Your Customer Loyalty is Costing you Money

Being a good, loyal customer should always pay off in long-term rewards and savings. But for car insurance, that's not the case. A new study offers an argument for shopping around.

dollar bill close up

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Customer loyalty incentives are widespread and often lucrative: heck, my sister gets enough reward dollars from her Banana Republic Visa to shop her way to a new wardrobe every few months, free of charge. But customer loyalty doesn’t always pay: Specifically, keeping your dollars with the same car insurance company for years can cost a lot more—hundreds per year.

Think about it. You’re already suspicious about staying too long with…

  • Cable companies. Though this is changing even as I type, cable companies are one of the last remaining monopoly-friendly businesses in this country (only a few competitors can exist in each cable market). And that’s why they’re so evil to their loyal customers. (P.S.: Fight back. Or find alternatives.)
  • The bank in charge of your mortgage. Whether the market has changed or your credit score has improved since you bought your home, chances are, refinancing can score you some serious savings on what just might be your most valuable possession.
  • Magazine subscriptions. Put yourself on auto-renew? Please, son. You learned long ago to send in a check and never fork over your credit card numbers, for fear of that yearly subscription you got such a great deal on suddenly costing you twice or even three times as much.

And it turns out…the same is true of car insurance. Which is why it pays—and we mean that literally—to compare car insurance rates.

J.D. Power and Associates recently released its annual Insurance Shopping Study, and the findings inside it aren’t surprising—at least not to us here at The Zebra. The study discusses both reasons for and consequences of switching insurance companies. As it turns out, according to the study, folks are likely switch car insurance most often as a result of sub-par customer service, which we can totally understand: Who wants to get chewed out or have their claim ignored?

In 2013, @JDPowerCars found customers save around $300 when switching car insurance companies.

For those customers who switch companies, J.D. Power found that they save on average around $300 when jumping carriers. But perhaps the most surprising stat is the one we’ve already mentioned: Loyalty doesn’t necessarily pay, especially in the car insurance world. J.D. Power found that, “The longer customers had been with their previous insurer, the greater the savings when they switched carriers, probably because the old policy came with annual premium increases.” Taking just 60 seconds to check or otherwise shop around really could save you hundreds of bucks each year.

Savings by the Numbers

What would you do with $300? What about $426? For those uber-loyal customers surveyed in the study, who had been with their prior insurer for more than 11 years before switching, their savings were on average $426. That’s a lot of money!

$426 in car insurance savings equals*:

  • 121 free gallons of milk
  • 35 free movie tickets (for you and a pal/significant other/furry friend, that’s nearly 18 date nights)
  • 85 free impulse-magazine purchases at the checkout aisle
  • 130 free Starbucks grande lattes
  • 35 free yoga classes

*prices not exact. That milk price can get jumpy.

The bottom line is, there’s an upside to the countless car insurance commercials you’re bombarded with: They mean companies are clamoring for your business, and you can find a more competitive rate—you just have to look for it.

Check out the full study. It’s also interesting to note that the study found customer satisfaction didn’t always increase as rates decreased. Though insurance commercials might make you feel otherwise, the insurance business is about more than just a dollar amount, of course. You have to trust your company, and the service should be exemplary, too. If you found out you could pay $300 less for insurance each year, would you switch? What about $426? Let us know!