The Internet Drives Down Car Insurance Prices for Military Families

In the old days before the internet, car insurance rates went up every year without fail. One reason was inflation, but even on an inflation-adjusted basis, car insurance rates still went higher with each passing year. Medical costs were the main reason for car insurance rate increases, since car insurance pays for medical damages sustained in car accidents, and medical costs have been outpacing inflation since the 1940s. In light of this fact, it would seem that there would be virtually no way that car insurance rates would not continue to go up… And then came the internet.

How The Internet Made Car Insurance Cheaper

When the internet first began gaining popularity in the mid-90s, people weren't sure exactly how it could be used. By the end of the decade, we had the "dot-com" boom, with millions of new businesses convinced that the internet could be used for commerce. Although many poorly constructed businesses failed by 2000, legitimate, traditional businesses like car insurance companies continued to flourish in cyberspace. As the price of taking your company online went down, smaller car insurance companies got on the web. In fact, it soon became cost effective to have entire insurance companies that were completely web-based.

This all brought an intense new level of competition to the car insurance business. Smaller, web-based companies with lower overhead could afford to charge less than their bigger name rivals, and they had to in order to convince satisfied customers to make the switch. Better yet, information about car insurance and the ability to compare the rates of multiple car insurance companies greatly increased the number of informed consumers who would actively shop around for the best rates.

At first, rates didn't go down, but the pace at which they went up began to slow. Instead of going up by 10% a year, rates might go up by 8%. Then 5%. But eventually, there was a tipping point by which enough competition and informed consumers were in the market that prices actually began to come down. 2006 was that tipping point, as overall car insurance rates took a mild 0.5% step back. When adjusting for inflation, this is more like a 3.5% rate cut.

How This Affects Military Families

Military families in all but 10 states have the option of buying USAA (United Services Automobile Association) car insurance. It is available to active-duty military personnel, retired service men and women, National Guard reserves and their families, and all people who grew up in military families. Thanks to making the move to web-based efficiency, USAA announced that it will be cutting its rates by a staggering 10% in 2007. Some customers have been known to save as much as $1,400 a year without even asking for the discount!

But military - and non-military, for that matter - families can all save even more by actively looking for the best rates. Even with a 10% rate cut, USAA might not be the best option for you. Every company determines its car insurance rates differently, and it just may be the case that another company would be willing to give you lower rates than USAA. You never know just how much you can save until you shop around, and thanks to the internet, this process has never been easier. Good luck!