Saving on car insurance may take some work

Forget Flo. Forget Mayhem. Forget that cute little Geico gecko, and the Liberty Mutual policyholder who says a claim made her break into her "happy dance."

Just don't forget this one nugget of truth hidden behind all their commercial high jinks: All auto insurance isn't created, or priced, equally. So it pays to shop around and to weigh your options carefully - and to repeat that process every several years, whether you want to or not.

That may not be what any consumer wants to hear - homework! - but it's the clear take-away from "The Truth About Car Insurance," an analysis published online Thursday by Consumer Reports based on two years of number-crunching and policy research.

Some of its data points, viewed together like the dots in a pointillist painting, present a picture many will find shocking, including how premiums for drivers in almost every state vary dramatically based on their credit records.

For example, a sample policyholder in Pennsylvania - an adult with a clean driving record - would pay $1,088 a year if he or she had "excellent" credit. With merely "good" credit, that premium would rise 17 percent to $1,272. With "poor" credit, it would more than double, to $2,258.

Not surprised yet? Try this: Give that sample driver both "excellent" credit and a driving-while-intoxicated conviction, and he or she would pay $1,893 - nearly 20 percent less than that same driver without a DWI but with poor credit.

If you've been paying attention to how auto insurance has evolved over the last two decades, these kinds of findings won't come as a shock. If not, chances are you don't grasp how far auto insurers have moved from the old model - the one where they used, let's say, "experience" to set "ratings."

Years ago, most insurers based auto-policy premiums on factors such as how long you've been licensed, how often you've crashed, and whether you've been caught speeding or doing other reckless things.

But then auto insurers veered into the brave new world we now call "Big Data." In fact, they were among its corporate pioneers, as they realized that other kinds of non-driving data seemed to better predict which policyholders would cost them how much in claims.

Except in California, Hawaii, and Massachusetts, where it's illegal to use credit data to set auto premiums, many insurers now use credit and other non-driving data, such as education and profession, to set prices. Complicating this even more, insurers don't describe their models openly, and behave differently from state to state.

To help you see what's at stake, Consumer Reports did its own Big Data analysis, crunching two billion price quotes from 700 companies operating across the country.

You can see the report for free online at http://bit.ly/1OE18Rn, with state-by-state numbers for the same sample customer.

The report's editor, Margot Gilman, calls it "a guidepost to help you understand the shenanigans that go on in your insurance pricing."

Other examples include "price optimization," another Big Data trick that essentially penalizes a customer's loyalty: If you stick around long enough, the report says, some companies use "statistical models to gauge how likely you are to shop around for a better price" and then count your "stickiness" as a factor that raises your premium.

Sometimes, insurance regulators fight back. Six states have barred price optimization since last year, when it was first brought to their attention by Robert Hunter, director of insurance for the Consumer Federation of America.

Variations in state regulation add to consumers' confusion.

The report says that since the Great Recession, at least 29 states have adopted a model provision designed to protect policyholders if "extraordinary life circumstances" such as a job loss or divorce damage their credit records.

Neither Pennsylvania nor New Jersey is on the list, but consumers in this region may be protected, anyway.

Marshall McKnight, a spokesman for the New Jersey Department of Banking and Insurance, says that since 2004, New Jersey insurers have been required to disregard credit information "directly influenced by extraordinary life events," such as illness, injury, job loss, or identity theft.

Pennsylvanians who already have coverage should also be protected from credit-related price increases, says Insurance Department spokesman Ron Ruman. "Your credit score can be used in setting your rates when you get a policy, and if there are changes it can be used to improve your rating for auto insurance," he says. "But it can't be used to downgrade your rating."

Consumer Reports' parent, Consumers Union, suggests such data shouldn't be used at all in setting premiums. It's using the magazine's findings to launch an advocacy campaign titled "Price me by how I drive, not by who you think I am."

Gilman says the report's "big take-away is that consumers are misinformed if they think that they're in good hands with their insurer, that their loyalty will be rewarded, and that they can get coverage and forget about it."

She says Consumer Reports recommends shopping for coverage about every three years, and comparing quotes from a dozen insurers.

The data support what Flo and the Gecko are saying: You can save hundreds of dollars if you shop - even if it's not by choosing one of their companies.

215-854-2776@jeffgelles

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