>Many insurance companies offer lower premiums if you install a car alarm. So I guess they work at least a little, otherwise they wouldn't lower their premiums.

I can think of another reason.

They run their computations- and say the insurance can be priced at $100. But hey what if we just increase to $105, and then offer a $5 discount to people who have car alarms? We get extra money (average of >100) and people think they are saving money. Who knows, might even be getting some type of kick back from the car alarm industry for promoting them.

Maybe I'm making shit up- but I've grown to hate insurance companies so much that it also makes perfect sense.

if you believe insurance companies have miscalculated their risk models, perhaps there is a massive business opportunity to undercut them then.

Only for the not so lucrative market of car owners without car alarms. Since all new cars are outfitted with one I would guess this would be the n% least willing to spend on their cars.

A better business case:

Insurance: $105, with alarm: $100

‘And here is a discount code for use with company X’.

And every referral get a kickback. Profit.

If you change the requirements for an insurance policy you attract a different risk pool. Just like health insurance companies offering gym membership to find healthier customers.