Is How You Drive Really What Determines Your Insurance Rate?
December 20, 2011 at 9:11 AM
Ask people how they think insurance rates should be computed and they will say "driving history. They think careless drivers should pay more, careful ones less.
The Insurance industry sees it differently. Certainly if you have a number of accidents your rate my go up. But, insurers want to identify costlier customers ahead of time, so they look at a customer\'s age and address. People who live in congested or crime-prone areas, as well as young drivers, are more likely to file claims.
Insurers have spent fortunes unearthing factors that identify risk. Unfortunately, some of these factors seem to have nothing to do with whether or not one is a good driver.
Some factors include credit score, income, occupation and education. Insurance companies believe these details are big business secrets, but its pretty clear that all these factors can bear on a customer\'s financial security. As unfair as it seems, people in weaker financial positions are more likely to file a claim than those who are finacially secure.
For example, a well-to-do driver is more likely to fix a dented fender out of pocket, especially if it can lead to a rate increase. People with less money may not have that option.
Education and occupation could cause rates to vary by 30% according to a study performed in Florida. Another study done in New Jersey found that lower income drivers were less likely to get the lower rates than people with professional incomes.
Consumer advocates feel this unfair and profiling. They feel you should not be penalized for using coverage you paid for. Consumer groups are pushing for regulations to curb use of credit scores for selling rates. But, for now, it is what it is. Below are some things you can do to minimize your cost:
• Keep a fund for paying for a door ding or fender bender versus filing a claim.
• Have a higher deductible
• Improve your credit score, pay bills on time, reduce the number of credit cards you have, trim your credit limits and reduce outstanding balances.
• You may not be able to boost your income or education level, but report them to your insurer. If you have teenage drivers, they may be eligible for a good student discount.
• Get a less expensive vehicle. Consider carrying liability only on vehicles 10-15 years old, as they may not be worth covering for theft or damage.
There are a number of things you can do to decrease your premium without sacrificing coverage!
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Illini Community Insurance is a full service, multi-state and multi-lined insurance agency. In other words, we have carriers across all lines of insurance that help us help you to insure your risks. With licenses in 26 states, we have the ability to insure risks from your basic home/auto to more complex commerical insurance risks. Our services also include a Coldwell Banker Realty group and a full benefits department for individual health, group health and even self-funded TPA arrangements.