David Batstone  | | If I were heavily invested in the auto insurance industry, I would have plenty cause to worry. Far too many people view insurance companies as scam artists. Put simply, they have a trust problem.
Before proceeding, I must put forth a disclaimer: It is never a good idea to mess with a columnist with international distribution. Worse yet, never mess with his parents. Geico Insurance did just that.
My parents, both in their mid-70s, switched to Geico a bit over six months ago. They twice had been involved in fender bender accidents in parking lots so State Farm, which had previously insured them, raised their rates dramatically. The fact they had been paying premiums to State Farm for over two decades without an accident or speeding ticket did not matter, of course. That particular inequity we can pursue on another day.
My parents called several companies, including Geico, to see if they could reduce their balloon payments. Geico offered them the best savings over their previous policy. As one might expect, the Geico agent inquired as to the details of their driving record, and my parents dutifully disclosed their parking lot mishaps. The agent offered an attractive rate, then encouraged both my parents to take a seniors driving course so that they could further lower their premium. My parents soon thereafter took the course and received the senior discount.
That was six months ago. Geico recently sent my parents their bill for the next half annum, and to their shock the premiums had doubled. Since my parents have been perfect drivers during the ensuing period, they naturally called to see if a mistake had been made. The Geico agent had no better defense than say that someone must have overlooked their two parking lot accidents. "And what about the senior driving course discount," my parents asked? "Oh, there is a new law in California that two senior drivers of a single car cannot receive a discount," the agent responded.
That news sent my parents shopping for auto insurance once again. Not one company they went to could say they had heard of any such law change affecting senior drivers. They quickly found a more favorable rate and switched away from Geico, their senior driving course discount intact once again.
As coincidence would have it, while these events were going on I received in the mail from Geico a marketing offer with a catchy ad line, "Fifteen minutes could save you 15 percent or more on car insurance." The flyer claims that a phone call could save you hundreds of dollars. Curious in light of my parents' experience, I made the call.
The Geico agent reviewed my driving record and auto ownership, then did the number crunching. He came back with a premium nearly exactly to what I currently pay with my current insurer. I informed him of that fact, and he quickly responded, "Well, you would be better off switching to us then, because we will lower your rates every six months you stay with us." Right, exactly my parents experience.
I went online to find out if the Batstone family simply suffered from paranoia. I discovered that Consumer Reports did a more systematic study of the Geico promise, tasking its staffers to make a quote call to Geico. They found that only four of the 14 people who called would save by switching to Geico. The others would actually be paying more, according to a WIS-TV (Colombia, South Carolina) story on the Consumers Report test.
Failing to deliver on a promise to deliver a lower rate falls into the category of white lies for which marketers feel no guilt. I advise companies, however, that making false promises you do not intend to keep eats away at the reputation of the company. And reputation is the guardian of the company brand. More serious a breach of trust yet is a bait-and-switch practice that converts customers to a lower cost policy, then raises the rates once the conversion is complete. That practice makes a customer feel betrayed.
The insurance industry is begging for a consumer revolution. They better change soon or bolster their ramparts for the counter offensive. |
