Of the half dozen or so auto insurance companies who do TV ads, the majority of them say things like ‘people who switched from plans W, X and Y saved $400 a year when they switched to Z’. But then the next commercial will say ’ people who switched from plans X, Y and Z saved $500 a month when they switched to plan W’.
So how do they all claim to be cheaper than each other?
The people that switched saved money. They’re not claiming that everyone would save money.
because it depends on a bunch of factors including what you drive, where you live, what your record is, and so on. GEICO advertises that people save 15% or more, but the last time I got a quote from them, it was double what I was paying AAA.
Well, as to HOW, they just say it. 
As to how they can do it and not be nailed for false advertising, it’s not that hard:
Cherry pick your examples,
Couch you language; Geico always says you CAN save 15% on your car insurance, they don’t guarantee you will, and
It is generally true for most customers that if they go out of their way to shop for ANY recurring service, they will get a lower rate. Once you’re in with an auto insurance company - or your cell phone company, or cable provider, whatever - they’ll jack your rates and carefully crank up what you’re paying. When you express an interest in price, like with being a new customer, price discrimination kicks in and your prospective new provider will offer you a sweet rate to get you. Ten years from now they’ll be screwing you.
The secret for the price-conscious consumer is to call your existing service providers, out of the blue, when your account’s in good standing, and say you want lower rates or sayonara. Sometimes it doesn’t work but you’d be surprised how often it does. After I had my cable TV/internet bill slashed by 35% just by calling and demanding I pay less, I starting getting friends and relatives to do it and it worked every time. I called by cell phone provider and saved money there. Switched car insurance, saved money, and then when I got a new car and was quoted a new rate said it was too high and got more savings.
Suppliers take you for granted and will offer better prices to customers who make a stink. A person who is shopping around for a new supplier is, by definition, making a stink, so will get a better price and then pay down the road if they let themselves be taken for granted.
Also, you’ll notice that they say, "People who switched from [Company A] to [Company B] saved $XXX. They don’t include people that decided not to switch from [Company A] because their rates were lower.
Altho in general I agree with you, and shopping around is a Good Idea, my insurance company has not done this. I have a great agent. Every year or so i get a couple of quotes from other companies, and they are almost always higher. Once they could beat my rates by $10 the second year, which wasn’t enough to switch.
But yes- if one has auto insurance, it’s a good idea to get a couple rate quotes a year.
The other factor is the type of coverage changes - changes in deductibles, underinsured/uninsured coverages, liability maxes, etc all change the pricing.
Which is why I deplore the “name your own price” scam with Progressive - sure - you can “name your own price” and likely get close (or save some money) - but if you’re not careful, can end up woefully uninsured with a high deductable to the point that you’re not getting anything for your payments.
Also, the really big, full-line insurance companies make their money by insuring everything about you. They may not be particularly competitive if you just ask them for a car insurance quote, but they’ll try to give you a quote on a car/home/life/libility package that makes the car part look great.
Yeah, different companies will have different methods of calculating your insurance risk based on all sorts of factors, some of which aren’t obviously relevant. And while there is lots of data behind the risk models, ultimately there’s still a lot of arbitrary judgements in deciding which factors are most important. So in some cases one company can take the same information about you and decide that you are a lower risk, and thus charge you less than your current insurer.
Here’s another related question: why don’t companies lambast each other over claim percentages? If it can be shown (maybe it can’t) that Geico doesn’t pay out on 15% of their claims, why don’t the other companies point this out? Maybe this is a precedent that nobody wants to set (Pandora’s Box) for fear of counter-ads from their targeted competitor?
I have Allstate, and the main reason is that their ads aren’t solely focused on premium costs in EVERY. SINGLE. AD. I.e. That Guy Who Was The President on 24 will often talk about other benefits and programs that Allstate offers, while I don’t think I’ve ever seen Geico promote themselves in any way other than using that “you could save 15% or more” jingle.
Yes, but that works both ways. By having my car insurance with the same co that give my home insurance, I save 10% on each.
Generally, all big companies pay out. It how difficult they make the claim process, how niggling they get and whether or not they want to cancel you after a single claim that makes a difference.
Also note that the ads actually say “switching could save you up to 15% or more.” They’re not promising anything!
“Calling us could result in a hot date with our telephone agent, or not.”
A lot of them say ‘saved an average of’ xyz. Of course if you are on insurance Y and switch to insurance Z but pick a far skimpier plan on Z then yeah you will save money. Maybe that is how they do it.
Another thing they don’t mention is that the coverage after switching may not be the same. After they get your particulars, if the price that their actuary tables isn’t less that what you’re currently paying, they’ll state it as just a trivial variation, and suggest changing a parameter (such as your deductible) that will lower the premium. They might also ask for a little more of a down payment that will reduce the monthly premium, which is all that some people worry about.
Other sneakiness is rampant; e.g., the vanishing deductible that Nationwide touts. If you request it, they’ll just up your monthly premium so that the excess you end up paying will eventually cover the cost of a deductible that you may or may not ever need. And they keep on charging that, even after you’ve overpaid enough to cover a deductible.
I used to have one of the big insurance companies as a client.
90% of the magic in the claim is in the “people who switched saved $XXX”. As every insurance company has different actuarial models, there will always be some people who will save money by switching from Insurer X to Insurer Y (and, as FatBaldGuy notes, the claim doesn’t include all the people who got quotes, found that Insurer X was more expensive, and didn’t switch). There is actually an independent agency out there which does an annual study of auto insurance policies, and does the calculation of how much people who switch to different brands save – that agency’s study is the source for the claims which the various insurance companies use in their ads.
Some of the people who switch do, also, switch to non-identical policies (e.g., higher deductible), as Wesley Clark notes. Geico, in particular, seems to do this a lot – when you get a quote online, they have you enter information on your current policy, but when you get a quote, they will often push a lowball quote, which doesn’t provide the same coverage as you currently have. And, they don’t exactly call out the fact that you’ll be getting less coverage by going to that much lower price.
Car insurance adverts use an entirely new form of mathematics in which phrases like “55% of customers could save up to £200” actually make sense.
Just think about that for a moment.
There’s a phenomenon in the insurance industry known as “adverse selection.” Basically it means that the customers you least want to insure are the ones who most want insurance. If Company A advertises that 98% of claims are paid in full, they’ll get a lot of applicants who were canceled by Company B for making too many claims.
If you’re calling another insurance company, it’s to pay less money.
I am a person who switched and saved.
I bought a new car, and had all the insurance coverage on it cuz it’s worth a lot.
After 3 years, car starts getting old, it depreciates, I am low on funds for a few months, I figure I should have less insurance on it.
I called Geico instead of my prior company, and dropped all the extra coverage I didn’t want anymore and never used anyway.
So when I switched to Geico, I saved hundreds of dollars on car insurance. It’s because I requested a cheaper policy and deleted collision, theft, and glass coverage.
They are not talking about adding a new policy with them, just switching over a policy on a used vehicle. People who switch, by definition have used vehicles, and are interested in less coverage. All truth, but sneaky advertising.
I was a Geico customer for years and they kept raising my rates for pretty crappy coverage (barely above state minimums). Eventually I decided to shop around, and got a Progressive policy with much higher coverage/lower deductibles, for a *much *lower rate. Now my Progressive rate is starting to creep upward again, so I got a Geico quote. And, surprise! Lower cost for higher coverage with lower deductibles. So I’m switching again. Even though I’ve been a Geico customer in the past, I’m still getting a great rate to switch back.
The key here is, for prospective customers without accidents/violations in the last 3 years (like me), Geico doesn’t rate them like they rate existing customers. I don’t know if every insurance company does this, but I know this is why Geico frequently appears to be the cheapest. A policy for a driver with a clean history is automatically put into the lowest-possible risk category, because they can attract new customers more easily. After the first 6-month term, *then *they will rate you based on every nitpicking criterion your state will allow them to use (including credit history). And your rates will almost invariably shoot up.
The reason Progressive is trying to charge me more for insurance now is because they *just *pulled my credit history, after being with them for a year (two 6-month policy terms). If I have to, I’ll keep switching between Geico and Progressive for lower rates every 6 months for the rest of my life.
**Rachell **GOOD for you!