When it comes to auto insurance, can loyalty cost you? The answer might surprise you.
A loyalty discount is exactly what it sounds like. If you’ve been with your insurance company for a pre-determined period of time, you can receive a discount for your loyalty. Depending on your specific insurer, the discount can grow the longer you’ve been a customer. While this idea makes sense for insurers, this might not be a good idea for an insurance consumer, i.e., you. Let’s explore the pros and cons of customer behavior and loyalty in car insurance.
Discount availability depends on state- and insurer-specific guidelines. For example, the “homeowners insurance discount” does not exist in California because the state does not allow homeowner status to be used as a rating factor. Ohio and Maryland do not allow insurance companies to use customer loyalty as a rating factor. Some insurance companies simply don’t offer loyalty discounts if they don’t see the merit in them.
You shouldn’t look for or stay with an insurer simply because they offer a loyalty discount — or any discount, for that matter. Below is a list of auto insurance companies with loyalty discounts. The amount may vary based on insurer-specific rules and state regulations.
Many see loyalty discounts as a price optimization practice. For example, price optimization entails an insurer offering a longtime customer a 10% discount for their loyalty while raising their rates by 30%. In this case, the discount from the loyalty program hides a net rate increase.
This methodology stems from an algorithm used to measure customers' sensitivity to price changes. Companies believe the longer you’ve been with an insurer, the less likely you are to shop around. Even if you haven’t had any at-fault accidents, filed any claims, and have a good driving record, your rates could increase.
While the tricks to save on car insurance premiums are beyond the scope of this article, the rule of thumb is to shop around every six months for car insurance. Price optimization aside, it’s important to shop around for car insurance because every company has its own individual pricing approach, and your rate will vary company to company.
If you feel your current insurer is charging you more because you’ve been a loyal customer, enter your zip code below to see car insurance rates from other carriers.
If you’re looking for more ways to save on your car insurance or information on other discounts, see our related topics below.