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How Claims Affect Insurance Premiums



CarInsurance.com wants you to pay the least possible premium for your auto policy. Our learning center is committed to giving you information that will help save you insurance premium dollars.

Here are some explanations about how claims affect your premiums. We will try to explain what parts of a claim impact rates and underwriting.

Auto claim premiums are affected by three main factors:

  • ISO Symbols
  • Driving Record
  • Insurance Fraud

ISO Symbols

Insurance companies must have a way of determining what it will cost to repair any type of vehicle in a qualified body shop once an accident has occurred.

To achieve this goal, insurance companies and agents subscribe to a service provided by a company called "Insurance Services Offices, Inc.", or "ISO". This service rates every vehicle produced in the USA and throughout the world with a symbol, called an "ISO symbol". The ISO symbol is related to the value of the vehicle. The higher the symbol number, the higher the insurance premium cost and the higher the parts cost, and for a body shop to repair.

These symbols are built in as part of the insurance company's computer rating system, (your insurance premium quote), which agents and companies use to determine the premium amount required for the auto policy. Insurance companies look at this factor as a basis for the premiums you pay.

Example ISO symbols for 2005 vehicles:

  • 6 - Dodge Caravan SE 4 dr. Wagon
  • 10 - Mercury Sable GS 4 dr. Sedan
  • 16 - Honda Accord EX 2 dr. Coupe
  • 25 - Audi A8 Quattro 4 dr. Sedan

In general, the higher the vehicle cost, the more expensive to repair, and a higher policy premium cost required. The higher your ISO symbol, the higher exposure for an insurance company after a claim. Be aware that some companies use much more complex rating systems that may use the ISO symbol as a basis, but internally they use their own claims history to determine the proper factor or symbol to charge.

Driving Record

The second main factor which affects auto claims and therefore insurance premiums comes from your driving record. Your premiums are based upon a rating system which is filed and regulated by the state or country where you live.

Almost all insurance company premiums are based upon an "allocation" type of rating system. This system is set up in order to allocate policy premiums fairly and is based upon several factors, but one of the main factors statistically is: How safe are you in your driving record? Are you the type of driver that is accident prone? Does your driving record indicate that you will be a driver who creates auto crash claims?

When any person has an accident or a claim, the cost which the insurance company must allocate to auto policy premium is more than just the cost of repairing the vehicle.

The salary and benefits of the claims adjuster is part of the cost. His vehicle cost is involved. The wages and benefits of the person who takes your telephone call to report the claim is involved. The cost of building and equipment required to provide offices for claims adjusters, and related personnel is involved. All costs must be allocated based upon a driver's statistical likelihood of creating claims. Insurance premiums are designed to highly reward safe drivers. A claims free driver, will pay less than a driver with claims. Unless other factors or discounts can show that it is not a trend. Like it or not, this provides considerable incentive to not be a careless driver.

Insurance Fraud

Insurance fraud is a third major factor in how auto claims affect insurance premiums. There are many types of car insurance scams. They can even involve people you would normally trust such as Doctors and Lawyers. Here is a list of common scams.

  • Staged Rear-End Car Accidents: A scam driver will quickly get in front of an innocent driver and then slam on their brakes causing a rear-end collision. The scam driver will collect money for his collision damage, and then will fake medical injuries to collect even more.
  • Adding Damage: Whether staged or not; after an accident, a scam driver will go to another location and cause extensive damage to their vehicle, then claim that the damage happened during the original accident.
  • Fake Helpers: Scam helpers will wave an innocent driver into traffic, but then crash into the innocent driver. When the claim is filed, the scam driver will deny waving anyone into traffic. Another way fake helpers try to scam people and insurance companies is by offering to help an innocent driver find an auto repair shop, doctor, or lawyer. In this example, everyone is in on the scam. The body shop charges you enormous rates, the doctor and lawyer also lie to collect more.

To summarize; ISO symbols, driving records, and fraud are major factors in determining insurance premiums when it is time to renew your auto policy. An auto claim will affect your insurance premiums. We wish we could say one accident will cost XX amount more and 2 claims will cost XX amount more, but we cannot. Rating systems are too complex.

A common question is should I report it or pay the claim myself. Typically if a claim is $750 or more it is economically better to report it, unless you have multiple claims in 12 months. The change in insurance premiums are less than the amount you spend (up to $750). We report all claims in our household because that is the reason I am insured. I want the protections I am paying for with my auto insurance premiums.

Always drive defensively, use common sense, strive to avoid accidents, injuries, and claims. At CarInsurance.com you can check your premium with the numerous companies they represent. You can compare quotes by entering in your information along with one claim, two claims, etc. and see the best possible policy for your premium dollar. Enter your zip code above.


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