Lately companies have been reacting to financial difficulties in two distinct ways. Some companies have been just putting their prices up and hoping that would take them out of red. The other companies have been reacting much more fundamentally. They have been improving their production lines and sharpening their operation to have the maximum economies. Once they can manage this task and become leaner and meaner some of them have even cut rates to bring the competition to their rivals.

While it is clear that money problems hit everyone and households are starting to tighten their belt it is very hard to see how the first strategy of just increasing prices would help companies. Such behavior could only be seen as sign of weakness and indication that they can’t come up with innovative ideas.

It is not difficult to see many examples of two types of companies in the markets. Probably the well known one is a very established car manufacturer that has been occupying news headlines only last year with all the problems of malfunctioning vehicles. Today the same company is number one selling car brand in America despite bad publicity. They have not buried their heads in the sands and felt sorry for themselves. They have come up with fantastic incentives and sales promotions and forced their way back to be one of the top car manufacturers. There are a lot of lessons to be learned from their story.

In the same way many car insurance companies have been sharpening their pen on the face of fierce competition in the industry. Only few years ago most top insurers would hold their rates and send out a message that they do not need to reduce their rates as their quality justifies higher premium charges. Today they are the ones that are topping the best rates charts on any car insurance comparison sites. They are the ones forcing the competition aggressively with great rates and innovative products.

Those insurers have read the situation better and changed their attitudes. They see that they would lose their market share if they have not done something about it. Motorists can get quotes from many companies within minutes and compare rates now with the help on internet. Therefore it would have been naïve of vehicle insurance companies thinking their policyholders would stay with them despite discovering lower rates from similarly reputable firms. Lately policyholders are getting their policies online and even putting their claim themselves on the internet. Naturally they would want to see some of those savings afforded by firms reflected in their premiums.

In the past an agent of a large insurer would simply say to an applicant that they need to pay a bit more if they want to be insured by one of the most reputable insurance firms in America. Now those sales gimmicks can simply not be accepted. A large firm has a better chance of using their financial strength and economies of size to establish a cutting age underwriting house and claim handling. Any economy book would confirm that larger firms have a better chance of offering the best deals. Luckily we are witnessing several companies are taking this theory to heart to offer cheap auto insurance to their customers.

Finally it is not difficult to see that pressures from highly informed consumers are playing an important role in these changes. If those companies believed that they could get away with higher premiums would they ever lower their rates?