Why Saving Money on Car Insurance is Harder Than It Looks

August 14, 2014

Ever get the feeling that you’re paying too much for your car insurance? You most likely are. USA Today reports that the average American auto insurance customer overpays by $368 each year, according to research by Nerdwallet.

Auto insurance companies know this. That’s why they work hard to keep their existing customers — and to discourage them from shopping around. Here’s what you can do about it.

Comparison shopping is a challenge

Lawyer Type Professional Man Researching BooksIf you listen to the commercials, saving money on car insurance sounds as easy as using a coupon at the grocery store. That’s what insurance companies want you to think. The truth is more complicated: It’s really hard to find the best deal on auto insurance.

We ran the numbers. It takes 7 minutes and 47 seconds on average to get an auto insurance quote — and if you get quotes by visiting all the major insurers’ sites, you’re looking at hours of work. Not only that, but you’ll find yourself revealing your personal information over and over again, such as your age, address and social security number.

Be wary of insurers and other sites that offer to help you compare multiple quotes. Most of them will give you estimates that aren’t entirely accurate, or they’ll collect your personal information to sell to someone else as a lead.

Why your car insurance company wants to keep you

It’s true in most businesses that retaining existing customers is cheaper than recruiting new ones, and car insurance is no exception. Your auto insurance company is working hard to keep you. One way they do this is with loyalty rewards. Progressive, for instance, rewards its customers with certain perks such as large accident forgiveness after five years; after 20, customers get a lifetime renewal guarantee.

But often, the real reward for your loyalty is higher premiums. To keep their long-time customers, auto insurers use price optimization, the practice of using personal customer data to raise rates just enough that you won’t feel the urge to switch. Over the years, your rates creep up and up until you’re paying far more than you should. According to Earnix, 45 percent of large insurance companies use price optimization. Consumer groups maintain that this practice amounts to unfair discrimination against customers and that insurance rates should be based on risk.

Loyal customer? Time to shop around.

Here’s the good news: If you’ve been with your current insurer for a long time, you’ll probably be able to save big by switching — an average of 32 percent, according to USA Today. Have you gotten married, changed professions or simply maintained a  safe driving record? You may be eligible for car insurance savings you’re not seeing. Even celebrating a birthday can save you money. Typically auto insurance rates fall after you turn 25 and don’t start going back up until you near 70.

Even if you think you’re getting a good rate now, it doesn’t hurt to compare. You may find that switching insurers is an easy way to save a few hundred dollars per year — and we’re pretty sure you can think of some better ways to spend your hard-earned money. Luckily there’s an easy, free, no-commitment way to compare. We work with auto insurers to let consumers compare multiple insurers at once, with real, accurate rates. More, your personal information is safe us – we only pass along your information to the auto insurer you want to buy from.  Try compare.com today and see how much you could be saving.


Auto Insurance Buying Guide

Buying auto insurance can be a confusing and disoriented process. We want to make sure that our users can make informed choices about their car insurance, selecting from as many options as possible. Read our Auto Insurance Buying Guide to educate yourself before you start a quote.

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