Have you ever had the sneaky suspicion that you’re being taken advantage of by your auto insurer? You may be right. Consumer Reports embarked on a two year investigation analyzing more than 2 billion insurance price quotes. What they found was a car insurance game that is rigged with inconsistencies and inequities that cause too many of us to pay far more than we should.
What you see is often not what you get
According to the study, the companies that make incredible savings claims ironically often charge the highest rates. Quirky but lovable pitchwoman Flo, for instance, has persuaded many of us to sign up for Progressive auto insurance.
Yet, Progressive was found to have the second most expensive annual premiums among the top five national insurers tested by Consumer Reports. It charged nearly $597 on average more than the lowest provider, USAA.
Your credit worthiness rather than driving habits may be driving your premiums
While you might think that all good drivers should be charged nearly similar rates, the reality is far different.
“What we found is that behind the rate quotes is a pricing process that judges you less on driving habits and increasingly on socioeconomic factors.”
Insurers analyze your credit report to develop a credit score that helps determine your rates. Unfortunately, the financial penalties for a poor credit score are staggering. Consumer Reports, for instance, compared the average premium for adult single drivers with clean driving records.
Those with excellent credit paid on average $1409 annually while those with good credit shelled out $1712 every year. Consumers with poor credit, however, paid an astonishing $3826 annually. This was over double the rate paid by those with good and excellent credit.
Insurers use other unfair pricing tactics
Are you the type of consumer that seldom shops around for the lowest price? Your auto insurer knows. Increasingly auto insurers are analyzing your personal shopping data to help predict how sensitive you are to price increases. The less likely they deem you are to complain or shop for a new insurer, the more likely you are to face higher rate increases.
In the insurance game, loyalty is over-rated.
Consumer Reports discovered that while many insurers offered loyalty discounts to long time customers, others didn’t. In fact, in some cases, insurers seemed to penalize loyal customers with higher rates than they should otherwise be paying. Geico Casualty, for instance, was noted for its $3267 “loyalty penalty” in New Jersey.
The teenage driver penalty varies considerably as well. While it can be costly to add a teenage driver to your policy, the increase in the policy can vary dramatically between insurers, ranging from a 16% increase in premium costs to a 250% increase in premium costs. Because of this wide discrepancy, Consumer Reports suggests that you comparison shop insurers when you’re about to add a teenage driver to your policy.
Don’t get fleeced
To keep from getting soaked with car insurance costs, do everything in your power to improve your credit. The financial benefits of having good credit are substantial, potentially saving you tens of thousands of dollars over your lifetime.
Just as crucial in saving money is making sure that you never automatically renew your auto policy each year without at least comparison shopping your policy with the competition. Your pocketbook will thank you for it.
To learn more about how to get the lowest car insurance rates check out ConsumerReports.org/FixCarInsurance.
BMWK, when is the last time you comparison shopped your car insurance premiums.