HOW AUTO INSURERS USE YOUR NONDRIVING HABITS TO RAISE PRICES

You expect your car insurance rates to increase after you buy a new vehicle, cause a crash or add a young driver to your policy. But some insurers jack up prices based on seemingly unrelated data — like your magazine subscriptions or what groceries you buy.

Even if you have a clean driving record and have stayed loyal to your insurance company for the past 10 years, you could be paying higher premiums than someone with the same driving history, car and background. Why? Price optimization.

WHAT IS PRICE OPTIMIZATION?

Price optimization is the practice of charging higher rates based on the likelihood that a person will not shop around for a lower price. Insurers create algorithms based on all kinds of personal data, including loyalty to other service providers and shopping behavior, but not your driving habits. This is a separate formula from other common auto insurance rate factors like age, neighborhood, gender and the type of car you drive.

Factors can run the gamut from your magazine subscriptions, the number of phones you buy and your web browsing history. This means a company’s most loyal customers may be most affected by this practice.

And while it’s true insurers often have a loyalty discount, if you’re overcharged by 30%, a 5% or 10% loyalty discount isn’t worth it, explains Robert Hunter, director of insurance at the Consumer Federation of America, a nonprofit group based in Washington, D.C.

With the average cost of car insurance at $1,621 per year in 2019, according to a NerdWallet rate analysis, price optimization could cost you more than you think.