Traditionally key factors that affected car insurance rates are driving records, claim history, the car insured and experience of drivers. Many motorists believe this is still the case. However, recent studies show that companies pay attention to a whole lot of other factors that have nothing to do with driving, experience or having no claim.
Years ago, computer programming technology was not as good as today. Now companies can include a lot more factors in their programs. Also, analytical skills have improved considerably. They can process large amounts of information and see if a certain detail increases or decreases the chance of a claim and adjust their auto insurance prices accordingly. In the end, it is down to the chance of companies having to make claim payments.
However, many motorists have no idea about other determinants and are still convinced that the claim history and driving skills are the main influencers in premium calculations. A survey carried out by Consumer Federation of America (CFA) confirms that motorists don’t agree with the fact that many other things can be as influential.
Nearly 70% of drivers surveyed believe that avoiding accidents, moving violation tickets, having good and long driving experience should be the main ways of getting cheap car insurance rates. They feel this is a fair way of rewarding or penalizing a driver seeking coverage.
Only thirty percent of them believe Occupation, not having coverage previously, level of education, credit score and gender is a fair way of looking at a driver. Most people believe there are not good enough reasons to differentiate drivers from each other.
Automobile insurance companies respond to this argument with their own judgement. They believe they can correlate many other factors in their quote programs and this will reward more drivers. If there is a link between the possibility of claims and certain characteristics, they are happy to use it. And they are happy to offer better rates for such applicants.
When companies are pressured by competition to keep their rates low the only other thing they can do is to calculate the risks a lot better. As a result, they can offer lower quotes to qualifying drivers and higher rates for others. As long as they get the balance right, they would be happy with the outcome and break into profitability.
Another good argument is that there are hundreds of companies in the market now. Each of them will consider different risk factors and they will come up with varying quotations for each applicant. This opportunity of seeking quotes from a wide range of insurers and taking the best offer is an unignorable fact in these debates. If you do not like the way a certain provider is looking at you and calculating premiums you can switch to the one you are happy with.
A driver with a good education, home ownership and great credit score can take advantage of all the discounts offered for such qualities. Another driver from a lower income group can find a company that mainly rewards good driving skills and clean insurance history and maximize their savings. This thinking may not sound fair but it should be understood that insurers are commercial companies, which are trying to return profit for their investors.
There are ways to get around most problems in the open market. Most state insurance departments do not feel they can interfere with the way companies set their rates to a degree. Too much interference can result in higher premiums for most people as well because companies can close shops in certain locations. That would lead to reduction in competition and allow remaining operators to charge whatever they like.