Are You a Victim of Price Optimization?
Are you a victim of Price Optimization? If you were, would you even know? So, what is Price Optimization?
Price Optimization is the process of finding that pricing sweet spot or maximizing price against the customer's willingness to pay. Companies up and down the supply chain, rightly dedicate a massive amount of time towards Price Optimization to ensure that their products will sell quickly at the right price while still making a decent profit. Most insurance companies today use Price Optimization.
Do consumers care about this?
The short answer is no. Most consumers are not even aware of what Price Optimization is. A significant portion of the insureds today still believe that by staying with one insurance company for years, they are receiving the best rates and benefits period! Unfortunately, that is further from the truth.
Take two individuals with the same credentials and driving the same cars. Client A shops for insurance every couple of years, while Client B stays with the same insurance company for years. The insurance company knows that Client A keeps shopping for better rates; the insurance company will give them a better price to keep them as a client. While Client B has been with the insurance company for many years, the insurance company will raise their premiums without fear as they know they will stay with them! Client B in their mind still thinks they are receiving the best rates! That, unfortunately, is further from reality. Consumers ultimately care about how much they are paying for insurance and whether they like the product and service.
Auto insurance is a highly competitive, highly regulated business. The vast majority of drivers today have a large number of insurance companies to choose from—and shopping for insurance has never been easier. Auto insurance ads are ubiquitous, appearing with high frequency in every advertising medium. Does the consumer even know if they are paying too much for auto insurance if they have not shopped for insurance in many years?
So I am going to start with the same question I began with and ask you this: Are you a victim of Price Optimization?