April 2, 2011

How Averages And Statistics Help To Set Basic Auto Insurance Rates

There's no more important tool for an auto insurance company than a solid set of actuarial data. Actuarial data contains hundreds of statistics which give the insurer a realistic idea of the chances of an insurance claim; the idea is that by collecting statistics, an insurer can accurately assess the chances of an insurance claim. If auto insurance companies are particularly good at figuring the chances of a claim, they can charge auto insurance rates that help them make a profit from their customers. As one might expect, insurance statistics are a crucial part of every insurance quote, and understanding them can provide a driver with valuable tools for lowering his auto insurance rates.

To understand the importance of statistics, it's helpful to look at a single form of car insurance. Collision coverage, for example, provides benefits for a driver in an accident in which he is at fault. If the driver owns a vehicle that's statistically more likely to be driven dangerously, the average auto insurance rates for his collision insurance will be relatively high. Likewise, if the driver has a relatively inexpensive vehicle with relatively low accident statistics, his insurance rates are more likely to be low.

Auto insurance companies look at every statistic that they can legally use to try to accurately assess the chances of claims. They'll often look at the incidence of claims in a particular state and even in a specific zip code. This is why average auto insurance rates are higher in many cities, where a claim due to an accident or car theft is more likely. Auto insurance companies also charge drivers differently based on their age, their experience, and even their genders. Statistics are actually the reason why insurance rates raise after an insurance claim - there's a much higher chance of a second claim in the future after a first claim has been reported.

Basic auto insurance rates are completely controlled by statistics, but car insurance providers don't have unlimited power to use statistics when setting rates. They're prohibited from discriminatory pricing. As such, they can't charge a customer more due to race, nationality, ethnicity, or handicap status. Nevertheless, as industry that uses extremely complex actuarial systems to track every possible statistic, just about any other average or statistic can change the cost of a basic auto insurance policy. For a better study of statistics, drivers can look online for auto insurance quotes, which often shed some light on their personal risk factors. Drivers who understand their own statistics can look for ways to make themselves safer drivers, which can often result in major savings and car insurance discounts.