Customer Loyalty May be Costing You

For most businesses customer loyalty is rewarded. Grocery stores send special coupons and in-store savings to their loyalty card holders, airlines have mileage points, and auto insurance companies send you rate increases.

The tactic of increasing auto insurance rates to loyal customers is called “price optimization” and it happens to a lot of people. Even if you haven’t had any accidents, made any claims, or changed vehicles, your rates may still see annual increases.

Bob Hunter, with the Consumer Federation of America calls it “profit maximization”. Insurance companies have a lot of data on consumers and using an algorithm that can establish which customer are likely to shop around for the best price and which aren’t.  So consumers that are most loyal and stay with the same insurance year after year, may be paying more and more for their loyalty.

Robert Hartwig, head of the Insurance Information Institute, stated to National Public Radio, that “Price optimization is OK as long as it relates to legitimate financial objectives — like making a profit.”

When it comes to auto insurance, reconsider your loyalty and shop around or ask an independent agent like Diona Irish or David Izquierdo to review your policy to ensure you’re always getting the best possible auto insurance rates and NOT being rewarded for your customer loyalty by an auto insurance firm.