Auto Insurance

Financial instruments like auto insurance are absolutely identical no matter who sells them. Yet companies like Geico saturate the airwaves with competing offers for auto insurance that vary by hundreds of dollars. How is it that Geico can advertise so much more than State Farm and still consistently undercut its rival on price?

Price discrimination is a key component of affordable insurance, yet it simultaneously reduces the rewards for the people most likely to need coverage. This results in enormous headaches for everyone when some people opt to forgo any coverage in spite of laws to the contrary. Your auto insurance rates bounce around so much because different companies look at different aspects of your insurability. Women drivers are better than men, yet age and accident history are bigger determinants of future claims.

Constantly comparing competing premiums may not seem like much of a good time, and that's probably why most people don't do it. Yet if you haven't checked your rates in the last six months, you could probably find a better deal somewhere. Many people feel a great deal of loyalty toward their local agent or a company that treated them well in the past, but the simple truth is that this loyalty may have a direct monetary cost of hundreds of dollars.