March 13, 2011

The Role Of Statistics In Determining The Cost Of Auto Insurance Quotes

Auto insurance statistics are absolutely vital to the insurance industry. Without statistics, car insurers would be forced to guess what drivers should pay for their policies. This would mean high rates across the board for both high and low risk drivers. Most drivers realize that statistics play heavily into the cost of automobile insurance, but understanding exactly how they're used can be very helpful. By knowing how your car insurance provider approaches your policy and decides your quote, it's possible to find lower insurance quotes immediately and to gradually lower your premiums over time by taking the right actions.

Actuarial companies find auto insurance statistics by comparing claims data to assess the likelihood that a certain driver or vehicle will be involved in an accident. Drivers with a higher risk receive higher automobile insurance rates, while drivers with lower risks will receive proportionately lower rates. This may sound fairly straightforward, but it can be a very complex process due to the sheer number of statistics that insurance companies look at. They look for correlation between driver location and accident, for instance, as well as info about the ages and demographics of drivers. Basically, the insurance companies need to try to find any statistics that could affect the chances of a claim and use that info to make their quotes more precise.

There are important exceptions. Insurance companies are not permitted to use statistics that could be potentially discriminating. A person cannot receive a higher automobile insurance quote because of race or ethnicity. This would constitute a civil rights violation, regardless of whether the driver would receive a higher or lower rate. Similarly, drivers cannot be charged more due to their handicap status because of the Americans with Disabilities Act. Interestingly, handicapped Americans have a statistically lower chance of being involved in an accident, so if discrimination was allowed in this instance, handicapped drivers would probably receive lower insurance rates.

If an insurance company can legally use a statistic, it's a safe bet that they'll use it. Drivers can pay more for their gender (men generally pay more until the age of 65, when women begin paying more), their location (zip codes with fewer accidents and low amounts of car theft pay less), their state (state insurance laws can be a major factor in insurance costs), and just about anything else. When looking for auto insurance quotes, it pays to think about these statistics. Try to choose a safe vehicle and do whatever you can to cut the chances of an accident. You may be able to drastically cut your auto insurance premiums by taking a few simple steps that counteract your risks.