How Insurance Companies Identify Risk for Car Owners

Insurance companies earn on safe car owners and lose on car accidents. That is why it is highly essential to them to identify risks before an accident happens and set higher rates for those motorists, who probably will get in it.

The system by which the company measures the risk constantly changes. Earlier, only basic logical facts matter: driving experience, a model of the car and the age of the car owner. But now, especially with starting using AI for identifying risk, new relationships have begun to be found.

About comparing rates of the specific insurance companies you can read in that article, Esurance vs AllState, and here we consider the factors that are essential for rates and what you can do with it.

What Factors Influence Your Rates

  • Credit rating. It may be surprising, and there is no rational explanation, but statistics show the strong interconnection between credit rating and car insurance rates.
  • Age before 19 is considered as the riskiest. Such car owners pay 50% more for car insurance. Age 20-24 is considered as still not so safe. And only car owners 25+ look like reliable motorists for insurance companies. If you are over 55, you even can get a discount for seniors.
  • If you are a man, get ready to pay more. The National Highway Traffic Safety Administration says that male automobilists get in crashes 3 times more often than female ones (70+% of accidents vs 25+% of accidents).
  • There are many essential details about the job: how often insurance company client drive (remote workers have a big advantage), how much he or she works (always tired people are not attractive for risk assessment managers or AI system) and does he or she need to be attentive to details (that is why scientists pay less).
  • Car model. Expensive cars can be stolen, and it is way too risky to let their owners have low rates. But such models also can have useful safety features, and it is very good because it reduces possible damage.
  • That’s nothing new in fact that different areas have different levels of crime. So it is the question not only of your safety but also about the price of your insurance because companies do not want to trust “bad” neighborhoods.
  • Marriage status. Lonely people are not attractive neither as tourists (just see the cost of a living room per 1) nor as clients of insurance companies. Probably, the logic “I will drive safer because there is a person who waits for me at home” works.

We can not guarantee that this is the full list. Like we said before, many firms use AI for risk assessment, and this means that sometimes it is not even understandable why you have got the rate you have got. Interconnections became more complicated. But you can still change it. Of course, you do not have to marry for it or change your gender, but the things like credit rating, car model and address are in your hands.

Also, you can speak with a manager and find out specifically how you can reduce rates. For example, you can get a discount as a student or something else.