If you need another reason to shop around for auto insurance, how about this: Some companies may charge higher rates if they believe you won't shop around.
"New insurance company practices might be ripping you off," said Robert Hunter, director of insurance at the Consumer Federation of America. "It has never been more important to shop around for auto insurance, no matter how long you have been with your current company."
Hunter said some insurance companies practice "price optimization," matching up consumer data with statistical models that predict how likely a customer is to shop around, and how much of a price hike that consumer will tolerate. Then insurers may raise their premiums accordingly — even if the consumer has a spotless driving record.
"If you call in to thank [your company], it's worse than if you complain," Hunter said, because some companies could use that data to decide you're a loyal customer, no matter what, and take advantage of that loyalty.
The insurance industry contends that the process doesn't discriminate, and doesn't abandon the core principle of risk-based pricing. "It simply provides more precision ... and allows insurers in an analytical way to deal with 'what-if' scenarios," said Loretta Worters, vice president of the Insurance Information Institute, a nonprofit organization sponsored by the insurance industry.
Risk-based pricing allows insurers to price auto insurance based on the likelihood of having to pay claims on the driver. Changing underwriting and rating factors that have been shown to accurately project an insurer's future claims payouts "will only distort prices and result in good drivers subsidizing riskier ones," Worters said.
The insurance premiums a company charges must be approved in each state, said Mike Nixon, vice president of insurance operations for Armed Forces Insurance. "Two consumers with the same risk characteristics should be charged the amount the company has been approved to charge," he said. "Any discounts allowed have to be approved as well."
He said AFI doesn't use price optimization.
It's not a standard tool for USAA, said spokesman Roger Wildermuth, but USAA has used it "to better target specific rates within an actuarially acceptable range. For example, price optimization can help us identify the most competitive rate we can offer and still cover expected claims."
USAA "is committed to charging rates that are competitive and reflect the risk associated with insuring a car or a property," he said. "And we use actuarially sound and legally approved methods to calculate those rates."
Noting that prices vary widely and change often, CFA's Hunter recommends consumers compare prices at least every two or three years to determine whether they're still getting a good deal.
It's easy to see how it pays to shop around. And if you get a lower quote for a policy that offers the same type of coverage for your vehicles, call your current insurer, tell them your new price quote, and ask if they can match it or do better.
Nixon said some insurers offer an"advance quote" discount, which reduces the cost of the insurance if the quote is at least seven days before the effective date. "If a person is shopping last minute and needs to issue soon after the quote, they may pay more than a person that shopped ahead."
But before you cancel your current policy, make sure you have it in writing that your new policy is in effect, and you've read the terms and pricing.
Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.
