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Posted: 1:45 p.m. Wednesday, Aug. 13, 2014

When Should You Switch Insurers?



By Clark Howard

ClarkHoward.com


A huge percent of people never shop their insurance needs. That's not necessarily a good idea considering that modern American business punishes loyalty, rather than rewarding it.

The Wall Street Journal reports that roughly 1 in 3 people never shop their auto insurance. Almost half never their shop home insurance. Yet if you do shop around, particularly for auto insurance, a new report from NerdWallet.com says you'll likely save a third on your premiums.

Don't be a data mining statistic

Nearly half of all big auto insurers use a data mining technique called price optimization where they develop a customer loyal index number on you. That number tells them whether or not you shop around or if you're the kind of person to stay with the same company year after year.

If they determine you're loyal, they will keep raising your rates year by year to make you more profitable for them. The increases will be incremental, but not enough to drive you away as a customer.

My recommendation is even if you are a loyal person, you should shop your insurance every third year.

If you find a better deal, call your current insurer and tell them. They may lower your rates.

The thing is, insurers steadily beef up profits the longer you stay with them. They exploit creatures of habit. That's one of the ironies of modern capitalism, as I mentioned. The deals you see, particularly in the technology arena, are typically for new subscribers only! I've never understood that.

If you just shop your auto and home insurance, you may save hundreds each year, maybe more than $1,000. You can shop on the web, by phone, or with an independent agent.

It's your money!

Should you switch even if it's cheaper?

If you're with a poorly ranked insurer, there's no question: Shop the market to find a lower price and fire them! That's a win-win. You can get higher quality at a lower price.

On the other hand, if you're with the two elites of the insurance industry -- Amica and USAA -- I say you should stay even if it's more costly.

One other thing, even if you decide not to shop the market, call your current insurer and see if there are any longevity discounts or other special discounts. You don't ask, you don't get.

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