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Auto Insurers May Use Personal Data to Determine Policy Price

March 10th, 2020

Have you ever considered the fact that your magazine subscriptions could factor into the price of your auto insurance policy? If you’re scratching your head right now, you’re likely not the only one.

While we expect that our car insurance rates will go up after certain events (involvement in a crash, addition of a young driver to a policy, etc.), what many don’t know is that some insurance companies actually look to some of your personal information to increase your rates.

While insurance companies charge one customer one premium, they may be charging another twice the amount for the exact same coverage. But why is that? Two words: price optimization.

Price Optimization Practices

Price optimization is a practice in which companies will charge their customers a rate based upon how likely they are to shop around with other companies. You can think of it as a sort of price matching game.

If someone is only working with one store and is willing to pay $100 for a product, the store will gladly sell the product to them for that amount. But if another customer comes along and points out that one of the store’s competitors is charging only $80 for the same product, many stores will match that price. The price optimization of insurance policies is quite similar.

The Negative Impact of Customer Loyalty

In addition to basic factors such as age, gender, car make & model, and neighborhood, many insurance companies will utilize their own set of algorithms based on personal information, such as how loyal a potential customer is to other service providers. This could include taking a look at your web browsing history or even your magazine subscriptions. Unfortunately, this usually means that those individuals who are most loyal to companies will also pay more for car insurance.

Even customers who receive loyalty discounts are often overcharged – even after the discount is factored in. In fact, according to the Los-Angeles based non-profit, Consumer Watchdog, Farmers Insurance was recently discovered to be overcharging some of its longtime customers by 4-13 percent annually, amounting to $26-29 million total per year.

Despite the illegality of price optimization practices in 20 states, many companies still employ them. Although each state requires that insurance rates not be unfairly discriminatory or excessive, it can be difficult for commissioners to discover when companies are utilizing such practices.

So What Can You Do?

This is not to say that you need to change insurance carriers all the time, but it’s helpful to understand that taking even just a little bit of time to compare rates can help to bring down the cost of a policy. Since auto insurance premiums tend to change bi-annually, it may be best to research policies each time yours is up for renewal. Additionally, it’s smart to shop around for different policies prior to adding a younger driver to your plan. You may qualify for a rate that you wouldn’t typically qualify for once the new driver is added. Also, be sure to compare auto insurance rates:

  • When you want to change the coverage of your policy
  • Before you move
  • After you have received a traffic ticket or DUI
  • After you have been involved in a car accident

No matter what, while price is always important, it is also best practice to look into the reputation of the company upon which you decide. One company could be less expensive than another, but if they aren’t helpful when you need them those most, what are you really paying for?

Henson Fuerst Can Help

If you or a loved one has been injured in a motor vehicle accident due to the negligence or recklessness of another, it can have a profound impact on many aspects of your life. No one should have to pay for the careless mistakes of someone else.

The experienced North Carolina personal injury lawyers can help you to navigate the legal system and get what it is that you deserve. At Henson Fuerst we fight for what serves you best. To learn more or to schedule a free consultation, call us at 919-781-1107 today!