Why Is Price Optimization So Important?

PennyGem’s Elizabeth Keatinge tells us about price optimization.

Transcript

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.