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Base car insurance rates


Two companies can offer you rates that differ by hundreds or even thousands of dollars, even though they are looking at the same information.

Just how are your car insurance rates established? 

Insurance companies make educated guesses about how likely you are to file a claim by poring over data, then determining a base rate that applies to broad categories of drivers, such as men under the age of 25 living in Sacramento, Calif.  They then look at the individual factors that change the likelihood of a claim, assigning a risk factor to each.

The algorithm each company creates must be filed with and approved by your state’s insurance regulator.

While auto insurance companies tend to use the same basic criteria, they weigh the various risk factors differently.  One insurance company might have had fewer claims for theft for your particular car, for example, or more fraudulent injury claims in your neighborhood. These risk factors can include:

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Your premium may rise or fall with a change in any one of these rating factors.

Drivers are normally grouped according to their level of risk.  For example, when you turn 25 it’s likely you will be placed in a different group with your auto insurer -- one with a lower base rate since those over age 25 tend to be in fewer accidents. 

A change in rating factors may lower your premium, but technically it is not a discount.

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