), at one time I served as one of the insurance "experts" at www.allexperts.com. During that brief stint, I had a question submitted from someone who purchased his auto insurance through a web site, without the aid or counsel of an agent. Here's his story.... 

"I am looking for affordable auto insurance and am wondering if you can help me in consideration of the following circumstance.

"I purchased an insurance policy online which ended up being with [name of a large independent agency company goes here]. The transaction was finalized with a call center and my credit card was charged for the six-month premium I was quoted.

"I was out of the country for several weeks and came home to a refund check and a notice of cancellation of the policy in the mail due to 'drivers license having been suspended in the past 5 years.' I don't remember them asking me this question online (though I could be mistaken and perhaps checked the wrong box) and I'm sure they didn't ask it on the phone or I would have told them.

"I would appreciate any advice you may have to give with regard to how to proceed. Thanks - in advance - for your "expertise" in this area...

"Sincerely,

"Tom"

Dear Tom:

Welcome to the wonderful world of online insurance! In cyberspace you'll save a fortune by getting rid of those worthless middlemen (sometimes referred to as "agents"). Everyone knows that the exorbitant commissions collected by these do-nothings is just money wasted. After all, auto insurance is auto insurance...it's like buying light bulbs or something at Wal-Mart...nothing to it.

As you know, studies prove conclusively that people don't like to use an agent if they don't have to. Of course, studies show that people don't like to go to the doctor either, but that doesn't mean it's not a good idea or that they don't have value. (And keep in mind that agents still make house calls :-).

But seriously, I visited the web site to check out their quote form and discovered that one of the first questions asked was whether or not my license had been suspended in the past five years. If I answered "yes," then it told me to get lost (in so many words). So, I'm assuming that you must have checked the wrong radio button on the quote form. However, I'm surprised that this wasn't reiterated when you finalized the deal with their call center, or at least advised about the potential consequences of an inaccurate application.

But, regardless of what happened, it is very difficult to insure property or liability exposures purely through online transactions or while dealing with someone on the phone whose insurance knowledge is unknown. Not all auto policies or carriers are the same. For example, many (if not most) personal auto policies will cover your use (to some extent) of rental cars for business or pleasure. However, there are policies by some of the most recognized insurance companies in the country that don't provide coverage for the use of nonowned autos, particularly if used for business.

In addition, you may have exposures such as business use of an auto (e.g., pizza delivery), teenage drivers, occasional use of nonowned autos, etc. that could affect your coverage. In my opinion, each account is unique and your needs cannot be adequately or properly met without the counsel of a good agent who understands your situation and asks the right questions.

An online inquiry about auto insurance is fine, but I'd never entrust my vehicle or my liability exposure without the intervention and, again, counsel of a good agent. Despite what you may be told in the advertising of some insurers, most agents earn their commission by providing sound, valuable advice that can pay for itself many times over...as you've just learned.

P.S. When your auto insurance was cancelled, did you receive an "Adverse Action" letter or memorandum from the insurance company? Whenever a consumer is denied insurance based on a "consumer report" (such an an MVR), the Fair Credit Reporting Act requires that the insured be provided with this information.