OK math wizards, explain this...

[Wilson Deaton]

I just saw a commercial for a product (some kind of insurance, I wasn't actually paying close attention). What caught my attention was their statement that their's cost up to 3 times less than their competitors.

Could someone explain to me what "3 times less" means?



Wilson

[David Graham]

The way I read it is that at best their premiums are one third less than their competitors (highest price????)....... IMHO I suspect that that they have worded this ad poorly on purpose in order to be deliberately ambiguous.

[Valisha Trammell Hall]

The competitors price divided by 3 is the advertiser's price.

[Cecil Wallace]

Hmmm.... if the competitor's price was $100, then would mean that their price would be a negative $200 ($100-$300)? I would love to do business with them if they are gong to pay me to insure with them.

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[Shea Zellweger]

Generally, it's competitor's price divided by 3. Exception being if there's some sort of standard price, and their competitor is also a discount group- for instance, the MSRP for this widget is 100, and our competitor sells it for 90. We offer it for 3 times less than that, or $60. That's not a very common usage, though, and I've only seen it done by people who are trying to confuse folks into thinking it's a great deal.

[Marsha Lynn]

I just saw a commercial for a product (some kind of insurance, I wasn't actually paying close attention). What caught my attention was their statement that their's cost up to 3 times less than their competitors.

Could someone explain to me what "3 times less" means?



Wilson

This is indeed interesting math. Perhaps there is a missing variable. Don't you think that before we can find out how much less the advertiser's price is we must first know how much less the competitor's price is so we can multiply that amount of "less" by three?

[Mike Schutz]

You've already put more thought into the statement than they thought you would- and perhaps more than they did themselves.

[Marsha Lynn]

You've already put more thought into the statement than they thought you would- and perhaps more than they did themselves.

And he has dragged others into the madness.

[Benjamin Hobbs]

I like the car insurance commercials which tell you that you can save $300 if you join them... except that every single car insurance commercial says that.

Does that mean that if I switch two times I will have effectively saved $600?

How is it possible for me to save $300 switching from Progressive to Allstate and save $300 if I switch from Allstate to Progressive?

I know they say "average savings", but does the math bother anyone else?

[G R 'Scott' Cundiff]

I just saw a commercial for a product (some kind of insurance, I wasn't actually paying close attention). What caught my attention was their statement that their's cost up to 3 times less than their competitors.

Could someone explain to me what "3 times less" means?



Wilson

Maybe it means that their competitor's cost three times more than theirs?

[Wilson Deaton]

I know they say "average savings", but does the math bother anyone else?

There are many many variables that affect that price. The result is that one company might be cheapest for you and your car but a different company would be cheapest for me and my car...

Suppose ten of us are with Company A. We all get quotes from Company B. For eight of us, Company A is the cheapest so we DON'T switch. But for two of us Company B is cheaper (by $200 and by $400). Those two switch. Company B can then advertise, "Those who switched from Company A to Company B saved an average of $300!"

In short, the stat is, "savings by those who switched." Of course, this number is skewed high because those who don't save a good amount don't switch!

Wilson

[Shea Zellweger]

I like the car insurance commercials which tell you that you can save $300 if you join them... except that every single car insurance commercial says that.

Does that mean that if I switch two times I will have effectively saved $600?

How is it possible for me to save $300 switching from Progressive to Allstate and save $300 if I switch from Allstate to Progressive?

I know they say "average savings", but does the math bother anyone else?

You gotta listen to the commercial: "People who switched saved______." People, for the most part, only switch insurance companies when they're going to save money. If it were going to cost you more, you probably wouldn't switch. So you're already starting with the assumption that if you switch, you're saving money. That $300 savings is a lot less impressive if you take into account the number of people who considered switching, and decided against it because they wouldn't be saving anything.

[Wilson Deaton]

Well, there have been some good theories proposed as to the meaning of, "three times less."

All I can say is, I hope their underwriters/adjusters/actuaries/premium setters are better at math than their ad producers!

Wilson

[Glenn Messer]

We have a car dealer in our area who advertises that he will beat any other dealers advertised price by $500 or he will personally pay you $5,000 in cash. I have thought, "Ok, if I can find a dealer who advertises the same vehicle at $5,500 less than this guy, I just might collect $5,000. Otherwise, I don't think he will be paying $5,000 to anyone." Most of these type of ads are just meant to catch your attention.

[Benjamin Hobbs]

You gotta listen to the commercial: "People who switched saved______." People, for the most part, only switch insurance companies when they're going to save money. If it were going to cost you more, you probably wouldn't switch. So you're already starting with the assumption that if you switch, you're saving money. That $300 savings is a lot less impressive if you take into account the number of people who considered switching, and decided against it because they wouldn't be saving anything.

I understand that it is a savings by those who swtiched. But them problem is that if I switch from more than one company will I save 200% of X dollars? (X being the amont saved from initial switching) If I switch 3 times will I save 300% of X?

Do you see where the math is misleading?

[Shea Zellweger]

I understand that it is a savings by those who swtiched. But them problem is that if I switch from more than one company will I save 200% of X dollars? (X being the amont saved from initial switching) If I switch 3 times will I save 300% of X?

Do you see where the math is misleading?

No, not really. I've heard plenty of people say it's misleading, but IMO it's not. It's an average savings of people who switched. You will only switch if you're going to save money. If you switch from Geico to Allstate, saving $200, you won't switch back to Allstate and save money. More likely than not, you'll go right back to the $200 higher rate. That's why they only sample people who make the switch. If they said "Average quote difference," it wouldn't be nearly as impressive.

[Billy Cox]

I just saw a commercial for a product (some kind of insurance, I wasn't actually paying close attention). What caught my attention was their statement that their's cost up to 3 times less than their competitors.

Could someone explain to me what "3 times less" means?



Wilson

One-third of the cost, but average schmoes hate fractions.

[Benjamin Burch]

Others seem to have it figured out already. They mean to say that their price is 33% that of their competitors or, more precisely, that their competitor's is 3x more. Saying their's is 3x less may appear to communicate (their's is 3x more) with an emphasis on the low figure of their price. It's terrible math, but probably effective communication.

[Marsha Lynn]

Others seem to have it figured out already. They mean to say that their price is 33% that of their competitors or, more precisely, that their competitor's is 3x more. Saying their's is 3x less may appear to communicate (their's is 3x more) with an emphasis on the low figure of their price. It's terrible math, but probably effective communication.

But can they really sell the same insurance for 1/3 of the price? Something besides the math seems a little off here!

[Benjamin Hobbs]

But can they really sell the same insurance for 1/3 of the price? Something besides the math seems a little off here!

It's just like when Comcast/Verizon/Cox gives you internet/tv for $35/month....


...for the first 6 months. Then it's back up to $95/month till Christ returns.

Introductory rates get you every time.

[Benjamin Hobbs]

No, not really. I've heard plenty of people say it's misleading, but IMO it's not. It's an average savings of people who switched. You will only switch if you're going to save money. If you switch from Geico to Allstate, saving $200, you won't switch back to Allstate and save money. More likely than not, you'll go right back to the $200 higher rate. That's why they only sample people who make the switch. If they said "Average quote difference," it wouldn't be nearly as impressive.

Ugh, you're still not getting it.

Every car company says you'll save $300 by switching to them.


So if you leave Allstate, with a bill of $1000/6 months and go to Progressive you'll pay $300 less. =$700/6 months

And if Liberty Mutual says you'll save $300 by going to them then, and you switch, that's now $400/6 months.

And if Geico says you'll save $300 by switching to them then that leaves you with $100/6 months.

See the problem?

And btw, they do say "average amount saved" in Geico, Progressive and Allstate commercials.

[Shea Zellweger]

Ugh, you're still not getting it.

Every car company says you'll save $300 by switching to them.

No... every company says that when people switch to them, they average $300 in savings. From an advertising standpoint, it's a big difference. If All State said "If you switch from Geico, you WILL save $300," and Geico said the same thing about Allstate, the recursive mathematics would be an issue. But their sample group is people who've already switched, so it's a given that the majority of them saved money. I can sorta see how it would be confusing, but there's nothing wrong with the math, just with their sampling data.

[Wilson Deaton]

Ugh, you're still not getting it.

Every car company says you'll save $300 by switching to them...

But Benjamin, they don't say, "you'll save $300 by switching." They say, "those who switched saved." There is a world of difference there.

I once got a quote from Geico. It didn't save me anything. I didn't switch. Therefore, I don't show up in their stats!

Wilson

[Gina Stevenson]

Figure that their topmost "savings" is talking about the most expensive car it's possible to insure. That way, while still paying a "good amount" of insurance, one might still save when compared to another company. Have found those ads to be nearly come-on jokes ... have gotten a bunch of similar to what I already have that has gone up waaay too much over the years, tho' having an old car.

There was one I probably should have switched to months ago, but I was dragging my feet due to an issue of principle ... and it's cost me more than the too-much I tho't they wanted, tho' less than mine. You see, he quoted me a price of about $62/month, and then goes: "Oh, wait a minute; you haven't had it since it was new, so it will be $72/month, not $62."

WHAT!? Why is that? Am I supposed to not know how to drive a van yet, because I "Haven't had it since it was new!?" Crazy, especially since the previous vehicle was also a van, and maybe a bit longer than this one. Totally crazy reasoning on their part, I tho't. Unbelievable.

So, because they wanted $72, instead of the more reasonable $62, I ended up paying about $40/month more on the one I'd gotten that went up & up while figuring out what to do. Duh! BUT when they would not even dicker/"eat" some of that extra $10, that did not set well with me, since I've had several years of driving such a vehicle, & it was not as if this were the very FIRST van I'd ever had! Ho-hum.

[Billy Cox]

Others seem to have it figured out already. They mean to say that their price is 33% that of their competitors or, more precisely, that their competitor's is 3x more. Saying their's is 3x less may appear to communicate (their's is 3x more) with an emphasis on the low figure of their price. It's terrible math, but probably effective communication.

I take back what I said about the advertised price being 33%. It is more likely that in the best case scenario someone's annual (or semiannual) saving was three times what they would have saved if they switched to some other company. So if I could have saved $50 by switching from Allstate to Progressive, but then saved $150 by switching from Allstate to Geico, that would be the math behind the claim.