Car insurance premiums can vary significantly between insurance companies due to the rating factors they use, the statistical information they look at, their own claims experience and the cost of doing business. We'll explain this in detail, and provide examples of how rates can differ, sometimes by a lot, sometimes by a little, depending on the company.
Auto insurance rates vary from one insurance company to another because each uses its own unique formula to assess risk and determine how much you pay. All insurance companies will base your rate on the following variables, but no two companies will have the same exact end result:
- How much risk you present to an insurance company
- What it costs your insurer to conduct business
- How much money your insurance carrier estimates it will need to pay all claims during the year
For example, you’ll see in the chart below that the cheapest price for the same policy can be hundreds of dollars less than the most expensive.
Enter your state in the search field to see how much average rates differ by company for a full coverage policy:
|State||Company||Average annual rate|
|Florida||21st Century Centennial||$1,972|
|Iowa||Amco Ins Co||$645|
|Idaho||Depositors Ins Co||$863|
|Illinois||Amco Ins Co||$678|
|Mississippi||Progressive Gulf Ins Co||$1,268|
|North Carolina||State Farm||$845|
|North Dakota||State Farm||$1,132|
|North Dakota||Mid Century||$2,560|
|New Hampshire||State Farm||$1,036|
|New Jersey||21st Century Centennial||$762|
|New Jersey||Allstate NJ||$1,761|
|New Jersey||State Farm||$1,847|
|New Mexico||State Farm||$1,177|
|New York||State Farm||$1,855|
|Rhode Island||State Farm||$1,132|
|South Carolina||State Farm||$1,511|
|South Dakota||Mid Century||$982|
|South Dakota||State Farm||$1,052|
|West Virginia||State Farm||$1,309|
*Rates were fielded by Quadrant Information Services from up to six major insurers in nearly every ZIP code of each state. Driver profile: male, age 40, married, clean record and good credit, driving 2016 Honda Accord. Full coverage of 100/300/100 with comprehensive and collision; $500 deductible.
Here are nationwide average car insurance rates by company:
- Geico: $901
- Nationwide/Allied; $1,227
- State Farm: $1,313
- Farmers: $1, 351
- Progressive: $1,415
- Allstate: $1,758
Assessing your risk
Weighting different factors about you
Insurance companies assess a number factors to determine your likelihood of experiencing an accident or loss, or how much of a risk you pose. Not all companies consider the same factors. Additionally, some companies attach more significance to certain factors than others. That means your rates will vary from one insurance company to another depending upon the rating factors each insurer uses and the weight they place on the different factors.
The following factors influence car insurance rates as they are commonly used by insurers to assess if you are a high-risk driver or not:
- Your age
- The make and model of your car
- Your driving record
- Where you drive and keep (garage) your car
- Your claims history
- Your credit rating
Using statistics to help assess risk
Auto insurance companies analyze statistical information about millions of drivers. They then use it to identify characteristics of drivers who are more likely to file claims that the company would have to pay. The statistical information that insurance companies collect regarding driver types and so on can differ, so that as well can make insurance rates differ.
When calculating how much you pay, insurance carriers also usually group you together with other people whose age, sex, occupation and experience are similar to yours. If you fall in a group considered low risk, you are likely to pay less for coverage than if you are put in a group considered high-risk.
Planning for future claims costs
The amount needed by the insurer to cover the costs of accidents or losses that may happen in the future also plays a role in determining your rate, and also varies by company. Since insurance companies can’t see into the future, they must use past claims history and experiences to help determine future losses that they will have to pay out on. Because each company has had different claims experiences with the groups of people they insure, the rates charged by different companies are never identical.
“Each car insurance company assesses risk differently, so some may hike your rate for a claim by a lot, while others may increase it a little, and still others may not ding your rate at all if you’ve been accident-free for many years and have a clean driving record,” says Penny Gusner, consumer analyst for CarInsurance.com. “That means in some cases, even if you’re insured by the cheapest company in your state, you’ll need to switch to keep getting the lowest rate after a claim.”
CarInsurance.com’s rate analysis shows that it pays to spend some time shopping for your policy after a claim or moving violation, Gusner says. “Our data research shows that for the insurers surveyed, a driver can save up to $4,300, the average being about $600, by comparing car insurance quotes after an accident claim.”
The cost of doing business
There is also the varying cost of doing business as an insurance provider that is taken into account when rates are set. Each company's cost of doing business (how much they pay to sell and service policies), along with their financial goals, is different, resulting in different prices being charged.
Comparing rates is the smartest way to save on car insurance
Car insurance premiums can vary widely between insurance companies due to the rating factors they use, the statistical information they look at, their own claims experience and the cost of doing business. That’s why to get the best rates you need to do a car insurance comparison, and see which companies have the lowest rates for the coverage you want. You can estimate car insurance costs by deciding how much coverage you need, taking into account your age and where you live. Enter your ZIP code and in the tool below, and you’ll see average car insurance rates for the coverage level selected. You’ll also see the highest and lowest rate fielded from up to six major insurers – for the same policy. This shows you how much you can save by comparison shopping.
Car insurance companies and customer service
Knowing the reasons why car insurance rates are never the same for any two insurance companies provides incentive to comparison shop. But Penny Gusner, consumer analyst for CarInsurance.com, says you should never select an insurer on price alone. It's wise to consider how you will be treated when you actually have to use your insurance and file a claim. Here are how major insurers scored, out of 100, on Insure.com's Best Car Insurance company survey of 3,700 consumers. Participants were asked about value for price, customer service and claims handling.
|4||CSAA Insurance Group||88.09|
|6||Auto Club of Southern California (Auto Club Enterprise Insurance Group)||87.67|
|8||The Auto Club Group (ACG) - AAA||86.84|