Auto and Home Insurance: The Need to Price Shop

We now have an “animated conversation” between the Consumer Federation of America (CFA) and an insurance industry group, the Casualty Actuarial Society (CAS).

The issue has to do with the pricing of home and auto insurance. Most of us know that insurers don’t go out of their way to inform current customers about rate reductions. That’s the main reason consumers who switch carriers save so much money doing so. Insurers count on customer inertia — most customers don’t check prices so they don’t know they’re over paying.

However, between 1988 and December 2020, CAS members agreed to a principle that insurance pricing had to bear a relationship to the actual cost of providing the insurance. In December, saying that the principle was redundant and unnecessary, CAS quietly revoked it.

From the CFA point of view, some carriers have been lobbying since 2013 for “price optimization,” basically the ability to raise prices arbitrarily on those who don’t shop. CFA maintains that the CAS move clears to table for insurers to gouge consumers, especially those living in areas with fewer companies offering coverage.

Bottom line: Like companies, families need to review insurance policies once each year to make sure they have what they need and are paying a fair price for what they are getting. You’re going to need an independent broker — someone who doesn’t work for a specific insurer — to help you with that review.



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