Faithful Auto Insurance Customers Experience Premium Increases

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Auto insurance companies often tell their customers that by simply sticking with their coverage drivers can save money on their insurance. While this may be true under certain circumstances, a consumer advocacy group argues the opposite.

The Consumer Federation of America released a letter recently stating that the most faithful auto insurance customers may actually be seeing an increase in their rates year over year. The primary reason for this increase is their decision to not shop for car insurance with other companies.

Pricing Methods Impact ‘Sticky’ Auto Insurance Customers

It’s common knowledge that auto insurance customers are encouraged to maintain some form of coverage at all times — even if not regularly operating a vehicle — to avoid higher costs when attempting to secure coverage in the future.

In an attempt to maintain their own customer base, some insurance companies even create programs that reward customers for sticking with them for the long haul.

But according to a letter sent by the Consumer Federation of America (CFA) to state insurance commissioners last month, all faithful insurance customers don’t benefit from lower rates. In fact, the CFA revealed that nearly half of the largest insurers are able to use methods like “price optimization” or “scientific pricing” to increase premiums from so-called “sticky” customers.

The CFA and at least one state commissioner have labeled the practice unfair discrimination, particularly against less affluent consumers who were less likely to shop for alternatives.

Shop for Car Insurance to Find Affordable Rates

While no known legal actions are currently being taken to halt the practice of “price optimization,” consumers do have access to alternate ways to keep their rates low –most of which come from utilizing their right to shop for car insurance. Here are some tips to help shop for coverage the right way:

  • Pay attention to term renewal notices. Insurance companies typically send their customers term renewal notices approximately one month prior to the current term’s expiration. Look at newly proposed coverage amounts to help determine how much you could save by shopping around.
  • Shop online. Many people shun the process of shopping for coverage because they don’t like calling multiple companies for quotes. But by shopping online, consumers can not only access fast, free quotes, but also purchase coverage via the chosen insurer’s website.
  • Look for discounts. Insurance companies offer numerous discounts based on everything from bundling policies to purchasing coverage online. You may also be able to secure discounts based on club affiliations or memberships with specific financial institutions.
  • Consider PAYD coverage. Individuals who don’t drive often may find that securing some form of usage-based or pay-as-you-drive (PAYD) coverage could save money. This coverage examines the driving behaviors of customers and only charges based on those behaviors, as opposed to charging based on common risk factors like driving records and credit scores.

Most auto insurance companies allow customers to end coverage at any point during their term, making it beneficial to shop for car insurance year-round. If you find a policy you like mid-term, you can end your policy and move on the more affordable coverage right away.

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