Avoid car insurance price hikesWhether it’s car insurance or health insurance, the irony of insurance is a little painful. I pay nearly a hundred bucks a month for something that I hope I’ll never use.

Womp womp.

Of course, I try to lower this expense as much as possible–while making sure I’m adequately covered, in case sh!t happens. But here’s a sneaky little thing I just learned about.

Ever heard of insurance price optimizing? I hadn’t either, until I read this article from Credit.com. It’s a sneaky insider trick, and, well, here’s how they put it:

“Price optimization is a data mining tool used by insurers to charge higher premiums to those consumers least likely to shop for a new policy in the face of a rate increase.”   

Here’s what that means. If car insurance companies feel like you’re shopping around, they’ll keep your price nice and steady to keep you as a customer. But if they don’t think you’re likely to shop around, they’ll take advantage of it by upping their price. Is it just me, or does this kind of sound like a bad relationship?

Basically, it pays to keep your options open and look for new car insurance (or any kind of insurance, really) every now and then.

Bob Hunter of the Consumer Federation of America told the site about this tactic. He first heard about it at an insurance webinar. Kudos to him for staying awake to share this helpful consumer tip.

To make sure it wasn’t just an isolated practice, Hunter did some research and confirmed that “price optimizing” is a pretty widespread tactic. How do the insurance companies know you’re likely to shop around? They can review your credit report data, and “a host of other data available from third-party sources about current and prospective customers.”


What You Can Do About It

We’ve got the CFA and other consumer groups on our side, trying to fight this practice. But in the meantime, there’s one simple thing you can do:

Find six insurance companies with the lowest rates. Narrow it down to four companies with the least amount of complaints, then call each of those companies for a quote. Credit.com suggests using a rate comparison tool that might be offered by your state insurance commissioner. Then, you can use this database to research complaints.

It may also help to check your credit report annually. Some insurance carriers reward strong credit.

Ultimately, you might consider calling your insurance carrier’s bluff. You can switch companies, just to show that you know you’ve got options. Credit.com writer Gerri Detweiler summed up her experience:

“That’s what I had to do when my auto insurance rates started to climb… We switched to another company. A year later the new insurer raised our rate substantially for no apparent reason. My old insurance company kept sending me letters asking me to come back, and when I responded, they offered me a rate well below the one I was paying before I left.

For more info, check out Credit.com’s full report.

Photo: David Castillo Dominici via Free Digital Photos


Kristin is a writer and money saving maniac. Follow her on Google+.
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4 comments… add one

  • David @ Simple Money Concept April 16, 2014, 11:32 am

    Good idea. But are people really going to get 6 quotes from 6 different companies? It sounds like a hassle, but if the savings are big, then we should all do it!

    • Kristin Wong April 16, 2014, 12:39 pm

      I think it’s less about finding big savings and more about just making sure you don’t get PO’ed (price optimized).

  • Carol Hebert April 28, 2014, 8:37 am

    I had never heard of “price optimizing” until your article; it’s very interesting and you’re right, it’s a very sneaky practice. Thank you for the heads up! I’ve been investigating and found http://www.zanda.com/toplists/90000030000022/best-car-insurance-companies which shows the best auto insurance companies to go with based on actual users who rate the companies. Do you agree with this list that they’re the best out there?

    • Kristin Wong April 28, 2014, 9:01 am

      Sure thing! Glad you found the post helpful. I’ve had pretty terrible experience with both Progressive and Allstate, but then those are the only insurance companies I’ve had to deal with lately. Maybe they’re all like that!

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