Want more proof that the auto insurance industry is completely insane? Drivers in some states can cut their premiums by 30% to 50% by simply buying a policy in December, a recent study found. Drivers can give themselves a Christmas present by purchasing insurance during the holiday season.
When InsuranceRates.com examined auto insurance in all 50 states, it discovered that the month in which you buy a policy can greatly affect the rate. The effect varied greatly by state to state. The information didn’t compare different companies, nor did it compare methods such as online and agencies.
The biggest discrepancy was in Hawaii, where some drivers are paying nearly 50% more because they buy insurance in a certain month. A 35-year-old man with a clean driving record paid 47.9% less for the exact same policy in December than in March in the Aloha State.
The difference in rates for a similar driver with similar records in South Dakota was 3.7%. The same driver would pay rates that were 39.7% in December had he lived next door in Wyoming. Other states that showed a big month-to-month discrepancy included Maryland, Pennsylvania, Virginia, Texas, Maine, and Nebraska. Drivers in the District of Columbia faced similar differences.
What’s even more surprising is that the experts at InsuranceQuotes.com couldn’t find any reason for the month-to-month difference, nor did they discern any pattern to the massive differences in rates.
The most likely reason for the difference is that insurers or agents might be offering discounts in December in order to increase their yearly business, yet that doesn’t explain the state-to-state gap.
The gap between states might be explained by the differences between state laws on insurance that can raise rates substantially. Rates in Pennsylvania might be higher because that state’s auto insurance is notoriously complicated.
What is Causing the Difference?
This study shows that many Americans are simply paying too much for car insurance. If rates can differ that greatly, then it is obvious that insurers could offer much lower rates if they wanted. If the study is accurate, then some Americans could be paying premiums that are 50% higher than they need to pay.
The study also verifies a claim that we have made here in the past and will make again. In many cases, auto insurance rates are not based upon any sort of hard data. Instead, they seem to be based on guesswork. There’s no way that the rates could vary so greatly if they were based on any sort of hard numbers.
A big problem is that there is often little or no detailed data about driving habits and patterns available. Insurers have no way to tailor policies to fit individual drivers.
Okay, to be fair, insurers are aware of this, and some of them are trying to rectify the situation with new technologies like Telemetric devices. Unfortunately, only a small number of drivers are taking advantage of such devices.
Another problem is that a lot of drivers simply don’t shop around for the cheapest insurance. A driver in Hawaii who shopped for a policy in March could probably find that 47% discount he would get in December by simply checking with more than one insurance company.
The bottom line is that a lot of people are paying are too much for auto insurance out there. Such vast differences in premiums would not exist if insurers knew they couldn’t get away with them.