The economics of rewarding you for staying loyal to a company should be simple yet, for reasons unclear, insurance companies take most of their policyholders for granted. Surprisingly, depending on the state, up to 80% of all policyholders renew with the same company year after year. With such information to hand, it’s hardly surprising insurers feel no pressure to offer loyalty bonuses. They just assume you will renew.
Let’s think about this for a moment. You could be with the same company for twenty years, paying your premium installments on time and never making a claim. This should justify some recognition since, if we counted you as the only policyholder, you would have been pure profit. Now spread that out. The majority of policyholders are safe drivers and never make claims. Were it not for the hard core of inexperienced, unlucky and old drivers, insurance companies could run with little effort and vast profit. As it is, there’s more effort required and only by continually increasing the premium rates can the profit margins be maintained high enough to keep the investors happy.
What would it take for every insurer to start offering loyalty bonuses on a routine basis? The answer is simple. Competition. If there was real competition for your business, every company would be chasing you with details of their latest offers. There would be welcome bonuses and guaranteed low rates turning into loyalty discounts as the years go by. As it is, some companies do offer bonus incentives for you to switch but, for the most part, these disappear as soon as spring turns into summer. Once the new insurer has you, the assumption is you will turn into the same loyal policyholder who never needs a reward to stay. What the insurance industry call the churn factor is low, i.e. the percentage of people who regularly move from company to company to take up each new welcome bonus offer. Even when people do make the change, the resistance to further change seems as great as ever.
The moral of all this is that most of us are being played for suckers. Insurers keep the level of competition artificially low. There are incentives to switch but they are half-hearted. The number of insurers is kept small. You might be surprised to learn that even the biggest insurers do not have have branches in every state. They all pick and choose where they will set up. Given this somewhat cynical exploitation, we should all survey every option to change whenever our policies come up for renewal. If we find a better offer, we should move. This is the only way to force the insurers to respect us and offer loyalty bonuses to keep us happy. If we continue to lie passively and allow the insurers to exploit us, there will never be any rescue.
This site offers a free service. Since it does not cost you a cent to find out what the other insurers are offering, you should take the time to look around. The car insurance quotes come in quickly. They are easy to understand. You can quickly see which companies are going to save you money. How much money? It can be hundreds of dollars! Get those car insurance quotes rolling in!