Yet another Reason to Hate Your Car Insurance Company

Americans have yet another reason to hate their auto insurance companies. Insurers have figured out how to identify those customers that don’t shop around and charge them more.


“Insurance companies are beginning to use software to raise your prices if they determine that you’re one of the people who won’t leave with a higher price,” Bob Hunter, the Director of Insurance for the Consumer Federation of America, told a South Carolina TV station.

The practice is called price optimization, and what it really means is that insurers single out those drivers willing to put up with high prices and charge them more. The software lets them spot which individuals aren’t going to switch policies.


If that wasn’t bad enough, low income families are more likely to get on the list for not switching insurers, Hunter said. Lack of time, resources, and education keeps poorer people from shopping around.

Price optimization is good and bad news for insurance shoppers. It’s good news because insurers do have lower prices available; they just don’t want to tell you about them.

Around 60% of households do not even bother to shop around for auto insurance, Hunter pointed out. That means 60% of households are probably being charged too much for car insurance.


The sorry situation is that the average American family expends more time and effort on nickel and dime savings, such as coupon clipping, and ignores the real money savers. Spending a half hour at the computer searching for lower car insurance rates will save you more money than all those coupons in the newspaper.

Surveys in South Carolina found that rates for similar auto insurance policies varied by as much as 50% in the same market. A person who shops around could cut his or her auto insurance premium by 50%. Since the average American pays around $125 a month for auto insurance, he or she could be putting an extra $62 a month (or $744 a year) in his or her pocket by doing so.

One reason why many upper class families have a much better lifestyle is not that they necessarily have more money, but they are better at maximizing their resources. They spend their effort on the biggest savings and ignore the penny pinching.

The moral of the store is to shop around for everything these days. You can save a lot of money if you get a little creative and take advantage of modern technology.