What’s Really Driving My Auto Insurance Price?
As with all areas of insurance, auto insurance rates continue to fluctuate based on a variety of factors. If you’ve ever wondered why your rates have changed, it’s likely based on a combination of lifestyle (think: location, family changes, driving history) and technology. I wanted to take a moment and discuss auto insurance — in particular, how it’s rated and why you might see changes to your policy on a regular basis.
As technology adapts and becomes more prominent in our industry, carriers can use more data when they determine insurance rates. First are the typical factors, such as your driving record and claims history. Next are logical factors, such as credit score, zip code, and family changes. In addition, they’ll also utilize more advanced technical information, like vehicle trends and predictive modeling. Carriers use this information to determine what they feel are the best rates for consumers — while still turning a profit.
When I started in the industry in 1992, we rated insurance directly out of a manual using a preset table of numbers. The typical carrier had preferred and standard rates based on driving history; higher-end carriers sometimes had an additional premier rate. We used these two or three basic tiers to categorize an insured party; the rates were then based on those tiers along with vehicle cost. Fast forward to today, with all the information we’ve discussed so far and how the industry has adapted, insurance carriers have gone from three tiers to well over 1,000. Next, let’s examine a few of the major predictors and their impact on rates.
Driving Record and Claims History
A speeding ticket or car accident has a lot of implications, which is why it’s still the most widely used information in determining your insurance rates. One thing that most carriers have determined based on statistical data is that a person who has been involved in one accident is more likely to be involved in a second. Because of this determination, expect your rates to increase around 30-50% for a period of three years after an accident.
Zip Code
Where you live can also have an impact on your rates. If you live in the suburbs and move into the city or vice versa, you could see your rates jump. A rule of thumb to follow with these types of moves is that as people, vehicles, and traffic get closer together, insurance rates will increase due to a higher chance that you might be involved in an accident. City center or urban areas tend to have more accidents and vehicle theft than suburban or rural areas; naturally, insurance providers have to take this into consideration when determining rates.
Family Changes and Finances
Along with moving, other life changes within your family or finances can alter insurance rates. As an example: statistics show that married people are less likely to have auto accidents than single drivers, more likely to have multiple vehicles (leading to discounted rates), and more likely to have other bundling factors, such as home, umbrella, or life insurance policies. All of these factors will drive your rates down.
Another example in this category that affects insurance rates is your credit score. Based on historical data, those with higher credit scores are less likely to file a claim; this factor leads to lower insurance rates.
With all that said, insurance carriers are constantly evolving the way that they rate insurance products. As technology advances and becomes more readily available, the sophistication and detail of determining rates will also change. We work hard to stay up to date on the information and structure clients’ coverage to maximize value. If you have any questions, don’t hesitate to reach out to your Lindow Insurance agent — we’re always happy to help clarify things for you.
Thanks again for the opportunity to protect your families.
Jon
