July 20, 2010

Accident Statistics And How They Affect Auto Insurance Quotes

Since it is mandated by the federal government for auto owners to purchase car insurance and hold those policies for as long as they own and drive their vehicles, auto insurance companies do a very steady and stable business. Of course, such a large operation had many myriad departments and moving parts and it can be very complex in the inner workings of the business. Insurance companies are based on the fairly simple premise that every month individuals pay a certain amount of money into the system which is then controlled and distributed by the insurance company. However, insurance companies are counting on the fact that not all policy holders will be filing claims at the same time; in fact some policy holders may never file a claim at all which is what allows the insurance provider to remain profitable. Insurance providers develop their business strategy based on accident statistics and when they form a new auto insurance quote for a perspective client, they consult many different sets of statistics.

When a new client approaches an auto insurance company for an estimate of what the monthly coverage would cost him, the insurance company must then determine the amount of risk the client represents to the company in order to formulate an appropriate price. This is done by analyzing statistics. Statistics analysts have a very important function within the insurance company. It is their job to research any number of different details about a person or a car. For instance, statistics show that female drivers are involved in more accidents than male drivers, just as younger drivers are involved in more accidents than older drivers. This means that if a young female driver is interested in obtaining car insurance, the price quoted to her for a monthly rate will be considerably higher than a rate quoted to an older male driver. This is because the insurance company knows that the greater the risk of an accident occurring is, the greater the risk that they will have to pay out when a claim is filed. In order to offset their losses, they will charge the potentially risky client more money.

There are many other different statistics that are analyzed as well. Some colors of cars are more prone to be in accidents- perhaps because the drivers attracted to those colors (like a flashy red) might be more dangerous drivers. Other colors are simply not as noticeable by other drivers and therefore more likely to be hit. As you can see, accident statistics play a very important role in determining the price for an auto insurance quote.