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What is Insurance Price Optimization? The Insurance Industry's Dirty Little Secret.

Price Optimization sounds like a nice term doesn't it? It can be but not when it comes to insurance! In fact it is the Insurance Industry's Dirty Little Secret.


Many companies reward their most loyal clients with incentives, freebies and discounts. But in car insurance, the opposite can actually happen. Price optimization is a little known technique that penalizes loyal auto insurance customers by charging them higher rates because their insurer believes they are unlikely to shop around for a better price.

By mining data and testing incremental price increases, some insurers try to predict who is less likely to switch companies, and then charge those customers more in order to squeeze out higher profits. Something I like to call a loyalty tax.

Many Illinois drivers are being punished with higher premiums just for being loyal to their insurance company.

According to this Wall Street journal Article Allstate and other car insurance companies try to identify customers who are unlikely to switch companies or even shop their rates. Which turns out to be about 60% of all policy holders

Allstate initially denied it uses "any form of  price optimization", but in 2011 Allstate filed a report with the SEC saying that it does indeed use price optimization. As an Allstate agent for 12 years I can tell you that Allstate does in fact use price optimization in their rating. The longer you have been insured with them the more likely you are overpaying. 

Nine states so far have banned price optimization (Pennsylvania, California, Florida, Maine, Indiana, Maryland, Vermont, Washington and Ohio),  but it is alive and well in Illinois.

No insurance company will tell you if they are charging you more due to price optimization, the only way you can keep the insurance company honest is by shopping your rate every few years. Complacency can end up costing you big money.

This is why I feel it is best to use an independent insurance agent. They will have access to multiple companies and can shop your rate for you. Once you find an agent that is a good fit for you, you can keep the same relationship with your agent, but switch companies as needed.


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Rueck Insurance is your independent, one-stop insurance center for all your personal and business insurance needs in Illinois. Insurance shopping is easy when the Protection Team provides you with multiple quotes to choose from. You will always know you are getting the best coverage at the lowest possible price.

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Rueck Insurance is your independent, one-stop insurance center for all your personal and business insurance needs in Illinois.

702 Bloomington Rd#205
    Champaign, Illnois
(217) 355-9075

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