Car Insurance Discounts

Car Insurance Discounts

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Auto insurance discounts fall into five categories: driver safety, driver status, policy, vehicle and usage-based. We explain which ones are automatically applied when you get a quote and which ones require driver initiative, and we show you how to obtain these discounts and save money on your car insurance.

Driver safety car insurance discounts

These types of car insurance discounts reward drivers for their good driving habits. These are the most common discounts across insurers, and make up a sizeable chunk of consumers' savings on car insurance rates.

Discount name
Companies that offer the discount
Defensive drivingState Farm, Geico, Allstate, Travelers, Nationwide, Progressive, Farmers
Accident-freeState Farm, Geico, Allstate, Travelers, Nationwide, Progressive, Farmers
Safe driverState Farm, Geico, Allstate, Travelers, Nationwide, Progressive, Liberty Mutual
Low mileageState Farm, Allstate, Travelers, Nationwide, Progressive

Defensive driving discount (10% to 15%)

Drivers who take defensive driving lessons from a certified or registered school will be qualified for a 10% to 15% discount on their liability, collision and personal injury or medical payments coverages. Classes teach drivers how to better assess road, traffic and weather conditions to avoid accidents.

One way to find classes is through the National Safety Council, which offers online defensive driving lessons certified by most states.

Some companies automatically ask whether you've taken defensive driving lessons when quoting your rate, but you can even get the discount in the middle of your policy. Lastly, before signing up for the lesson, check with your insurer to see if you must be a senior citizen to be eligible for these reductions.

The table below shows how much classes can cost at two national schools, and the size of the discount (using Geico as an example). Savings are calculated based on average insurance expenditure per the National Association of Insurance Commissioners (NAIC).

State
I Drive Safely
American Safety Council
Sample discount
Average premium
Estimated savings
California$19.95$19.955%$745.55$37.28
New York$29.95$24.9510%$750.63$75.06
Pennsylvania$30.00$19.9510%$488.19$48.82
Delaware$14.95$12.9515%$748.55$112.28

Accident-free and good-driver discounts

Companies like Allstate, Geico, State Farm and most others offer good-driver discounts if you have been accident-free for three to five years. This discount is usually automatically applied. If you do not qualify at signup, you can adjust your premium at the time of your next renewal if you have been accident-free for the required time. The definition of a "good driver" may change slightly across companies, so check with your agent for the details.

Safe driver discount (10%)

Safe driver discounts are given to motorists for conservative habits such as having all passengers wear seat belts, low driving speeds, less aggressive braking, etc. We have seen insurers discounting liability and collision auto insurance premiums by about 10% and higher for these good driving habits.

For many insurers, safe and good-driver discounts are the same, with the exception of Geico and Allstate, which distinguish between the two and offer them as separate discounts. Companies like Progressive and Allstate usually monitor safe driving via their Snapshot and Drivewise programs, which we discuss more below.

Savings for low mileage and usage (varies, up to 20%)

If you don't use your car often, you may qualify for a low mileage usage discount. Whenever you get a quote, insurers will ask about your average annual mileage. The average person drives around 12,000 miles per year, but those who drive less than 7,500 can see some great discounts. Safeco offers a discount as high as 20%. In order to qualify for this discount at certain companies, however, you may have to sign up for driver monitoring technology, which we discuss more below.

Driver status car insurance discounts

These are discounts that are based on the driver, just not on their driving habits. Whether your child is a good student or you served in the military, your personal profile can be key to saving a good amount on your car insurance.

Discount name
Companies that offer the discount
Good studentState Farm, Geico, Allstate, Travelers, Nationwide, Progressive, Liberty Mutual
Student awayState Farm, Allstate, Travelers, Liberty Mutual, Farmers, Nationwide
MilitaryGeico, Esurance, USAA
ProfessionalGeico, Farmers, Travelers, Nationwide, Liberty Mutual
SeniorGeico, Allstate, Liberty Mutual

Good-student discount (5% to 25%)

For young drivers, rates are very high until you turn 25. If you maintain a B average, however, you can qualify for savings as high as 25% in the form of a good-student discount. You just need to be a full-time student and provide proof of your scholastic records to your insurance company.

Away-from-home student discount (5% to 25%)

As a parent, you can save on your policy if your child driver left their car at home when they went to college and the college is located more than 100 miles away from home. You may ask your agent about this discount right away or during your next renewal. This discount should show a significant reduction in your liability coverage, as we have seen as much as 25% savings on premiums.

Professional and academic organizations, employee discounts (2% to 10%)

Most insurance companies have affiliations and partnerships with other organizations that provide their members or employees with additional discounts. These tend to be trade or professional organizations and university alumni groups. Geico currently partners with more than 500 professional and university organizations whose members may earn membership discounts upon buying a policy. For these members, Geico offers a 3% discount on the total policy premium.

Senior/mature driver (5% to 10%)

Drivers above the age of 55 may qualify for additional premium reductions in the form of a "senior" or "mature" discount. Allstate offers a 10% discount for their basic liability and physical damage coverage. Some insurers will also reward drivers past the age of 55 if they receive certification from taking a mature driver improvement course online. This course covers similar ground as a defensive driving course and helps you brush up on your knowledge of the latest defensive driving tips.

Military and federal employee (8% to 15%)

If you have served the United States through military or federal government employment, you can find companies that honor that contribution. Geico, for example, gives 8% to 15% discounts to active service members and federal employees, as well as veterans and retirees, for their entire policy premium. Other companies such as USAA exclusively provide auto insurance products to military and defense personnel, and extend that benefit to up to two generations of family members.

Policy car insurance discounts

Policy car insurance discounts are based on your policy. You can alter your policy in certain ways so that you get specific discounts. Sometimes the discounts are automatically applied, and sometimes you have to request them.

Discount name
Companies that offer the discount
HomeownerState Farm, Geico, Allstate, Travelers, Nationwide, Progressive, Farmers
Bundling/multi-policyState Farm, Geico, Allstate, Travelers, Nationwide, Progressive, Farmers
Early signingState Farm, Geico, Allstate, Travelers, Nationwide, Progressive, Liberty Mutual
Paid in fullState Farm, Allstate, Travelers, Nationwide, Progressive
Electronic billingGeico, Allstate, Progressive, Farmers, Liberty Mutual, Nationwide, Travelers
LoyaltyState Farm, Progressive, USAA, Farmers, Nationwide

Homeowner car insurance discount (varies, 3%)

Some insurers provide a homeownership discount even if the policyholder has not purchased homeowners insurance with them. When available, the discount is applied to the liability, physical damage, personal injury protection and uninsured/underinsured motorist premiums — a majority of the different types of coverage, except rental and towing coverage. We found that Progressive gives a 3% discount to qualifying homeowners. Some insurers will honor both bundling and being a homeowner, and the discounts are usually automatically applied when you acquire your quote online. We discuss bundling discounts below.

Multi-car discount (varies, up to 25%)

We have seen insurers such as State Farm giving as much as a 25% discount for a multi-car policy. For a 34-year-old couple insuring their Toyota Camry and Nissan Versa, putting both cars under the same policy could save them almost $200 per year on their car insurance costs. Most insurers will ask that all vehicles on the same policy be owned by persons related by blood or marriage, but in some cases, insurers will also accept unrelated roommates for multi-car discount consideration (given that they might jointly own or drive the vehicles).

Bundling/multi-policy discount (5% to 25%)

Consumers with multiple assets to protect, such as auto and home, can potentially save on their overall insurance costs by placing them with the same company. The bundle can come in many combinations, such as auto plus home, auto plus boat, and auto plus home plus umbrella policy, to name a few, and each results in a different premium reduction. While the discounts are not necessarily equally applied across different insurance lines, insurers give a range of 5% to 25% off the total auto insurance premium for bundling policies.

Savings for signing early (~3%)

When you shop for insurance before your current policy expires, look out for the early signing discount. This tends to be a rarer discount — less than half of the major insurers we've looked into offer it. When it is available, you can get 3% to 10% taken off your total policy premium, depending on how far in advance you sign up for the policy. Travelers, for example, offers this discount if you sign up three days ahead of your current policy's expiration.

Paid-in-full reduction (5% to 10%)

Insurers encourage you to pay your entire six-month or annual premium up front by giving you a discount of around 5% to 10%. This is a separate option on your quote page that you will have to choose, and it usually requires the full premium upon the policy's first effective date in order for the discount to kick in.

Electronic billing/autopay (5% to 10%, or $30)

If you have opted for electronic billing, there is a chance you can qualify for some savings on your premiums. This type of discount isn't very common; generally, national and larger insurance companies with online presences have this available, while smaller carriers don't have the infrastructure.

Nationwide and Allied take $30 off for setting up automatic payments through electronic fund transfer (EFT). Allstate has two separate discounts under this category: 5% for automatic EFT payments and 10% for keeping your bills paperless.

Loyalty discount

Insurers fight to keep their business by offering loyalty discounts to faithful customers. While some providers like Geico refer to their multi-car and bundling discounts as loyalty discounts, we have seen other insurers rewarding consumers who've stayed with the same carrier for a long time. This discount doesn't necessarily come in the usual form as a premium reduction, but it could be more rewarding in the long run.

For example, Progressive has a tiered loyalty rewards program that honors fifth-year customers with one large accident forgiveness and distinguished customer service.

What does accident forgiveness amount to? Loyal drivers could be saving approximately 20% in total by avoiding the accident surcharge applied to their liability and collision coverage premiums. Loyalty program specifics vary by insurer and state.

One note of caution for loyal customers: It might still be worth your while to shop around for rates if pricing is important to you and your insurer has regularly increased rates. Some studies, such as one from the Office of Public Insurance Counsel in Texas, indicate that on average long-term policyholders could save over 19% on their annual auto premiums by switching.

Vehicle car insurance discounts

If your car comes with certain attributes such as an anti-theft device, VIN stitching or anti-lock brakes, you will probably qualify for a few discounts. These additions to your vehicle provide a level of comfort to your insurance company because they can prevent costly damage.

Discount name
Companies that offer the discount
Anti-theftState Farm, Geico, Allstate, Travelers, Nationwide, Progressive, Farmers
Anti-lock brakesState Farm, Geico, Allstate, Travelers, Nationwide, Progressive, Farmers
Passive restraintState Farm, Geico, Allstate, Travelers, Nationwide, Progressive, Liberty Mutual
New carState Farm, Allstate, Travelers, Nationwide, Progressive
Daytime running lightsGeico, Allstate, Progressive, Farmers, Liberty Mutual, Nationwide, Travelers

Anti-theft car insurance discount (5% to 15%)

Having these devices and features may help provide drivers with peace of mind, deter actual theft or help recover stolen vehicles, but they actually do little when it comes to saving on your car insurance premiums. Motorists can save 5% to 15% on their comprehensive coverage (up to 25% when insurers allow stacking), but comprehensive premiums tend to be the cheapest piece of your total coverage. Since these devices begin at about $20, and can cost up to $200 or more, their costs usually outweigh their benefits.

We don't recommend purchasing anti-theft devices for the sake of saving on your premiums.

Consumers should consider them an investment that can go a long way in preventing further property loss and the resulting premium increase. If your car is often the target of auto thefts, investing in one of these anti-theft devices may make sense.

Here's an example of an anti-theft discount in action: A State Farm customer gets both a hood-lock and a passive disabling system totaling $180. The company gives drivers a 10% discount on their comprehensive coverage premiums. Based on the average comprehensive coverage premium of $134 a year, this works out to a savings of only $13.40.

Anti-lock brakes (5% to 10%)

Most insurers require an anti-lock braking system (ABS) to be factory-installed in order for a vehicle to qualify for this discount. As a result, this discount is usually automatically applied when you obtain a quote. Nevertheless, if you do not see this discount on your policy, always ask your agent to verify. The discount could mean 5% to 10% off your collision coverage premium, and depending on your car type and deductible, that could translate to savings of $20 to $100 a year.

Passive restraint (25% to 30%)

Passive restraint equipment includes front airbags and seat belts. Since 1983, all new cars have passive restraint systems installed by default, and insurers give out generous discounts for at least driver's seat and front passenger seat airbags and seat belts. When the vehicle meets the requirements, passive restraint discounts of 25% to 30% are applied to the policy's personal injury protection or medical payments coverage premium.

New car (10%)

For drivers insuring a car they just purchased, a new car discount could be available to reduce the cost of your physical damage coverage premium. This really differs by insurer and state, along with how "new" is defined. For example, Allstate offers new car discounts if the driver is the car's first title owner and the vehicle is a current model year or one year prior. Once drivers and their vehicles qualify, however, the 10% discount will remain on the insured's policy for three years without additional renewal action.

Daytime running lights (~3%)

Just like your nighttime headlights, daytime running lights are believed to reduce collision accidents. While manufacturers don't always equip cars with daytime running lights, having them could get drivers a 3% discount on almost the entire car insurance premium (except for comprehensive coverage). Although there are still debates about the effectiveness of daytime running lights, several large insurers offer this discount, including but not limited to: Geico, Allstate and State Farm.

Usage-based discount programs

A number of insurers have gone a step further to reward safe driving by creating gadgets that monitor a customer's driving habits. Drivers can insert a widget that measures metrics like speed, mileage, time of day driven and braking activity. Here are a few examples:

  • Progressive Snapshot
  • Allstate Drivewise
  • Travelers IntelliDrive

Upon policy enrollment, drivers receive a gadget that connects to their car's on-board diagnostics (OBD) port (standard for cars manufactured after 1996), which allows the insurer to record their drivers' data. Based on the data collected over six consecutive months, your car insurance company will determine if you're eligible for a usage-based discount or rewards program. With Progressive, Snapshot discounts range from 0% to 30% on your total premium — with the average being 6% according to the company's reports.

Expert Insights to Help You Make Smarter Financial Decisions

ValuePenguin has curated an exclusive panel of professionals, spanning various areas of expertise, to help dissect difficult subjects and empower you to make smarter financial decisions. Read on for more auto insurance insights.

  1. Discounts help companies learn about consumers’ behaviors. For instance, auto insurance companies provide discounts based on safe driving and grades. Are certain age groups more likely to trade their personal data for discounts?
  2. How might the perception of a good deal or discount, even if there is risk associated with it, impact someone's buying decision? How does that compare with the perception of a low price with no discount?
  3. Are discount and/or reward programs, such as accident forgiveness or safe driving discounts, more beneficial to attract new customers or to help maintain a current, loyal consumer base?
  4. A recent survey by ValuePenguin revealed that nearly 30% of women had never taken advantage of an auto insurance discount, compared to only 13% of men. Can you please elaborate on why you believe there may be a gap in those taking advantage of these types of loyalty programs?
  5. Some car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?

headshot of expert
  • Julio Sevilla, Ph.D.
  • Associate Professor of Marketing, University of Georgia
  • Read Answer

headshot of expert
  • J. Ian Norris
  • Associate Professor of Marketing, Berea College
  • Read Answer

headshot of expert
  • Benjamin R. Shiller
  • Assistant Professor of Economics, Brandeis University
  • Read Answer

headshot of expert
  • Joy Lu
  • Assistant Professor of Marketing, Carnegie Mellon University
  • Read Answer

headshot of expert
  • Abhijit Roy
  • Professor of Marketing at the Kania School of Management
  • Read Answer

headshot of expert
  • Ryan McCann
  • Assistant Professor, Division of Math and Science
  • Read Answer

The commentary provided by these industry experts represent their viewpoints and opinions alone.

Julio Sevilla, Ph.D.

Associate Professor of Marketing, University of Georgia

Discounts help companies learn about consumers’ behaviors. For instance, auto insurance companies provide discounts based on safe driving and grades. Are certain age groups more likely to trade their personal data for discounts?

In general, younger consumers, as in millennials or younger, are more open to trusting online entities and willing to share their data in exchange for access to free services, tailored discounts or search results, and overall a more customized and efficient online experience. In the case of auto insurance discounts, this is the group that is usually considered riskier and pays the highest premiums, so getting a discount in exchange for data may be a win-win.

How might the perception of a good deal or discount, even if there is risk associated with it, impact someone's buying decision? How does that compare with the perception of a low price with no discount?

I think this depends on who is offering the discounted or lower price. If it is a market-leading firm, then consumers may still trust the brand and find the opportunity appealing. If the offerer is a less known or suspect brand, then this discounted or lower price may be perceived as risky and not trustworthy, which may lead consumers to second-guess or at least to further scrutinize the details of the offering. This may also apply to credible brands offering discounted or lower prices if these truly deviate from what a consumer considers normal.

Are discount and/or reward programs, such as accident forgiveness or safe driving discounts, more beneficial to attract new customers or to help maintain a current, loyal consumer base?

These are both persuasive tools to attract new customers and to maintain current ones as long as the prices are competitive. Some consumers do not bargain on their insurance, as this is a not highly involving product category despite its relatively high price. These are the consumers who may stay indefinitely with a brand unless the price becomes prohibitive. There are other consumers who like to shop around every six or 12 months, especially if they see an ad with this type of offering or if their premium goes up even if just slightly. For these consumers, being exposed to this type of appeal either by their current or prospective provider can be very persuasive.

A recent survey by ValuePenguin revealed that nearly 30% of women had never taken advantage of an auto insurance discount, compared to only 13% of men. Can you please elaborate on why you believe there may be a gap in those taking advantage of these types of loyalty programs?

In general women are more involved with shopping, which will lead them to look for discounts more than men. This applies to department store shopping, groceries, etc. Interestingly, auto is an exception, as cars are more involving to men than to women, hence men will shop around more when buying cars, insurance, etc. For couples, men may also be in charge of handling car-related purchases, hence their higher likelihood of having taken advantage of discounts in this product category.

Some car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?

Past work has shown that consumers are very sensitive to the presence of a discount and not always as much to the magnitude of the discount, especially for not highly involving product categories like insurance. Given this, they may overspend on car technologies that may cost hundreds and just deliver discounts in the tens. Additionally, if the consumer truly desires acquiring the technology beyond the opportunity of getting a car insurance discount, then this small discount may serve as a license to justify acquiring the technology. Past research has shown that some people like to pay for advanced technologies that they may not even use, so even better if a small discount helps justify the purchase.

{"backgroundColor":"ice","content":"\u003C\/p\u003E\n\n\u003Ch3 id=\"expert-julio-sevilla\"\u003EJulio Sevilla, Ph.D.\u003C\/h3\u003E\n\n\u003Cp\u003EAssociate Professor of Marketing, University of Georgia\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cdiv class=\"ShortcodeToggle--root ShortcodeToggle--article \" id=\u003E\n \u003Cbutton class=\"ShortcodeToggle--toggle\" onclick=\"this.parentNode.classList.toggle('ShortcodeToggle--open');\"\u003E\u003Cp class=\"ShortcodeToggle--label\"\u003ESee their advice\u003C\/p\u003E\u003C\/button\u003E\n \u003Cdiv class=\"ShortcodeToggle--contents-wrapper\"\u003E\n \u003Cdiv class=\"ShortcodeToggle--contents\"\u003E\n \u003C\/p\u003E\n\n\u003Ch4\u003EDiscounts help companies learn about consumers\u2019 behaviors. For instance, auto insurance companies provide discounts based on safe driving and grades. Are certain age groups more likely to trade their personal data for discounts?\u003C\/h4\u003E\n\n\u003Cp\u003EIn general, younger consumers, as in millennials or younger, are more open to trusting online entities and willing to share their data in exchange for access to free services, tailored discounts or search results, and overall a more customized and efficient online experience. In the case of auto insurance discounts, this is the group that is usually considered riskier and pays the highest premiums, so getting a discount in exchange for data may be a win-win.\u003C\/p\u003E\n\n\u003Ch4\u003EHow might the perception of a good deal or discount, even if there is risk associated with it, impact someone's buying decision? How does that compare with the perception of a low price with no discount?\u003C\/h4\u003E\n\n\u003Cp\u003EI think this depends on who is offering the discounted or lower price. If it is a market-leading firm, then consumers may still trust the brand and find the opportunity appealing. If the offerer is a less known or suspect brand, then this discounted or lower price may be perceived as risky and not trustworthy, which may lead consumers to second-guess or at least to further scrutinize the details of the offering. This may also apply to credible brands offering discounted or lower prices if these truly deviate from what a consumer considers normal.\u003C\/p\u003E\n\n\u003Ch4\u003EAre discount and\/or reward programs, such as accident forgiveness or safe driving discounts, more beneficial to attract new customers or to help maintain a current, loyal consumer base?\u003C\/h4\u003E\n\n\u003Cp\u003EThese are both persuasive tools to attract new customers and to maintain current ones as long as the prices are competitive. Some consumers do not bargain on their insurance, as this is a not highly involving product category despite its relatively high price. These are the consumers who may stay indefinitely with a brand unless the price becomes prohibitive. There are other consumers who like to shop around every six or 12 months, especially if they see an ad with this type of offering or if their premium goes up even if just slightly. For these consumers, being exposed to this type of appeal either by their current or prospective provider can be very persuasive.\u003C\/p\u003E\n\n\u003Ch4\u003EA recent survey by ValuePenguin revealed that nearly 30% of women had never taken advantage of an auto insurance discount, compared to only 13% of men. Can you please elaborate on why you believe there may be a gap in those taking advantage of these types of loyalty programs?\u003C\/h4\u003E\n\n\u003Cp\u003EIn general women are more involved with shopping, which will lead them to look for discounts more than men. This applies to department store shopping, groceries, etc. Interestingly, auto is an exception, as cars are more involving to men than to women, hence men will shop around more when buying cars, insurance, etc. For couples, men may also be in charge of handling car-related purchases, hence their higher likelihood of having taken advantage of discounts in this product category.\u003C\/p\u003E\n\n\u003Ch4\u003ESome car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?\u003C\/h4\u003E\n\n\u003Cp\u003EPast work has shown that consumers are very sensitive to the presence of a discount and not always as much to the magnitude of the discount, especially for not highly involving product categories like insurance. Given this, they may overspend on car technologies that may cost hundreds and just deliver discounts in the tens. Additionally, if the consumer truly desires acquiring the technology beyond the opportunity of getting a car insurance discount, then this small discount may serve as a license to justify acquiring the technology. Past research has shown that some people like to pay for advanced technologies that they may not even use, so even better if a small discount helps justify the purchase.\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cdiv class=\"ShortcodeAlign--root ShortcodeAlign--horizontal-center\"\u003E\n \u003Cdiv class=\"ShortcodeAlign--container\"\u003E \n \u003Cspan\u003E\u003Ca class=\"ShortcodeLink--root Button--root Button--primary Button--auto-width\" title=\"Back to all experts\" href=\"#expertadvice\"\u003EBack to all experts\u003C\/a\u003E\u003C\/span\u003E\n \u003C\/div\u003E\n\u003C\/div\u003E\n\u003C\/p\u003E\n\n\u003Cp\u003E\n \u003C\/div\u003E\n \u003C\/div\u003E\n\u003C\/div\u003E\n\n","padding":"double"}

J. Ian Norris

Associate Professor of Marketing, Berea College

Discounts help companies learn about consumers’ behaviors. For instance, auto insurance companies provide discounts based on safe driving and grades. Are certain age groups more likely to trade their personal data for discounts?

Research demonstrates that younger consumers are more comfortable with sharing since they have grown up in an environment in which it is relatively normal to trade, say, social media insights for the free use of Facebook and such. On the other hand, younger consumers are also a bit more digitally savvy, so they know more about when they are being tracked and how. This might also make them a bit more skeptical of these kinds of offers if they are perceived to be deceptive or misleading in any way.

How might the perception of a good deal or discount, even if there is risk associated with it, impact someone's buying decision? How does that compare with the perception of a low price with no discount?

There is some research in consumer behavior that shows discounting can affect quality perceptions. Of course, low-priced alternatives can also be perceived as lower quality when they are easily comparable to other options. So I think it would come down to whether consumers are doing a lot of price comparison-shopping for insurance, as I imagine they are. On the other hand, "quality" might not be easily evaluated for consumers when it comes to insurance. My guess is the bigger question is one of trust: Will the company take care of me when I need it? In this case, the more important question will be how discounting or everyday low pricing affects perceptions of trust for automobile insurance.

Are discount and/or reward programs, such as accident forgiveness or safe driving discounts, more beneficial to attract new customers or to help maintain a current, loyal consumer base?

In general, discounts are often used to attract new customers or bring back old ones. This is particularly important in an industry where the options are somewhat homogenous — there are many ways of packaging and customizing insurance, of course, but it is a mature product with a well-established business model that works very similarly across providers. It can be a bit hard for providers to differentiate themselves for customers in a way that might allow them to use a more premium pricing model. As far as reward programs, these are designed to maintain current customers. Reward programs work like anything else by reinforcing consumers for the decisions they make — decisions to renew a policy or, as we are seeing increasingly, safe driving decisions. Given that safe driving discounts are relatively new, I do think it is an interesting question as to how effective they might be in attracting new customers. I imagine that drivers who already know they drive safely might find this an appealing promotional strategy. For unsafe drivers, the more interesting question would be whether it actually promotes behavior change.

A recent survey by ValuePenguin revealed that nearly 30% of women had never taken advantage of an auto insurance discount, compared to only 13% of men. Can you please elaborate on why you believe there may be a gap in those taking advantage of these types of loyalty programs?

If I knew nothing about the product, I would assume that any consumer more likely to take advantage of a discount may have evaluated the product less carefully. That is, discounting is sort of a low-effort consumer strategy — it works when consumers don't care as much about the specific product attributes, or when they don't see competitors as highly differentiated. So this finding suggests to me that women are evaluating insurance options more carefully than men, perhaps. This could mean women are more careful shoppers in general, or it could mean that men and women perceive insurance, as a product, differently. For instance, a consumer that sees insurance as a purely utilitarian product may just make a quick cost-benefit calculation and be tempted by a discount. But insurance is also a product that could be associated with needs and motives related to safety, trust and belonging — needs that could motivate a deeper evaluation of the product.

Some car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?

I think carefully segmenting the market is necessary here. A customer that is able to buy more car up front is, in theory, a customer of greater means — so this would reflect some pretty sophisticated financial reasoning. I would think transparency with this kind of consumer would be essential on the part of an insurance company.

{"backgroundColor":"ice","content":"\u003C\/p\u003E\n\n\u003Ch3 id=\"expert-j-ian-norris\"\u003EJ. Ian Norris\u003C\/h3\u003E\n\n\u003Cp\u003EAssociate Professor of Marketing, Berea College\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cdiv class=\"ShortcodeToggle--root ShortcodeToggle--article \" id=\u003E\n \u003Cbutton class=\"ShortcodeToggle--toggle\" onclick=\"this.parentNode.classList.toggle('ShortcodeToggle--open');\"\u003E\u003Cp class=\"ShortcodeToggle--label\"\u003ESee their advice\u003C\/p\u003E\u003C\/button\u003E\n \u003Cdiv class=\"ShortcodeToggle--contents-wrapper\"\u003E\n \u003Cdiv class=\"ShortcodeToggle--contents\"\u003E\n \u003C\/p\u003E\n\n\u003Ch4\u003EDiscounts help companies learn about consumers\u2019 behaviors. For instance, auto insurance companies provide discounts based on safe driving and grades. Are certain age groups more likely to trade their personal data for discounts?\u003C\/h4\u003E\n\n\u003Cp\u003EResearch demonstrates that younger consumers are more comfortable with sharing since they have grown up in an environment in which it is relatively normal to trade, say, social media insights for the free use of Facebook and such. On the other hand, younger consumers are also a bit more digitally savvy, so they know more about when they are being tracked and how. This might also make them a bit more skeptical of these kinds of offers if they are perceived to be deceptive or misleading in any way.\u003C\/p\u003E\n\n\u003Ch4\u003EHow might the perception of a good deal or discount, even if there is risk associated with it, impact someone's buying decision? How does that compare with the perception of a low price with no discount?\u003C\/h4\u003E\n\n\u003Cp\u003EThere is some research in consumer behavior that shows discounting can affect quality perceptions. Of course, low-priced alternatives can also be perceived as lower quality when they are easily comparable to other options. So I think it would come down to whether consumers are doing a lot of price comparison-shopping for insurance, as I imagine they are. On the other hand, \"quality\" might not be easily evaluated for consumers when it comes to insurance. My guess is the bigger question is one of trust: Will the company take care of me when I need it? In this case, the more important question will be how discounting or everyday low pricing affects perceptions of trust for automobile insurance.\u003C\/p\u003E\n\n\u003Ch3\u003EAre discount and\/or reward programs, such as accident forgiveness or safe driving discounts, more beneficial to attract new customers or to help maintain a current, loyal consumer base?\u003C\/h3\u003E\n\n\u003Cp\u003EIn general, discounts are often used to attract new customers or bring back old ones. This is particularly important in an industry where the options are somewhat homogenous \u2014 there are many ways of packaging and customizing insurance, of course, but it is a mature product with a well-established business model that works very similarly across providers. It can be a bit hard for providers to differentiate themselves for customers in a way that might allow them to use a more premium pricing model. As far as reward programs, these are designed to maintain current customers. Reward programs work like anything else by reinforcing consumers for the decisions they make \u2014 decisions to renew a policy or, as we are seeing increasingly, safe driving decisions. Given that safe driving discounts are relatively new, I do think it is an interesting question as to how effective they might be in attracting new customers. I imagine that drivers who already know they drive safely might find this an appealing promotional strategy. For unsafe drivers, the more interesting question would be whether it actually promotes behavior change.\u003C\/p\u003E\n\n\u003Ch4\u003EA recent survey by ValuePenguin revealed that nearly 30% of women had never taken advantage of an auto insurance discount, compared to only 13% of men. Can you please elaborate on why you believe there may be a gap in those taking advantage of these types of loyalty programs?\u003C\/h4\u003E\n\n\u003Cp\u003EIf I knew nothing about the product, I would assume that any consumer more likely to take advantage of a discount may have evaluated the product less carefully. That is, discounting is sort of a low-effort consumer strategy \u2014 it works when consumers don't care as much about the specific product attributes, or when they don't see competitors as highly differentiated. So this finding suggests to me that women are evaluating insurance options more carefully than men, perhaps. This could mean women are more careful shoppers in general, or it could mean that men and women perceive insurance, as a product, differently. For instance, a consumer that sees insurance as a purely utilitarian product may just make a quick cost-benefit calculation and be tempted by a discount. But insurance is also a product that could be associated with needs and motives related to safety, trust and belonging \u2014 needs that could motivate a deeper evaluation of the product.\u003C\/p\u003E\n\n\u003Ch4\u003ESome car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?\u003C\/h4\u003E\n\n\u003Cp\u003EI think carefully segmenting the market is necessary here. A customer that is able to buy more car up front is, in theory, a customer of greater means \u2014 so this would reflect some pretty sophisticated financial reasoning. I would think transparency with this kind of consumer would be essential on the part of an insurance company.\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cdiv class=\"ShortcodeAlign--root ShortcodeAlign--horizontal-center\"\u003E\n \u003Cdiv class=\"ShortcodeAlign--container\"\u003E \n \u003Cspan\u003E\u003Ca class=\"ShortcodeLink--root Button--root Button--primary Button--auto-width\" title=\"Back to all experts\" href=\"#expertadvice\"\u003EBack to all experts\u003C\/a\u003E\u003C\/span\u003E\n \u003C\/div\u003E\n\u003C\/div\u003E\n\u003C\/p\u003E\n\n\u003Cp\u003E\n \u003C\/div\u003E\n \u003C\/div\u003E\n\u003C\/div\u003E\n\n","padding":"double"}

Benjamin R. Shiller

Assistant Professor of Economics, Brandeis University

Are discount and/or reward programs, such as accident forgiveness or safe driving discounts, more beneficial to attract new customers or to help maintain a current, loyal consumer base?

While safe driving discounts (like Progressive's Snapshot program) initially attracted a lot of new customers, their impact on customer loyalty is lasting, at least for safe drivers. Safe drivers receive a substantial discount based on their observed driving habits (using a telematics device). But only their current insurer — the one that monitored them — knows that they have such safe driving habits. Typically, no other insurer can offer a competitive price to these drivers, at least initially. If a consumer were to switch to another insurer with a safe driving discount, they would need to pay a higher price at least until they have been monitored long enough to verify that they indeed have safe driving habits. Moreover, many consumers dislike being monitored so closely. The consumer also faces a risk that the next insurer may not reach the same conclusion that the driver is so safe, and so the discount may be smaller.

Some car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?

There are various insurance cost estimators one can use when factoring insurance costs into new car purchase decisions. However, one should be very careful. Some of the safest vehicles incorporate accident prevention technologies into the bumper and side mirrors of vehicles. While these technologies help prevent and lessen the impact of severe accidents, they are expensive to repair. Even a small accident can result in a large bill for vehicles with advanced safety technologies, which consumers end up paying a portion of through their deductible and higher premiums later on if they submit a claim.

{"backgroundColor":"ice","content":"\u003C\/p\u003E\n\n\u003Ch3 id=\"expert-benjamin-r-shiller\"\u003EBenjamin R. Shiller\u003C\/h3\u003E\n\n\u003Cp\u003EAssistant Professor of Economics, Brandeis University\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cdiv class=\"ShortcodeToggle--root ShortcodeToggle--article \" id=\u003E\n \u003Cbutton class=\"ShortcodeToggle--toggle\" onclick=\"this.parentNode.classList.toggle('ShortcodeToggle--open');\"\u003E\u003Cp class=\"ShortcodeToggle--label\"\u003ESee their advice\u003C\/p\u003E\u003C\/button\u003E\n \u003Cdiv class=\"ShortcodeToggle--contents-wrapper\"\u003E\n \u003Cdiv class=\"ShortcodeToggle--contents\"\u003E\n \u003C\/p\u003E\n\n\u003Ch4\u003EAre discount and\/or reward programs, such as accident forgiveness or safe driving discounts, more beneficial to attract new customers or to help maintain a current, loyal consumer base?\u003C\/h4\u003E\n\n\u003Cp\u003EWhile safe driving discounts (like Progressive's Snapshot program) initially attracted a lot of new customers, their impact on customer loyalty is lasting, at least for safe drivers. Safe drivers receive a substantial discount based on their observed driving habits (using a telematics device). But only their current insurer \u2014 the one that monitored them \u2014 knows that they have such safe driving habits. Typically, no other insurer can offer a competitive price to these drivers, at least initially. If a consumer were to switch to another insurer with a safe driving discount, they would need to pay a higher price at least until they have been monitored long enough to verify that they indeed have safe driving habits. Moreover, many consumers dislike being monitored so closely. The consumer also faces a risk that the next insurer may not reach the same conclusion that the driver is so safe, and so the discount may be smaller.\u003C\/p\u003E\n\n\u003Ch4\u003ESome car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?\u003C\/h4\u003E\n\n\u003Cp\u003EThere are various insurance cost estimators one can use when factoring insurance costs into new car purchase decisions. However, one should be very careful. Some of the safest vehicles incorporate accident prevention technologies into the bumper and side mirrors of vehicles. While these technologies help prevent and lessen the impact of severe accidents, they are expensive to repair. Even a small accident can result in a large bill for vehicles with advanced safety technologies, which consumers end up paying a portion of through their deductible and higher premiums later on if they submit a claim.\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cdiv class=\"ShortcodeAlign--root ShortcodeAlign--horizontal-center\"\u003E\n \u003Cdiv class=\"ShortcodeAlign--container\"\u003E \n \u003Cspan\u003E\u003Ca class=\"ShortcodeLink--root Button--root Button--primary Button--auto-width\" title=\"Back to all experts\" href=\"#expertadvice\"\u003EBack to all experts\u003C\/a\u003E\u003C\/span\u003E\n \u003C\/div\u003E\n\u003C\/div\u003E\n\u003C\/p\u003E\n\n\u003Cp\u003E\n \u003C\/div\u003E\n \u003C\/div\u003E\n\u003C\/div\u003E\n\n","padding":"double"}

Joy Lu

Assistant Professor of Marketing, Carnegie Mellon University

Discounts help companies learn about consumers’ behaviors. For instance, auto insurance companies provide discounts based on safe driving and grades. Are certain age groups more likely to trade their personal data for discounts?

When providing discounts based on safe driving and grades, rather than considering different age groups, it may be helpful for insurance companies to consider the types of consumers that they are attracting with these discounts. If the information on safe driving and grades is verifiable (e.g., by requiring a formal report card or transcript), there might be a self-selection process where safe drivers and students with better grades are more likely to sign up with the company. However, a limitation is that if the information is not easily verifiable or is easily faked, the company may instead end up with an adverse selection problem where riskier individuals sign up in order to take advantage of the discounts.

How might the perception of a good deal or discount, even if there is risk associated with it, impact someone's buying decision? How does that compare with the perception of a low price with no discount?

Reference prices are often a powerful driver of consumer decisions, so seeing a discount or some percentage off the standard price may be much more attractive to consumers compared to simply a low price with no reference point. Another useful strategy for insurance companies hoping to outprice the competition is to advertise their lower prices alongside competitor prices, again establishing a reference point.

When it comes to products like car insurance, people often don’t shop around as much as they should, and also tend not to switch insurance companies, regardless of discounts or advertising from other companies. These frictions are often referred to as "search costs" and "switching costs" and can be quite high.

Elisabeth Honka, assistant professor of marketing at UCLA, has done extensive research on this topic and has found that search costs and switching costs are important barriers to customers improving their insurance plans. This makes it even more important for insurance companies to emphasize discounts to break down these barriers and make consumers aware of the potential savings.

Are discount and/or reward programs, such as accident forgiveness or safe driving discounts, more beneficial to attract new customers or to help maintain a current, loyal consumer base?

During the early stage of the insurance purchase process, features of the program such as accident forgiveness or safe driving discounts may not be as top-of-mind to new customers as price discounts or free starting points in a reward program. Instead, these features will probably be more effective in retaining existing customers, who are closer to directly experiencing these benefits. The one exception might be new customers who have recently been in an accident and are specifically looking for programs that provide these benefits.

A recent survey by ValuePenguin revealed that nearly 30% of women had never taken advantage of an auto insurance discount, compared to only 13% of men. Can you please elaborate on why you believe there may be a gap in those taking advantage of these types of loyalty programs?

One possibility for this gender gap is the difference in behavioral tendencies between men and women when it comes to negotiations. I would recommend an excellent book entitled "Women Don’t Ask" by Linda Babcock, a colleague and professor of economics here at Carnegie Mellon. This book delves into the many ways that women often find it hard to ask for opportunities, pay raises, better deals, etc., compared to their male counterparts, due to a variety of social forces and inequalities. You can easily see how this might extend to everyday decisions such as asking for or taking advantage of an auto insurance discount or loyalty program.

Some car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?

Let’s consider, for example, a device that tracks how many miles you drive. The device may cost some amount up front for the customer to purchase, and if they drive more then they pay more for their insurance, and if they drive less then they pay less. In this situation, the customer is potentially at risk of paying more if they drive more than anticipated, or not saving as much as they expected even if they drive less, and therefore not making up for the cost of the initial device purchase. Thus, it is very important for these types of discount programs to clearly represent the projected savings to the consumers and the costs versus benefits.

As these devices get more sophisticated, potentially relying upon complex algorithms to compute how "safe" a driver is and the insurance discount they have earned, transparency between the customer and firm becomes imperative, especially since customers are often giving up more and more of their private data. In my own research on how to define good explanations for algorithms, my colleagues and I find that customer satisfaction for financial decisions such as credit card or loan approvals can be sensitive to factors such as the complexity of the algorithm and the individual’s own realized outcomes.

{"backgroundColor":"ice","content":"\u003C\/p\u003E\n\n\u003Ch3 id=\"expert-joy-lu\"\u003EJoy Lu\u003C\/h3\u003E\n\n\u003Cp\u003EAssistant Professor of Marketing, Carnegie Mellon University\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cdiv class=\"ShortcodeToggle--root ShortcodeToggle--article \" id=\u003E\n \u003Cbutton class=\"ShortcodeToggle--toggle\" onclick=\"this.parentNode.classList.toggle('ShortcodeToggle--open');\"\u003E\u003Cp class=\"ShortcodeToggle--label\"\u003ESee their advice\u003C\/p\u003E\u003C\/button\u003E\n \u003Cdiv class=\"ShortcodeToggle--contents-wrapper\"\u003E\n \u003Cdiv class=\"ShortcodeToggle--contents\"\u003E\n \u003C\/p\u003E\n\n\u003Ch4\u003EDiscounts help companies learn about consumers\u2019 behaviors. For instance, auto insurance companies provide discounts based on safe driving and grades. Are certain age groups more likely to trade their personal data for discounts?\u003C\/h4\u003E\n\n\u003Cp\u003EWhen providing discounts based on safe driving and grades, rather than considering different age groups, it may be helpful for insurance companies to consider the types of consumers that they are attracting with these discounts. If the information on safe driving and grades is verifiable (e.g., by requiring a formal report card or transcript), there might be a self-selection process where safe drivers and students with better grades are more likely to sign up with the company. However, a limitation is that if the information is not easily verifiable or is easily faked, the company may instead end up with an adverse selection problem where riskier individuals sign up in order to take advantage of the discounts.\u003C\/p\u003E\n\n\u003Ch4\u003EHow might the perception of a good deal or discount, even if there is risk associated with it, impact someone's buying decision? How does that compare with the perception of a low price with no discount?\u003C\/h4\u003E\n\n\u003Cp\u003EReference prices are often a powerful driver of consumer decisions, so seeing a discount or some percentage off the standard price may be much more attractive to consumers compared to simply a low price with no reference point. Another useful strategy for insurance companies hoping to outprice the competition is to advertise their lower prices alongside competitor prices, again establishing a reference point.\u003C\/p\u003E\n\n\u003Cp\u003EWhen it comes to products like car insurance, people often don\u2019t shop around as much as they should, and also tend not to switch insurance companies, regardless of discounts or advertising from other companies. These frictions are often referred to as \"search costs\" and \"switching costs\" and can be quite high.\u003C\/p\u003E\n\n\u003Cp\u003EElisabeth Honka, assistant professor of marketing at UCLA, has done extensive research on this topic and has found that search costs and switching costs are important barriers to customers improving their insurance plans. This makes it even more important for insurance companies to emphasize discounts to break down these barriers and make consumers aware of the potential savings.\u003C\/p\u003E\n\n\u003Ch4\u003EAre discount and\/or reward programs, such as accident forgiveness or safe driving discounts, more beneficial to attract new customers or to help maintain a current, loyal consumer base?\u003C\/h4\u003E\n\n\u003Cp\u003EDuring the early stage of the insurance purchase process, features of the program such as accident forgiveness or safe driving discounts may not be as top-of-mind to new customers as price discounts or free starting points in a reward program. Instead, these features will probably be more effective in retaining existing customers, who are closer to directly experiencing these benefits. The one exception might be new customers who have recently been in an accident and are specifically looking for programs that provide these benefits.\u003C\/p\u003E\n\n\u003Ch4\u003EA recent survey by ValuePenguin revealed that nearly 30% of women had never taken advantage of an auto insurance discount, compared to only 13% of men. Can you please elaborate on why you believe there may be a gap in those taking advantage of these types of loyalty programs?\u003C\/h4\u003E\n\n\u003Cp\u003EOne possibility for this gender gap is the difference in behavioral tendencies between men and women when it comes to negotiations. I would recommend an excellent book entitled \"Women Don\u2019t Ask\" by Linda Babcock, a colleague and professor of economics here at Carnegie Mellon. This book delves into the many ways that women often find it hard to ask for opportunities, pay raises, better deals, etc., compared to their male counterparts, due to a variety of social forces and inequalities. You can easily see how this might extend to everyday decisions such as asking for or taking advantage of an auto insurance discount or loyalty program.\u003C\/p\u003E\n\n\u003Ch4\u003ESome car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?\u003C\/h4\u003E\n\n\u003Cp\u003ELet\u2019s consider, for example, a device that tracks how many miles you drive. The device may cost some amount up front for the customer to purchase, and if they drive more then they pay more for their insurance, and if they drive less then they pay less. In this situation, the customer is potentially at risk of paying more if they drive more than anticipated, or not saving as much as they expected even if they drive less, and therefore not making up for the cost of the initial device purchase. Thus, it is very important for these types of discount programs to clearly represent the projected savings to the consumers and the costs versus benefits.\u003C\/p\u003E\n\n\u003Cp\u003EAs these devices get more sophisticated, potentially relying upon complex algorithms to compute how \"safe\" a driver is and the insurance discount they have earned, transparency between the customer and firm becomes imperative, especially since customers are often giving up more and more of their private data. In my own research on how to define good explanations for algorithms, my colleagues and I find that customer satisfaction for financial decisions such as credit card or loan approvals can be sensitive to factors such as the complexity of the algorithm and the individual\u2019s own realized outcomes.\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cdiv class=\"ShortcodeAlign--root ShortcodeAlign--horizontal-center\"\u003E\n \u003Cdiv class=\"ShortcodeAlign--container\"\u003E \n \u003Cspan\u003E\u003Ca class=\"ShortcodeLink--root Button--root Button--primary Button--auto-width\" title=\"Back to all experts\" href=\"#expertadvice\"\u003EBack to all experts\u003C\/a\u003E\u003C\/span\u003E\n \u003C\/div\u003E\n\u003C\/div\u003E\n\u003C\/p\u003E\n\n\u003Cp\u003E\n \u003C\/div\u003E\n \u003C\/div\u003E\n\u003C\/div\u003E\n\n","padding":"double"}

Abhijit Roy

Professor of Marketing at the Kania School of Management, University of Scranton

Discounts help companies learn about consumers’ behaviors. For instance, auto insurance companies provide discounts based on safe driving and grades. Are certain age groups more likely to trade their personal data for discounts?

With rapid advancements in technology, I'm afraid that usage-based insurance (or UBI), may become more of the norm in the next five to 10 years.

Safe drivers and those that do not drive a lot (low mileages) may be automatically attracted to such schemes. Discount-prone customers across all age groups will also be attracted to such a policy. Across all age groups, younger individuals are more likely to trade their personal data for discounts, since they grew up in an era where we have very little privacy and are hence more comfortable sharing personal information.

How might the perception of a good deal or discount, even if there is risk associated with it, impact someone's buying decision? How does that compare with the perception of a low price with no discount?

This is based primarily on consumer personality. In retailing, studies have demonstrated personality differences in preferences for EDLP (everyday low pricing) versus high-low (deal) pricing. Similarly, while buying auto insurance, we might find similar differences. Younger customers are more likely to be deal prone (versus a not-so-exciting option of low price with no discount).

Are discount and/or reward programs, such as accident forgiveness or safe driving discounts, more beneficial to attract new customers or to help maintain a current, loyal consumer base?

They are obviously more beneficial to attract new customers, most of whom are comparison shopping for the best deals and are likely to make decisions based on the benefits offered. However, once enticed, it is important to maintain those discounts and/or reward programs (instead of a "bait and switch" approach) or risk losing their customers to competitors who might snag them with more lucrative deals.

A recent survey by ValuePenguin revealed that nearly 30% of women had never taken advantage of an auto insurance discount, compared to only 13% of men. Can you please elaborate on why you believe there may be a gap in those taking advantage of these types of loyalty programs?

A recent study found that men pay slightly lower on average ($720 per year) on car insurance compared to women, who pay $739 a year, on average. These numbers do vary by age. Younger men (below the age of 25) pay much more than their female counterparts because of data showing riskier behavior by the former group. Older women, however, end up paying more than their male counterparts.

As far as taking advantage of auto insurance discounts is considered, I am not surprised that almost a third of women have never taken advantage of auto insurance discount, compared to just 13% for men, primarily because they are socially conditioned not to ask. Recent research by Carnegie Mellon University Economics Professor Linda Babcock, co-author of the book Women Don't Ask, showed that women are four times less likely than men to ask for a raise, and when they do ask, they ask for 30% less than men do.

There are at least seven states — California, Hawaii, Massachusetts, Michigan, Montana, North Carolina and Pennsylvania — that have laws in the books against discriminatory auto insurance pricing based on gender.

Some car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?

I would advise auto insurance shoppers to be careful before using this upgraded technology and agreeing to be monitored because of significant privacy concerns. Drivers should comprehend the risks, since the insurance company will have information on your whereabouts, how you drive, what you're interested in, where you live and who you're associating with. The information is also likely to be sold to other third parties without the individual's knowledge. There is also the danger of data breach, which may give this data to miscreants.

For those willing to overlook these risks, it is important to know what exactly will be tracked by the UBI program. Will it be just braking, idling and acceleration, or will it also track mileage and monitor driving quality.

However, UBI methods appear to be gaining traction. A recent J.D. Power study indicated that nearly 12% of auto insurance customers used such programs, and that nine of the top 10 largest passenger auto insurers have UBI programs in place.

{"backgroundColor":"ice","content":"\u003C\/p\u003E\n\n\u003Ch3 id=\"expert-abhijit-roy\"\u003EAbhijit Roy\u003C\/h3\u003E\n\n\u003Cp\u003EProfessor of Marketing at the Kania School of Management, University of Scranton\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cdiv class=\"ShortcodeToggle--root ShortcodeToggle--article \" id=\u003E\n \u003Cbutton class=\"ShortcodeToggle--toggle\" onclick=\"this.parentNode.classList.toggle('ShortcodeToggle--open');\"\u003E\u003Cp class=\"ShortcodeToggle--label\"\u003ESee their advice\u003C\/p\u003E\u003C\/button\u003E\n \u003Cdiv class=\"ShortcodeToggle--contents-wrapper\"\u003E\n \u003Cdiv class=\"ShortcodeToggle--contents\"\u003E\n \u003C\/p\u003E\n\n\u003Ch4\u003EDiscounts help companies learn about consumers\u2019 behaviors. For instance, auto insurance companies provide discounts based on safe driving and grades. Are certain age groups more likely to trade their personal data for discounts?\u003C\/h4\u003E\n\n\u003Cp\u003EWith rapid advancements in technology, I'm afraid that usage-based insurance (or UBI), may become more of the norm in the next five to 10 years.\u003C\/p\u003E\n\n\u003Cp\u003ESafe drivers and those that do not drive a lot (low mileages) may be automatically attracted to such schemes. Discount-prone customers across all age groups will also be attracted to such a policy. Across all age groups, younger individuals are more likely to trade their personal data for discounts, since they grew up in an era where we have very little privacy and are hence more comfortable sharing personal information.\u003C\/p\u003E\n\n\u003Ch4\u003EHow might the perception of a good deal or discount, even if there is risk associated with it, impact someone's buying decision? How does that compare with the perception of a low price with no discount?\u003C\/h4\u003E\n\n\u003Cp\u003EThis is based primarily on consumer personality. In retailing, studies have demonstrated personality differences in preferences for EDLP (everyday low pricing) versus high-low (deal) pricing. Similarly, while buying auto insurance, we might find similar differences. Younger customers are more likely to be deal prone (versus a not-so-exciting option of low price with no discount).\u003C\/p\u003E\n\n\u003Ch4\u003EAre discount and\/or reward programs, such as accident forgiveness or safe driving discounts, more beneficial to attract new customers or to help maintain a current, loyal consumer base?\u003C\/h4\u003E\n\n\u003Cp\u003EThey are obviously more beneficial to attract new customers, most of whom are comparison shopping for the best deals and are likely to make decisions based on the benefits offered. However, once enticed, it is important to maintain those discounts and\/or reward programs (instead of a \"bait and switch\" approach) or risk losing their customers to competitors who might snag them with more lucrative deals.\u003C\/p\u003E\n\n\u003Ch4\u003EA recent survey by ValuePenguin revealed that nearly 30% of women had never taken advantage of an auto insurance discount, compared to only 13% of men. Can you please elaborate on why you believe there may be a gap in those taking advantage of these types of loyalty programs?\u003C\/h4\u003E\n\n\u003Cp\u003EA recent study found that men pay slightly lower on average ($720 per year) on car insurance compared to women, who pay $739 a year, on average. These numbers do vary by age. Younger men (below the age of 25) pay much more than their female counterparts because of data showing riskier behavior by the former group. Older women, however, end up paying more than their male counterparts.\u003C\/p\u003E\n\n\u003Cp\u003EAs far as taking advantage of auto insurance discounts is considered, I am not surprised that almost a third of women have never taken advantage of auto insurance discount, compared to just 13% for men, primarily because they are socially conditioned not to ask. Recent research by Carnegie Mellon University Economics Professor Linda Babcock, co-author of the book Women Don't Ask, showed that women are four times less likely than men to ask for a raise, and when they do ask, they ask for 30% less than men do.\u003C\/p\u003E\n\n\u003Cp\u003EThere are at least seven states \u2014 California, Hawaii, Massachusetts, Michigan, Montana, North Carolina and Pennsylvania \u2014 that have laws in the books against discriminatory auto insurance pricing based on gender.\u003C\/p\u003E\n\n\u003Ch4\u003ESome car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?\u003C\/h4\u003E\n\n\u003Cp\u003EI would advise auto insurance shoppers to be careful before using this upgraded technology and agreeing to be monitored because of significant privacy concerns. Drivers should comprehend the risks, since the insurance company will have information on your whereabouts, how you drive, what you're interested in, where you live and who you're associating with. The information is also likely to be sold to other third parties without the individual's knowledge. There is also the danger of data breach, which may give this data to miscreants.\u003C\/p\u003E\n\n\u003Cp\u003EFor those willing to overlook these risks, it is important to know what exactly will be tracked by the UBI program. Will it be just braking, idling and acceleration, or will it also track mileage and monitor driving quality.\u003C\/p\u003E\n\n\u003Cp\u003EHowever, UBI methods appear to be gaining traction. A recent J.D. Power study indicated that nearly 12% of auto insurance customers used such programs, and that nine of the top 10 largest passenger auto insurers have UBI programs in place.\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cdiv class=\"ShortcodeAlign--root ShortcodeAlign--horizontal-center\"\u003E\n \u003Cdiv class=\"ShortcodeAlign--container\"\u003E \n \u003Cspan\u003E\u003Ca class=\"ShortcodeLink--root Button--root Button--primary Button--auto-width\" title=\"Back to all experts\" href=\"#expertadvice\"\u003EBack to all experts\u003C\/a\u003E\u003C\/span\u003E\n \u003C\/div\u003E\n\u003C\/div\u003E\n\u003C\/p\u003E\n\n\u003Cp\u003E\n \u003C\/div\u003E\n \u003C\/div\u003E\n\u003C\/div\u003E\n\n","padding":"double"}

Ryan McCann

Assistant Professor, Division of Math and Science, Columbia-Greene Community College, the State University of New York

How might the perception of a good deal or discount, even if there is risk associated with it, impact someone's buying decision? How does that compare with the perception of a low price with no discount?

I might suggest that the perception of a good deal or discount might be more enticing to consumers than just a low price. I find myself more open to exploring a possible purchase when some sort of advantage is advertised.

Some car shoppers may be willing to shell out more cash up front to purchase upgraded technology, with the anticipation that an insurance discount will offset the splurge. At what point do discount programs become problematic for consumers?

Discount programs can become problematic when they are overly complicated and may have strings attached that are not fully understood. A parallel example might be the adjustable-rate mortgage, which caused many to secure loans that had low payments at first, unaware of balloon payments and higher interest rates that could lead to foreclosure (which sadly was the case for many).

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