Why Are Some Car Insurance Companies Cheaper Then Others?

The car insurance industry is packed with competitive rates, TV commercial, billboards and out bound call marketing efforts. Each company is trying to get you to use their insurance over another, when in actually, their services and coverage are actually very similar. So why are some companies so much cheaper then others?

Sub-Standard Insurance:

Companies that fall into this level of auto insurance are the likes of SafeAuto, The General and Good2Go auto insurance. They offer very low monthly payments and are often way cheaper then the bigger companies.

So how can they afford to charge you less? In the case of sub-standard insurance, these companies only offer you enough coverage so you stay legal. They offer the bare minimum coverage you need to be able to legally drive. If you happen to use on of these companies and are in a big accident, you may be wishing you had used one of the bigger companies and paid a little more each month.

Standard Insurance:

In this set of insurance companies, you’ll find Geico, Progressive and 21st Century Insurance. The coverage available here is what you need to cover yourself if you happen to get in an accident. You’ll find many companies competing for you in this market, all offering savings.

Within this aggressive market you’ll see quite a bit of advertising, specifically on TV and digital channels. What you will also see is companies are very competitive in acquiring new customers. Many different deals are presented to potential customers to get them to switch insurance, so you truly do have a good chance of saving if you switch.

Each company does quite a bit of modeling to better understand the lifetime value of each customer. A customer who pays $100 and stays with an insurer for 5 years is worth more then a customer who pays $125 a month but only sticks around for 1 year.

So why exactly are some insurance providers cheaper then others? A lot goes into that. Some are willing to take a smaller margin on each sale while others have better customer retention rates and less people filing claims. To truly get the best deal you’ll most likely need to shop around and find an insurance provider that quotes very well for your specific demographic and driving record.