A little price competition is always good for the consumer, but intense competition is even better when it comes to auto insurance. With the many auto insurance companies out there competing for your business, even the big 5 – Allstate, State Farm, Progressive, Farmers, and Geico – feel the squeeze to bring their rates down. And, that is a very good thing.
Knowing that your competition is “eating your lunch”, so to speak, can be a huge motivator if you think they’re taking your existing policyholders away from you or, even worse, keeping potential customers from signing with you. According to a report released by the Insurance Information Institute, the heavily regulated auto insurance industry has reluctantly resigned itself to the fact that, with the high level of competition battling it out on the open marketplace, it has to be assured that coverages are widely available to motorists, while being affordable at the same time.
On the other side of the argument, the Consumer Federation of America (CFA), a non-profit organization that brings together almost 300 other non-profit groups, stated in an analysis conducted in mid-2013, that some of the major auto insurance companies were engaged in charging higher rates to drivers who were considered to have lower job and educational status. In response to the CFA’s claim, the Insurance Information Institute indicated that, although auto insurance rates are on the rise, they aren’t increasing as rapidly or to the extent of medical care. A small consolation to those drivers who may unfairly be paying higher premiums due to what the insurance industry views, by their standards, as a lack of educational status or working at a low to moderate income job, regardless of driving record.
The analysis conducted by the CFA, which involved 10 of the nation’s largest auto insurance companies, had examined the specific factors that insurers relied on when calculating the rate quotes in 10 different major urban areas across the U.S. The profile used for the analysis was that of a fictional 30-year-old single woman who rented a home in a moderate income area of a designated city. The woman drove a 2003 vehicle and her driving record was very good over the previous 10 years with no accidents or moving violations. In addition, for analysis purposes, she reportedly had been without coverage for the 15 days prior to the quote.
The conclusion of the CFA, following the study, was that auto insurers charge higher premiums for minimal coverage to the majority of working people who reside in urban areas, even those drivers with proven, perfect driving records. In spite of this, auto insurance companies are competing aggressively to get the business of every motorist within the marketplace.
As long as insurers are fighting it out among themselves to lure new policyholders or retain the ones they have, U.S. drivers are benefiting from the competition by way of lower rates. With the variety of options available to motorists searching for coverage or a better premium, comparison shopping is the solution to purchasing the policy that fits your budget and one that offers the most discounts.
Have you found the competition between auto insurers beneficial in your search for a better rate? Feel free to share your thoughts in the comments section below.