In these difficult economic times, everyone is playing the game of looking for savings on the must-haves. When the job may be lost because of cuts in state or federal budgets – for example, if the defense cuts follow on from the failure of the Supercommittee to agree a deficit reduction package, thousands of jobs will be lost – no one wants big regular commitments. That means discounts is the name of the game when it comes to shopping for insurance. Putting the question of the deductible to one side, the most common saving comes from bundling an auto with a homeowners policy. Insurers usually offer not less than 10% in premium rates which, in these difficult times, can be a good deal. Of course, before you sign up, you complete the shopping around, getting quotes for the policies separately and bundled together from several different companies. Never assume you cannot do better separately if you change insurers.

So far, all this is completely straightforward. In a free market, you can make savings and the insurer gets more business. This should be a win/win situation. Except, in some states like North Carolina, the free market is being twisted by some insurers. The strategy adopted by some of the larger companies like Allstate is aggressive, writing to existing homeowners policyholders to refuse renewal unless they switch their vehicle insurance to a bundle. In some states like New York, this forced bundling is illegal, breaching provisions on anti-rebating and anti-discrimination. In states where this is legal, the insurers justify this mandate on the basis of their business economics.

It’s a fact of the business that insuring people’s vehicles is highly profitable, but insuring homes is break-even or potentially loss-making. When you look at the last two years, the majority of companies have made a loss because of the increasingly bad weather. Indeed, 2010 was a record-breaking year for claims and this year has already passed the 2010 total. In the past, the insurers would simply have raised their premium rates to cover the losses, but most states now cap rate increases. Insurance Commissioners have become more protective of consumer rights. This means insurers are trying to get back into profitability on homeowners policies by forcing people to transfer insurance for their vehicles. It doesn’t work the other way round. Because vehicle insurance is profitable, there’s no requirement to bundle a homeowners policy. Indeed, given the choice, many insurers would no doubt like to terminate all homeowners policies.

So when you start shopping around and ask for auto insurance quotes from all the top companies in your state, remember to look carefully at their bundling rules. It’s entirely possible there will be nothing but good news with discounts you can enjoy without penalty. But be very careful to read the small print. You should also consider what your reaction will be if, as in North Carolina, you suddenly get a letter from one insurer requiring you to cancel policies with another insurer and consolidate all policies with the one insurer. First get auto insurance quotes with a view to changing insurer and then make a formal complaint to your Insurance Commissioner. The more people who complain and move their business, the better.