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Even When Americans Overpay for Car Insurance, Switching Insurance Providers is Hard

Even as many Americans are overpaying for their car insurance premiums, studies are showing that few of them are doing anything to find a better deal. According to an August 9 USA Today article, a NerdWallet study recently revealed that American drivers overpay by $368 on average for their auto insurance. Comparison shopping for a better deal could save these […]

Even When Americans Overpay for Car Insurance, Switching Insurance Providers is Hard

Even as many Americans are overpaying for their car insurance premiums, studies are showing that few of them are doing anything to find a better deal.

According to an August 9 USA Today article, a NerdWallet study recently revealed that American drivers overpay by $368 on average for their auto insurance. Comparison shopping for a better deal could save these drivers as much as 32% on their premiums, the study also revealed.

Yet despite this, the majority of drivers are choosing to stay loyal to their current insurance providers, even if these providers generally reward them with steadily-rising rates.

One reason many people stick with their providers is their perception of the process of switching to a new one,USA Today reports.

The NerdWallet study showed that a mere 12% of drivers found the process of getting a car insurance quote to be pleasant. The majority of respondents found getting quotes from different providers “time-consuming” and “unpleasant.”

“You get what you pay for for any service, you cant really compare two highly different insurance companies and say that someone has overpaid,” says Doug Johnson, President & CEO of Johnson and Fletcher Insurance. ”When claims are not responded to, or go unfairly that often is not considered during the choice of premium. You’re paying for coverage and customer service combined, as well as claim handling.”

According to USA Today, the reason many insurance providers overcharge their most loyal customers comes down to a method called price optimization.

With price optimization, an insurance provider can use data about a consumer to set their insurance rate high enough that inertia will prevent them from trying to find a better deal, the USA Today article reported.

The practice of price optimization is largely condemned by organizations like the Consumer Federation of America and the Center for Economic Justice — but regardless, 45% of the country’s largest insurance companies and 26% of all insurance companies in the U.S. practice price optimization.

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Written by Daily Inbox

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