Nothing really, but did you know that your morning coffee can cost the same as your auto insurance?
Before Starbucks, coffee was … well … just coffee.
But the brilliance of Starbucks was that it took this simple commodity, and created “an experience” that compelled consumers to pay $2 - $6 for a cup of coffee.
That’s right, that simple cup of coffee that your local diner used to sell you for a $1.00 (or less), is now a premium product, and consumers will pay “value” prices to get it.
I bring this up because I see so many people put less value in their auto insurance than they do that cup of morning coffee, they remain reluctant to pay for the premium auto insurance product, always seeking to find the low cost option.
The same morning coffee that we put a premium on, for the “experience,” cost roughly the same as the average auto insurance policy.
The average auto insurance policy will cost roughly $1,300 per year (for a 2 person household). If you get a coffee each morning before work, and pay $2.00, you will pay (for a 2 person household), about $1,000 per year … and that’s only if you get one before work.
Sure, we all enjoy the morning pick-me-up, and surely, if you’re like me, you may not even be able to function properly without your cup of “Joe.”
But this points out a particular point, psychologically we are accepting of a $2.00 cup of coffee, the same coffee we could brew in our home for a nickel, because we place some premium value on the experience, but we struggle to reconcile the value of our auto insurance.
There are plenty of reasons this is likely true. First, unlike your coffee, insurance> has not immediate reward, it’s an intangible product. And, most of us simply think we’re great drivers and won’t need our auto insurance.
And, this is probably more likely, we think that all insurance is the same.
But all auto insurance is not the same. There is much more to it than the limits and deductibles you see on your declarations page. Just like any other product, when you pay less, generally speaking, you are trading off something … and with insurance it is likely coverage or service (or both).
The reality is that auto insurance is not a commodity, and there are real differences between insurance companies and insurance agents. This is very different from your morning coffee.
Coffee is actually a real commodity, it’s trade as a commodity.
It is true that your auto insurance is an intangible product … you can’t wear it, eat it, or drive it, but you will need to use it at some point in your life.
If you’re not willing to invest as much in your auto insurance as you do in your morning coffee, you may find out the hard way what a ‘bad’ auto insurance company looks like when you have to file a claim.
Products become commodities when marketers have run out of ideas for providing value to consumers.
For the auto insurance market this likely became the reality when GEICO created the “15 minutes can save your 15% on your auto insurance” campaign. Before this advertisement, insurance advertising generally focused on the value of solid insurance protection. That was the period of the “Good Hands People,” “Get a Piece of the Rock,” or “Get Met it Pays” advertising.
Since GEICO created the price call-to-action, all we hear now from insurance advertisers is save, save, save.
It’s real tiring.
Much of the commoditization of the auto insurance market is due to the lack of creativity of the advertisers, I guess.
Roughly 20% of Americans consider shopping their auto insurance each year, so if you’re one of these people, think about how much you spend on your morning coffee, and treat you auto insurance with the same “value” consideration you place on that Carmel Latte.
We’ll work on the insurance agents and get them thinking about creating a better buyer experience.
In the meantime, you can talk with IronPoint Insurance Service where we still place a ton of value in making sure you have the right insurance protection, that you financial plan is secure, and your legacy is safe.
Want to know if you can save on home or auto insurance? See for yourself. Start a quote today.
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