How Your Auto Insurance Rates Are Affected by Statistics






Insurance companies make a profit by collecting more in premiums than they pay out for claims. Customers who are at a high risk of getting into an accident, or whose vehicles would be expensive to repair in the event of a claim, pay higher premiums to compensate for the cost.

In order to determine what rates to charge, insurance companies rely heavily upon statistics, especially in instances where data for a specific driver is unknown. Insurance companies invest a lot of time into collecting claims data and compiling the information, and look at everything from the age of the driver to the times of a day a person drives or the amount of traffic in a driver’s city.

Types of Statistics Considered

Insurance companies cannot discriminate against a driver based on ethnicity, race, or disability. Gender and age do affect insurance premiums, however, as does credit score.

Credit score affects insurance premiums not just because people with poor credit may not pay their premiums on time, but also because people with poor credit are more likely to file claims than those with good credit. People with poor credit may not be involved in more accidents, but they’re less likely to have extra income on hand to pay for repairs, and insurance companies recognize this statistical correlation.

Teen Drivers

Drivers under age 25 have much higher premiums than older drivers. There are several reasons for this:

·         Young drivers do not have any driving history go base premiums on, so the company relies heavily on statistical data.

·         61 percent of teenager passengers who die in car accidents are passengers in a vehicle driven by another teen.

·         Teens are at a high risk of driving under the influence; 25 percent of teen auto accident fatalities involve alcohol.

Once a teenager has driven for several years and proven himself safe, his rates will be decreased. Teens can enjoy some relief from high premiums by taking additional driver’s education courses, as these encourage safe driving habits and are seen positively by insurance companies.

Geographic Considerations

In addition to demographic information about a driver, insurance companies also take a driver’s location into consideration when deciding on rates. More accidents happen in cities and congested areas than in rural areas, due to the number of drivers and the likelihood of accidents occurring in heavy traffic. People who live in highly populated states will tend to pay more in insurance than those who live in sparsely populated areas, as do people who live in big cities as opposed to suburbs or small towns.

Insurance companies rely on statistical information to determine base rates for policies, but drivers are always able to save money on car insurance by driving safely, taking advantage of company discounts, or increasing security on a policy. Overall, statistics serve as a baseline for an insurance company; specific rates are always changing to reflect your driving record. By making safe choices and utilizing discounts, you can counteract the effect of statistics on your insurance rates.


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