PennyGem’s Elizabeth Keatinge tells us about price optimization.
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00:00Ever feel like companies are getting one over on you when it comes to prices?
00:08Well, they kind of are.
00:10It's called price optimization.
00:11See, as NerdWallet explains it, price optimization is the practice of charging higher rates based
00:17on the likelihood that a person will not shop around for a lower price.
00:21Car insurance companies create algorithms based on all kinds of personal data, including
00:25loyalty to other providers and shopping habits.
00:28Consumer Reports details how seven years ago, Allstate Insurance asked to run their
00:33customers' premiums through an algorithm to update costs.
00:36The markup and Consumer Reports analyzed the algorithm and found it actually produced a
00:40suckers list of big spenders who paid more.
00:44Others in underserved communities feel they're overcharged.
00:46Yahoo Finance reports that Consumer Watchdog just called for an overhaul of rules from
00:51the California Department of Insurance in order to stop auto insurance companies from
00:55overcharging drivers without college degrees or without white collar or other highly paid
01:00occupations.
01:02As NerdWallet advises, it always pays to shop around and compare prices before buying an
01:06insurance policy or anything else for that matter.