Do Loyalty and Tenure Matter to Insurance Carriers?

Generally speaking, the average person insures their property and automobiles with the same carrier. Doing so is often a matter of convenience but comes with various benefits as well. Most insurance carriers provide a multiple policy discount, and loyalty discounts are sometimes available, too. However, loyalty and tenure don't always matter to insurance carriers as much as people believe. A given individual might not see tangible benefits from keeping their assets insured with a single provider.

Discounts Don't Always Add up to the Lowest Rates

Insureds often receive discounts for bundling their insurance policies together. Home and auto bundles remain common across all insurers, and discounts are often available for other policy types as well. Typically, the discount for bundling ranges anywhere from 5 to 20% per bundled policy. That's a significant amount of savings, but insureds need to exercise caution here. It doesn't matter how high that discount is when another carrier could offer similar coverage for an even lower rate. Bundling can save money, but individuals shouldn't assume the bundle always saves money.


Loyalty Discounts May Reward the Carrier More Than the Insured

Similarly, many insurance carriers offer a loyalty discount. Insureds receive a larger discount the longer they keep a given policy active. This particular discount almost always caps out with a maximum discount after a few years, though. For that reason, policyholders must compare this discount with steady rate increases over the years. Once the discount tapers off and rates continue to increase, a loyalty discount rewards the insurance carrier rather than the insured. Insureds shouldn't fall for this trap because loyalty doesn't always pay.

Tenure Makes a Difference (But Not for Rates)

Most people believe their tenure matters to the insurance carrier, and that's actually true. Unfortunately, tenure makes no difference in rates aside from potential loyalty or multiple policy discounts. Similar insureds will pay very similar rates on home, auto, and other insurance coverages. Tenure makes a difference when it comes to other situations, though. If an insured's policy terminates due to accidental nonpayment, insurance carriers often reinstate long-term policyholders with no lapse or penalty. Tenure makes a difference in very specific situations.

What's the Bottom Line?

In the end, insureds need to exercise caution with loyalty, tenure, and bundling. These buzzwords and discounts help insurance carriers sell more policies to more people. All of these things benefit the carrier long-term rather than the insured. A given person could easily find identical coverage at a lower rate by shopping around. Although shopping requires time and effort, the savings could make up for it sooner rather than later. Loyalty and multiple policy discounts save money on specific policies, yet they don't guarantee the lowest rate compared to another carrier.

The Verdict: Insurance carriers care about tenure, loyalty, and policy consolidation because they earn more money over time.