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Have you been PO’d by your Michigan auto insurance company?

December 30, 2014 by Steven M. Gursten

If you haven’t, you might be now! Consumers Federation Of America reveals ‘price optimization’ scheme used by insurers to ensure higher prices to loyal customers

PO'ed at your insurance company

Aren’t businesses like huge, for-profit auto insurance companies supposed to value and reward loyal customers? Or at least, not go out of their way to hurt them?

Nope. Apparently, that type of “take care of those who take care of you” way of thinking is too old fashioned – and not profitable enough – for today’s giant auto insurance companies.

The latest money-making scheme to be deployed by the auto industry is a thing called “price optimization” and, according to the Consumer Federation of America, “about half of the larger [auto insurance companies]” use it to:

“[R]aise a driver’s premium if they conclude that the driver is not likely to leave their company.”

The CFA explains “price optimization” in its press release, “New Auto Insurer Pricing Scheme Makes It Important For All Policyholders to Shop Around,” as follows:

  • “The name insurers use for this dishonest practice is ‘price optimization,’  referred to as ‘PO’ by the insurers. The industry uses personal consumer data and statistical models to measure how likely each customer is to shop around and how much of a price increase he or she will tolerate.”
  • “After determining what economists call the “price elasticity of demand,” insurers push up premiums based on how unlikely it is that a customer will shop around for a better price, even if the driver has never caused an accident or been issued a ticket.”

So what should auto insurance consumers do to protect themselves from getting “PO’d” by their auto insurer – perhaps by the same insurer they’ve entrusted with their business for years and years or, even, decades?

Shop around, says the CFA, because you may be able to use quotes from other insurers to get your rates lowered by your current auto insurer.

However, if “price optimization” has caused you to lose faith in your auto insurer, then shopping around may help in finding a more affordable and trust-worthy company.

To learn more helpful information and tips about Michigan auto insurance companies, take a look at our “Attorneys’ Guide to the Best Auto Insurance Companies.”

Additionally, for a customer who believes she has been the victim of an auto insurance company’s “price optimization” scheme, the CFA recommends that the consumer file a complaint with her state’s Insurance Commissioner.  The Insurance Commissioner in Michigan is the Director of the Michigan Department of Financial and Insurance Services (DIFS). Here’s a link to the “Filing a Complaint” page of the DIFS website.

– Photo courtesy of Creative Commons, by Saoud

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