Regular companies reward their loyal customers with discounts, freebies and incentives. While it may seem backwards, car insurance providers reward their customers with higher premiums. This practice is known as price optimization, and while it has been made illegal in four states, it still has not been made illegal in Georgia.
A lack of loyalty in the face of premium increases will mean that you are less likely to become ensnared by this shady practice. Bob Hunter, member of the Consumer Federation of America, says that price optimization boils down to profit maximization. Auto insurance companies buy software that gives them data on everyone who buys almost anything. They even receive information on what you buy at the grocery store, such as how many apples and steaks you bought. In addition, they analyze whether you are staying with Direct TV when Verizon is cheaper. After they have determined how sensitive a customer will be to price increases, they base their prices on it.
While your auto insurance provider may give you a discount for loyalty, Bob Hunter says that it may not be all it seems. For example, they give you a 10 percent discount after they raised your premium 25 percent. Ohio, Maryland, California and Florida have banned price optimization for car insurance quotes, which means four states have banned it so far.
In essence, if car insurance companies deem you low-risk, they will take the risk of hiking your premium with the belief that you are not likely to leave. Despite this unscrupulous practice, consumer advocates are working towards a solution. In the meantime, you can avoid price optimization through shopping around. Never assume that you are receiving the best deal at your auto insurance company, and you will be on your way to saving more.
Call Pachuta Insurance Today @ 706-769-2262
Sources:
Lifehacker
KUOW
A lack of loyalty in the face of premium increases will mean that you are less likely to become ensnared by this shady practice. Bob Hunter, member of the Consumer Federation of America, says that price optimization boils down to profit maximization. Auto insurance companies buy software that gives them data on everyone who buys almost anything. They even receive information on what you buy at the grocery store, such as how many apples and steaks you bought. In addition, they analyze whether you are staying with Direct TV when Verizon is cheaper. After they have determined how sensitive a customer will be to price increases, they base their prices on it.
While your auto insurance provider may give you a discount for loyalty, Bob Hunter says that it may not be all it seems. For example, they give you a 10 percent discount after they raised your premium 25 percent. Ohio, Maryland, California and Florida have banned price optimization for car insurance quotes, which means four states have banned it so far.
In essence, if car insurance companies deem you low-risk, they will take the risk of hiking your premium with the belief that you are not likely to leave. Despite this unscrupulous practice, consumer advocates are working towards a solution. In the meantime, you can avoid price optimization through shopping around. Never assume that you are receiving the best deal at your auto insurance company, and you will be on your way to saving more.
Call Pachuta Insurance Today @ 706-769-2262
Sources:
Lifehacker
KUOW
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