How Insurers Secretly Target Lazy Shoppers for Higher Prices

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By Gerri Detweiler

Have your auto or homeowner insurance rates been creeping up? If so, you may have been "POed."

According to the Consumer Federation of America, some insurance companies are secretly "price optimizing" customers -- charging them a higher rate for no other reason than they think the customer won't shop around for a better deal. "Price optimization is a data mining tool used by insurers to charge higher premiums to those consumers least likely to shop for a new policy in the face of a rate increase," says the federation.

How do they know whether you are likely to shop around? For now at least, that information isn't public. "I don't know what's in the black box," says Bob Hunter, director of insurance for the federation, which unites nearly 300 nonprofit consumer organizations. But he notes that insurance companies typically can review credit report data, information provided on applications and a host of other data available from third-party sources about current and prospective customers.

As an actuary, Hunter says he first heard of this practice when he participated in an industry webinar touting the benefits to insurers of pricing policies this way. He subsequently reviewed industry information that indicated this is not an isolated practice. When insurers use a price optimization tool, "if you are in a group that shops less, you are going to pay more," he says.

The federation and other consumer groups are asking regulators to stop insurance companies from using price optimization techniques when setting rates and premiums.

Julia Angwin, whose book "Dragnet Nation: A Quest for Privacy, Security, and Freedom in a World of Relentless Surveillance" revealed many ways companies track consumer information and use it to increase profits, sees this as one example of the way our own information can be used to get us to pay more. "All the ingredients are there for ... charging the prices consumers can bear," she says.

What Does This Mean for You?

If you've been POed, how do you fight back? One way is to call the bluff. If your rate goes up, shop around. Better yet, shop every time your policy comes up for renewal, even if you think you have a good rate.

The federation recommends that consumers start by using the rate comparison tool available from their state insurance commissioner to identify the six insurance companies with the lowest rates for the sample profile closest to yours. Then use the NAIC complaint database to narrow down your choices to the four companies with the lowest level of complaints. Once you have your list of four, contact each one for a quote.

That's what I had to do when my auto insurance rates started to climb, even though I had been with the same insurance company for more than two decades, and my husband and I had good driving records. We switched. A year later, the new insurer raised our rate substantially for no apparent reason. My old insurance company kept sending me letters asking me to come back, and when I responded, they offered me a rate well below the one I was paying before I left.

Was I POed by either company? I'll never know, but if I hadn't taken the time to shop I would have paid hundreds of dollars more than I needed to.


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49 Comments

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michael.robinson51

It really is true. I bought a life insurance policy from someone who was supposed to be my financial "advisor" about 4 years back. I was paying about $300 a month for it but he told me it was worth it in the long run, and I do have 2 daughters so I know I needed something to protect my family. Well after doing some research I realized that I can just go to Life Ant or gnworth and get a policy for myself for about $25 a month for the same coverage. Its amazing what happens when you do your own shopping instead of trusting someone whose pay depends upon how much they can get you to pony up.

April 16 2014 at 9:35 PM Report abuse rate up rate down Reply
juststeve35

I love when the commenter below says that Insurance Company X gave 44% of their political donations to the DNC, yet it's all the GOPs fault?

smh

I cannot even conceive the level of self-delusion, dishonesty and utter lack of integrity required (not too mention the 3rd grade mentality/maturity level required) to play this Your Daddy is Worse Than My Daddy game....

April 14 2014 at 8:09 PM Report abuse rate up rate down Reply
juststeve35

Those who politicize this are simply arrogant ignorants determined to remain Part of The Problem.

April 14 2014 at 7:59 PM Report abuse rate up rate down Reply
juststeve35

State Farm has brought this practice to an art form....

April 14 2014 at 7:58 PM Report abuse rate up rate down Reply
gmsexton

one more weasel dick corporate strategy... people wonder why most americans think corporate america is run by a bunch of *********... here you go...

April 14 2014 at 4:10 PM Report abuse +2 rate up rate down Reply
rb

I've had no moving violations or accidents since 1975, yet my auto insurer kept raising my rates. I went with another company and saved over $400.00 per year. When I got the new insurance and called to cancel the old insurance, the person I spoke with said, well you've been a good customer for all of these years, we can lower your rates and meet the rates of the new company. I said, if you can do that now, why wouldn't you have done it before? I told them no thanks, and cancelled. I see now what they were doing. The dirty sob's.

April 14 2014 at 2:47 PM Report abuse +3 rate up rate down Reply
tstories

This is hardly news! They might be calling it PO'd now but it was always "you snooze, you lose." And this is in EVERY industry!

Like banks and CD rates. "New" money gets a higher rate at first. Then they assume you'll be lazy and not shop around and they'll screw you for years to come. One time I went to my back and they were advertising a nice rate. I asked for it when my CD renewed, they said, "Oh, sorry, that's just for "new" money.

So I withdrew all my money, walked around shopping (bank was in a grocery store), then came back with the check and asked if my money was "new" yet. The manager laughed and said, "Sure."

April 14 2014 at 1:36 PM Report abuse +1 rate up rate down Reply
teapartyisdying.uall

Humana

Humana and its subsidiaries, "one of the nation’s largest publicly traded health-benefits companies,"8 gave $1.2 million in the study period. Recipients in Florida got 44 percent of that ($508,300). The largest single recipient of Humana's largesse was the Florida Republican Party, at $206,300. Overall, Humana gave $681,554 to Republican candidates and committees, which is 58 percent of the money Humana gave. Humana did not give to nonpartisan candidates or to ballot measure committees.

Aetna

Aetna and its subsidiaries gave $950,717 to state campaigns. Aetna bills itself as "one of the nation's leaders in health care, dental, pharmacy, group life, and disability insurance, and employee benefits."9 Californians reaped more from Aetna than any other state, at $229,150, or 24 percent. As with Humana, the Florida Republican Party emerged as the top recipient of Aetna's contributions with $91,500. Aetna strongly favored Republicans overall, giving them $641,442, which is 72 percent of the total given by Aetna to partisan candidates and committees.

Now you know why the TPGOP are so against the ACA. They are owned by the health insurance industry.

April 14 2014 at 1:09 PM Report abuse -1 rate up rate down Reply
teapartyisdying.uall

UnitedHealth Group

UnitedHealth Group and its subsidiaries gave $2.3 million. UnitedHealth Group "serves more than 70 million Americans each year."7 UnitedHealth gave California recipients the most money, $522,800, which is 23 percent of the total they gave. Next in line were Florida recipients, at $419,000, or 19 percent. The largest single recipient, Florida Republican Party, gained $282,500. UnitedHealth gave $2 million to partisan candidates and committees. UnitedHealth favored Republicans 68 percent of time, giving them $1.4 million.

April 14 2014 at 1:05 PM Report abuse -2 rate up rate down Reply
1 reply to teapartyisdying.uall's comment
gop_goofyoddpeople

GOP not only are GOOFY ODD PEOPLE but GREEDY OBSTRUCTIONIST PIGS.

April 14 2014 at 1:56 PM Report abuse -1 rate up rate down Reply
newsmyrnasuite

Let me get this straight? Wasn't it the Republican House that has fought to repeal ACA and backed letting health insurance companies do business as usual with cancellations, high rate hikes, gouge customers with lousey coverage??

April 14 2014 at 12:52 PM Report abuse +1 rate up rate down Reply
2 replies to newsmyrnasuite's comment
amazin9999

And wasn't it the dems that prohibited insurance companies from competing across state lines and prevented tort reform so that lawyers coudn't file flimsy lawsuits at the drop of a hat without any recourse ? Wasn't it the Dems who gave us ACA with increased prices and deductible, lower choice between doctor and hospital and more fees to pay for it ?

April 14 2014 at 1:56 PM Report abuse +1 rate up rate down Reply
1 reply to amazin9999's comment
RANDYTHOMAS711

yep

April 14 2014 at 5:47 PM Report abuse +1 rate up rate down
juststeve35

No, actually it wasn't...

Get yourself straight and arm yourself with facts, eh???

smh

Just another toady who is proudly proving that the entire extent of their intellectual repertoire is composed entirely of rhetoric, hyperbole and kool aid fueled talking points!

April 14 2014 at 8:13 PM Report abuse +1 rate up rate down Reply
2 replies to juststeve35's comment
jrexmarda

Anyone who refers to drinking KoolAid® in some negative, politically fueled talking point should be sued by the company that makes the stuff.

April 14 2014 at 9:50 PM Report abuse rate up rate down
teapartyisdying.uall

Yeah, and the Tea Party drinks tea that is spiked with nuts.

April 14 2014 at 11:05 PM Report abuse rate up rate down