Insurance companies are regulated at the state level and have some of the strictest laws to comply with of any industry. For these highly regulated industries that operate on nationwide programs, changing an individual’s policy rates is not done arbitrarily. When the policy is issued, the patron’s file is sent to an actuarial group for evaluation and processing. Insurance companies provide a unique service in the marketplace in that they provide financial protection against potential risks and losses.
From the individual patron’s history and factual information, they will establish risk guidelines that correlate to a risk rate cost that is paid by the patron who then becomes insured. The subsequent policy issued is based on the facts submitted and the collective pool of information associated with other individuals who have similar risk factors.
Who You Are
Are you a teenage male with a red Camaro getting your license for the first time in Kentucky? If so, be prepared to spend a two week McDonald’s salary on car insurance. The insurance companies say you are the most likely first-time driver to get into an accident. To understand what can make your rates go up, it may be helpful to know what can make them go down. Anyone who has had insurance for a long time has noticed that their rates go down as they get older. It is not necessarily the getting older that makes the rate go down. It is the history you have established in driving along with the demonstrated maturity gotten through aging that are the larger variables. It is important that you demonstrate that you are a low-risk driver by establishing an accident-free driving report.
Insurance companies have a number of ways to promote safe driving to bring down your rates. If you buy a car that is rated very high for safety, has a smaller motor, and have taken classes for driver training, you can get your rates lowered. It is the opposite of these things that can make your rates go up. If you get a ticket for no seat belt, driving at high speeds or any other reason, expect your rates to go up. What you have done is demonstrated a higher risk of accident-prone behavior — statistically, people who drive fast and get ticketed also have more accidents.
What You Do
f you get a job as a delivery driver for a restaurant or parts store, your amount of time driving goes up, and your rates go up along with it. When you use your personal vehicle to perform business functions, the risk of being involved in a high-dollar civil suit relative to an accident go up exponentially, and your rates can follow. If you operate a heavy vehicle delivering rock, sand, or asphalt, your rates will go up for the same reasons and because the product you haul can increase the amount of damage done to other persons or property in an accident.
If your vehicle hauls any hazardous material or you work in a bar, the likelihood of higher premiums will be factored in. If you run a daycare and haul children from one place to another in a commercial capacity, you can expect your rates to skyrocket also. Anything about your life that demonstrates a risk of a higher payout than others of equal status otherwise can be considered viable reason to raise your rates.
How They Do It
Insurance companies can gather information in several ways. Not all accidents lead to higher premiums and not all drivers are equal. Insurance companies cannot raise your rates because of your color, religion, or sexuality. They can raise your rates based on your sex or your age without it being discriminatory. Women drivers are famous for having accidents while trying to drive and putting on make-up at the same time. Teenagers are more prone to accidents in bad weather due to their lack of driving experience. Both cases provide the actuarial scientists with enough evidence to reassess the risk and apply the higher rate accordingly.
One of the tools they can use includes running a credit report or a criminal background check. If it can be demonstrated that you have committed a crime or your financial history reflects character issues, this can also affect your rates.
Not all rate hikes are nefarious in nature or related to an accident. If your health condition changes in a manner that is higher risk such as a case of diabetes, loss of perfect eyesight, or some other condition that affects your ability to drive, the insurance companies are justified in making the premiums reflect that risk. There is wisdom in calling your insurance company for advice on the possible rate changes that may result from a new car purchase before you make a purchase. You can do more to protect the contents of your wallet than you may think, just by picking up the phone or going to www.insuranceland.org and asking a few questions.