Where's my car insurance discount?
Auto insurers tout low rates -- even as their rates rise. How to get the real deal.
This post comes from Anna Prior at partner site SmartMoney.
You can't escape them. From cavemen to mayhem to an ever-perky saleswoman named Flo, commercials for auto insurers proclaiming low rates are on nearly every channel, nearly all the time. Geico's ads alone have become such a part of the prime-time shillfest, there's even a Wikipedia page devoted to the firm's campaigns.
Given all that frenzied competition, one can't help but ask a simple question: Why aren't insurance rates getting any cheaper?
In fact, just the opposite is happening. According to the Insurance Information Institute, the industry raised rates an estimated 10% from 2008 to 2010, and it's expected to bump them up an additional 4% this year. That would amount to a roughly 31% hike since 2000 -- increasing the average annual expenditure from $690 to $900.
"There is a total disconnect between what we see on TV and what the insurance companies are taking out of our pockets," says Douglas Heller, executive director of advocacy group Consumer Watchdog.
For their part, insurers say they simply can't keep up with soaring medical bills for accident-related injuries, as well as pricier car parts and repairs (though the total cost of a new car has remained relatively stable in recent years).
"It's cost-based pricing," says Larry Thursby, vice president of personal auto insurance for Nationwide Mutual Insurance, which has increased rates just under 5.5% since 2007. "As our costs increase and decrease, so goes our costs to customers," he says.
Representatives for Progressive Insurance and State Farm Mutual Automobile Insurance offered similar explanations (Geico and Allstate declined to comment). Post continues below.
Analysts also point to a large number of uninsured drivers -- which now account for roughly 16% of those on the road, says Greg Horn of Mitchell International, which provides technology services for insurance and repair firms. Still, say analysts, while industry profits have indeed been flattening in the past few years, auto insurance is generally a lucrative business -- one that provides a steady source of income as the population grows.
So, if good old-fashioned competition isn't doing the job, is there anything consumers can do to lower their bills? Yes, if they're willing to give up a little privacy. In what appears to be the wave of the future, car insurers are beginning to offer discounts to drivers who let the companies in their car -- literally.
Last year, for example, Progressive launched a program that lets customers place a device that measures driving activity in their car for six months. The sensor program, called Snapshot, records data on rapid starts, hard braking, miles driven and more, to develop a portrait of a driver's behavior. Drivers deemed safe can receive up to a 30% discount after the initial month. Progressive isn't alone: Allstate's Drive Wise program incorporates similar devices and discounts, while Nationwide and State Farm say they're testing such technology too.
Don't like the Big Brother approach? Steve Weisbart, chief economist at the Insurance Information Institute, says there are less high-tech ways to save: If you're driving less these days because of, say, a job switch or loss, tell your insurer. Says Weisbart, "It can be as simple as asking, how can I lower my premiums?"
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