Have you ever wondered why car insurance never seems to be on sale? Or openly discounted? Plenty of people have wondered the same thing, so we decided to answer the question succinctly for everyone's benefit.
There are actually a few reasons why car insurance companies can't have sales or specials.
Insurance is highly regulated; the rates offered by the carriers have to be approved by each respective state’s department of insurance. In order for a company to offer an admitted insurance product in a state, such as California, there is an approval process. The Department of Insurance (DOI) will review the rate criteria and the underwriting rules applied to create a rate -- and require the premiums and rating factors yo be actuarialy justified.
This means, for example, if a company wants to offer a type of discount for teachers, it needs to demonstrate with data or actuarial reasoning that teachers are a better bet and deserving of a discount. This also means that carriers cannot give discounts for unsubstantiated reasons, like giving a discount to everyone born on a Tuesday. The reasoning behind this is that our insurance rates should be based on the risk levels accepted by the carrier insuring us.
Accordingly, “Sales” or “Specials” really don’t fit the criteria of actuarially sound reasoning. Although insurance underwriting itself is a form of discrimination, these rules are meant to negate any illegal discrimination.
In other words, car insurance sales are baked into the formula for arriving at a rate in the first place; each carrier tries to appeal to certain audiences. This is the legal way to compete on price.