Two Quick Notes on Car Insurance

I see so many commercials from car insurance companies that say: “People who switched to this insurance saved $x on average.”  That is, for the most part, a pretty worthless statement.  Why would anyone switch to a different car insurance provider if it cost more money?  They all essentially provide the same product.  Thus, the statement that people who switched to this insurance saved $x on average says this: people with particular characteristics switch to insurance companies whose insurance algorithm favors those characteristics.  In other words, car insurance customers act rationally.

Additionally, if you are a good driver, you should be dissuaded by an insurance company who offers “accident forgiveness.”  An insurance company is going to have to cover their costs one way or another.  If they don’t increase premiums for someone’s first accident, that just means they are using everyone else’s premiums as a whole to subsidize that person.  So if you are a good driver who doesn’t get in any accidents, this is not a good thing.  It’s not like a company who offers accident forgiveness is less profit hungry.