I wonder if Progressive’s price difference between the agent rate (brick & mortar) versus the direct rate (phone) would be construed as price optimization.
It depends on whether PGR can demonstrate an expense difference between the two distribution channels. If the expense difference justifies the rate, then it is not price optimization.
Kind of reminds me of Prescription Drug Pricing for life saving drugs like those that can cure Hepatitis C- how much are you willing to pay to save your life ? This no doubt may add to shareholder value – but is not the mage the Insurance Industry should have- and doesn’t a good image enhance shareholder value too ?
If two consumers had the exact same risk profile and lived in the same location then cost of insurance may be theoretically the same.
If someone lived in LA or SF County (high rent areas) should they be subsidized by low or moderate income drivers with the “exact same risk profile” living in northern or central CA (modest rent areas)?
Location, Location and Location is not just a real estate mantra. Auto insurance costs are higher in more affluent CA areas.
If someone wants to shop at local merchant or go to Costco they should be able to choose (CA is part of America). There are some values other than just raw price in auto insurance decisions (claims, customer service, etc.).
Attacking the “price optimization” of some carriers sounds “politically correct” but may be just a “straw man”. This may be counterintuitive, but increased regulation and government interference by the CA Department of Insurance distorts the natural supply and demand of the market.
The elephant in the room is how much of current auto insurance paid by consumers had indirect cost of excessive CA regulation (similar to price of gallon of gas in CA is not just for the cost of gas).
Every neighboring state to CA has average of 30-38 % lower auto insurance cost for the “exact risk profile” in Arizona, Nevada and Oregon location (car insurance rates by state, 2014 edition).
I wonder if Progressive’s price difference between the agent rate (brick & mortar) versus the direct rate (phone) would be construed as price optimization.
It depends on whether PGR can demonstrate an expense difference between the two distribution channels. If the expense difference justifies the rate, then it is not price optimization.
Kind of reminds me of Prescription Drug Pricing for life saving drugs like those that can cure Hepatitis C- how much are you willing to pay to save your life ? This no doubt may add to shareholder value – but is not the mage the Insurance Industry should have- and doesn’t a good image enhance shareholder value too ?
If two consumers had the exact same risk profile and lived in the same location then cost of insurance may be theoretically the same.
If someone lived in LA or SF County (high rent areas) should they be subsidized by low or moderate income drivers with the “exact same risk profile” living in northern or central CA (modest rent areas)?
Location, Location and Location is not just a real estate mantra. Auto insurance costs are higher in more affluent CA areas.
If someone wants to shop at local merchant or go to Costco they should be able to choose (CA is part of America). There are some values other than just raw price in auto insurance decisions (claims, customer service, etc.).
Attacking the “price optimization” of some carriers sounds “politically correct” but may be just a “straw man”. This may be counterintuitive, but increased regulation and government interference by the CA Department of Insurance distorts the natural supply and demand of the market.
The elephant in the room is how much of current auto insurance paid by consumers had indirect cost of excessive CA regulation (similar to price of gallon of gas in CA is not just for the cost of gas).
Every neighboring state to CA has average of 30-38 % lower auto insurance cost for the “exact risk profile” in Arizona, Nevada and Oregon location (car insurance rates by state, 2014 edition).