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BUSINESS Thursday 27 February 2020
A25

How auto insurers use your nondriving habits to raise prices

By KAYDA NORMAN of CEO of Keller-Brown Insur-
NerdWallet ance Services of Shrews-
You expect your car insur- bury, Pennsylvania, notes
ance rates to increase af- it's not necessarily a matter
ter you buy a new vehicle, of time but life events that
cause a crash or add a can cause rate changes.
young driver to your policy. She sees the biggest rate
But some insurers jack up inflation when customers
prices based on seemingly add a young driver to their
unrelated data — like your policies or buy a new ve-
magazine subscriptions or hicle. She says it's best to
what groceries you buy. shop around before you're
Even if you have a clean hit with higher rates.
driving record and have "You may qualify for a pre-
stayed loyal to your insur- ferred pricing tier before
ance company for the the young driver is added,"
past 10 years, you could for example, but you may
be paying higher premiums not qualify after, Brown
than someone with the says. Customers consid-
same driving history, car ered "preferred" by insurers
and background. Why? tend to have clean driving
Price optimization. In this Jan. 22, 2018, file photo a shopper scans an Amazon Go app on a cellphone while entering records and credit histories,
WHAT IS PRICE OPTIMIZA- an Amazon Go store in Seattle. Associated Press and receive the best rates.
TION? Other times you should
Price optimization is the And while it's true insurers of- law the tactic. "Some com- other person $2,000 is be- compare rates include:
practice of charging high- ten have a loyalty discount, panies are still using it, some cause the person paying — After you've had a car
er rates based on the likeli- if you're overcharged by have dropped it complete- $2,000 doesn't know about accident, DUI or traffic tick-
hood that a person will not 30%, a 5% or 10% loyalty dis- ly — we don't know which the $1,000 company out et.
shop around for a lower count isn't worth it, explains are which," Hunter says. there," Hunter says. — Before moving or relo-
price. Insurers create algo- Robert Hunter, director of And while every state re- SHOP AROUND AT LEAST cating.
rithms based on all kinds of insurance at the Consumer quires rates not be exces- ONCE A YEAR — When you want to
personal data, including Federation of America, a sive or unfairly discrimina- Auto insurance shopping change what your policy
loyalty to other service pro- nonprofit group based in tory, he says some state isn't glamorous, but just an covers.
viders and shopping be- Washington, D.C. insurance commissioners hour of your time compar- PRICE ISN'T THE ONLY FAC-
havior, but not your driving For example, Consumer just aren't paying attention ing rates might pay for your TOR
habits. This is a separate for- Watchdog, a nonprofit to price optimization. "It's next vacation. Whether Drivers should consider
mula from other common based in Los Angeles, de- hidden in rates and hard to you shop online, through more than cost when
auto insurance rate factors tailed a recent case in find." an agent or a combina- choosing an insurer, includ-
like age, neighborhood, which Farmers Insurance Because companies use tion, here are some quick ing things like the com-
gender and the type of car overcharged its longtime different algorithms to de- guidelines on how to com- pany's reputation and cus-
you drive. California customers 4%- termine rates, price optimi- pare car insurance quotes. tomer satisfaction scores.
Factors can run the gamut 13% more in premiums zation can affect anyone Auto insurance premi- "It's very easy to be se-
from your magazine sub- each year than it should who doesn't compare in- ums change as often as duced into focusing on the
scriptions, the number of have — $26 million to $29 surance rates often. Even every six months, so you price. But you're buying
phones you buy and your million a year in total. those not affected by price might benefit from doing this insurance to protect
web browsing history. This WHO IS AFFECTED BY PRICE optimization can save hun- a search each time your yourself against that fateful
means a company's most OPTIMIZATION? dreds of dollars a year by policy is up for renewal, but day when something hap-
loyal customers may be Price optimization is illegal comparing rates. if that seems like a hassle, pens," says Harvey Rosen-
most affected by this prac- in 20 states, but the CFA "The reason they can aim for once per year. field, founder of Consumer
tice. asserts all states should out- charge you $1,000 and an- Sarah Brown, president and Watchdog.q