Why Auto Insurance Loyalty is Difficult

Customers who are loyal to their car insurance company are often disappointed with raised premiums. According to NerdWallet, a data-driven, consumer finance website, US drivers overpay for auto insurance by as much as $368 per year. Research from NerdWallet shows that consumers can save as much as 32 percent from comparison shopping.

Why People Don’t Shop for Better Deals
Several notable consumer protection groups have called on the insurance industry to change their ways. Auto insurance rates vary by as much as a 154 percent average for each zip code. One of the reasons people do not comparison shop is that quotes are time consuming. Only 12 percent of people reported finding the process easy. However, insurance ads paint a different picture. Many well-known companies boast about quotes only taking 15 minutes. While this might seem simple, you have to understand this is only one quote. If you decided to compare 10 insurance companies, the time adds up to two-and-a-half hours.

Other times, people do not shop for car insurance by comparison because they have to give out personal information, such as their name, date of birth and address. People do not comparison shop because insurance companies do not make it easy for consumers.

Price Optimization
Most people expect accident history, age and the number of miles driven to influence their insurance premiums. Aside from risk-based factors, other data could be used to set your rates. Many companies used a data-mining technique referred to as price optimization to set rates high but not high enough to make customers shop around. Bob Hunter, director of insurance for the Consumer Federation of America has said that price optimization is a cunning method that overcharges Americans who buy car insurance.

To get the best deal, people should take their time when searching. Additionally, they should talk openly with their insurer about competitive offers. Comparing rates and telling your insurance company about your plan to switch can bring about a price reduction.