How can all insurance companies claim they can save you money?

August 15, 2011

You’ve seen the adverts, they all follow a similar script

Drivers who switch from insurance company x to insurance company y save on average ??? dollars. Then insurance company y also claim that if you switch to them from company x you save about the same so how is this possible?

Here’s an example of how this works
100 customers of company x call company y for an insurance quote, half the quotes are higher and half are lower. The half for whom the quote is higher say no thanks, the half that get a lower quote say yes (possibly…)

Note the advert said that customers who switch to them save on average…, not customers who call them save on average…

The fact is that on average, company x and company y charge around the same though it will vary depending on various attributes. All the advert is telling you is that it’s worthwhile shopping around, they just twist that to make themselves sound cheaper.

Earlier I noted that if the quote is lower the customer will only switch sometimes, the reason for this is that if you are told you will save $5 per year, do you go through the trouble of switching providers? probably not.
So now there is a new variable, how much cheaper does the quote have to be for you to be persuaded to switch? Would you switch from Geico to a lesser known provider for less than $100?

So if the ad says drivers who switch from State Farm save on average $400 and drivers who switch from Geico save $350, does this mean Geico is on average cheaper than State Farm or that Geico customers will switch for less?


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