Average Increase / Savings / Anything
Sunday, July 26th, 2009I think most people are a little puzzled by the paradox that is every insurance company claiming “average customer savings of $340!”. If this was true, people should switch from insurance provider to provider, eventually saving their way to zero. It’s not.
Let me draw an example. Here’s 3 customers, and their cost change.
-Customer A’s rates increase $300, his savings is $0.
-Customer B’s rates stay the same, his savings is $0.
-Customer C’s rates go down $300, his savings is $300.
The average savings is $100 per customer. Really, the average cost change is $0. From an economics perspective, you have no reason to change providers. Pity words don’t mean the same things they used to. I’ve spotted this in insurance ads, sales statistics, and political advertising.