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Lower Insurance Premiums By Threatening To Leave?

A classic tip for those looking to lower their cable television bills or their credit card interest rates may work in the world of auto insurance. I was reading a Consumerist post about USAA’s website technical issues and their response to, for a few hours, “losing” a woman’s IRA when I saw this little gem in the comments [3]:

xspook: I had their auto insurance for many years. I decided to shop around and found a much cheaper (over $600 a year savings) policy elsewhere. When I called to cancel, they offered to lower my policy, but couldn’t match the price I got elsewhere. That actually pissed me off, because, as a 10 year loyal customer I should’ve been getting the best price. Now that I tell them I’m leaving, they reward my loyalty with a lower price. Adios USAA. (emphasis mine)

Insurance is a tricky business that I know only a little about. In reading the Berkshire Hathaway Letters to Shareholders [4], the traditional payout on insurance premiums always seems to be in the 90’s (they make money by investing the float between when premiums are collected and claims are paid). That confirmed something I’ve always believed, that a large component of my car insurance premiums were dictated by risk. Riskier car? Higher premiums. Some accidents or speeding tickets? Higher premiums. Fair enough, that’s why I get insurance, to protect me.

But this little anecdote showed that threatening to leave your car insurance (or any insurance provider) can lower your premiums. I imagine the game that gets played is that all the organizational discounts, good driver discounts and such are up for grabs if a CSR can get you to stay. Who knows?

Either way, shop around for insurance and try twisting some arms to see if you can get a better rate.