Shopping around for the best health insurance plan can be beneficial to both the insured and insurers competitors. However, many people dislike shopping around, and that “is not only harmful to them but it also detrimental to the competitors” (Frakt 2). Customer loyalty and availability of many insurance providers is the main cause of customer resistance to switching from one provider or plan to another.
Customer loyalty can disadvantage consumers and the insurance market. For example, clients who are automatically re-enrolled to the previous insurance plan end up paying higher premiums for the similar services offered at a lower premium by other providers (Frakt 2). Also, it prevents insurance companies from attracting new customers. In addition, it hinders consumers from assessing better insurance packages that can suit various needs of different clients. It hinders innovation and superiority of services leading to services of poor quality (Frakt 3).
However, having various alternatives in the market can disadvantage the consumers because it is hard to select the best plan among many alternatives (Frakt 3). It can make consumers stick to the previous plan in order to avoid the struggle of selecting an unfamiliar plan. Consumers can benefit from various alternatives when there is adequate information about the available products or service in the market (Frakt 4).
In conclusion, having various alternatives for products and services can yield benefits to both consumers and the companies if adequate information is made available for effective decision-making. It promotes innovation among the companies and can lead to a reduction in prices.
Frakt, Austin, “Auto-Renewing Your Health Plan May Be Bad for You and for Competition.” The New York Times, 2014): 1-4. Retrieved from Http://nyti.ms/1nzqwiS