Are You Paying the Schmo Tax on Your Car Insurance?

 

0511-1002-2501-1027_car_keys_and_insurance_paper_clipart_imageHave you seen an increase in your car insurance lately? My family saw an increase in cost with the new car; but we saw another significant increase nine months later. How come? We did not have any claims or tickets.

Car insurance premiums are up across the nation. The lower gas prices have people driving more, resulting in more accidents. Geico, the second largest auto insurer, stated in their annual report that “we continue to implement rate increases where necessary” to combat recent cost headwinds.

The September 2015 issue of Consumer Reports commented on the rising costs of insurance and called it the “Schmo Tax”. The industry calls it price optimization.

Car insurance companies mine data about your shopping behavior. They look at how many cell phones you have; how long you have been with your telephone company; how large of a premium increase you swallowed with the last policy renewal. They use these factors to calculate how much rate increase you will take before moving to another company.

This practice is starting to be banned by state insurance departments. Nine states and the District of Columbia have nixed this practice. Idaho has not done so at this time.

I am sorry to report we were Schmos. Long term company loyalty will not always be given enough of a premium discount to remain faithful. We are probably not the only Schmos. A Consumer Report Survey shows 53% have been with the same insurer for at least 15 years.

We shopped our insurance policies and were able to save over $600 per year. We got rid of the “Schmo Tax”! You can try out www.Zebra.com to get premium quotes from 18 to 35 companies in your state. We used Consumer Reports to focus our attention on the top three rated insurance companies.

The next posting will give you tips on reducing your car insurance premium.

 

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