How are auto insurance rates calculated?

The cost of auto insurance is of great concern to Washington motorists. The rising cost of vehicle repairs and the skyrocketing cost of medical care affect the total cost of auto insurance, pushing premium rates up every year.

State law requires that companies submit request for rate changes to our office along with enough statistical and financial information to justify the rates requested. If our rate analysts are satisfied with the facts provided, the law requires our office to approve the request. If we ignored evidence that a rate was too low, we would be violating the law. The Office of the Insurance Commissioner is obligated to make sure there is enough premium collected to pay possible claims.

The greatest increase in recent years has been in liability coverages. These coverages pay for property damage and bodily injury. The impact of legal costs is a part of the overall expense.

Auto insurance rates are based on a variety of factors. The premium you pay consists of a “base rate” plus or minus amounts reflecting your age, gender, marital status, driving pattern, vehicle type, driving record and claims history. There is a different base rate for each type of car and geographical area. While individual companies may differ in the amounts they assess for each factor, the major rating factors are fairly universal.

Your age: Statistics show that, as a group, drivers under age 30 have more accidents per mile driven than the general population. Thus, young drivers are charged higher rates, as are families with young drivers in the household.

Your gender: Young men are involved in more accidents per miles driven than any other population group. The difference is especially pronounced for male drivers under 30. Washington law allows insurance companies to charge on the basis of gender and age where the actual proof of differences in risk exists.

Your car: Generally, the more expensive your vehicle, the more you will pay for comprehensive and collision coverage. Also, because sports cars and high-performance cars tend to get into more accidents, cost more to repair and are more likely to be stolen, they cost more to insure.

Your location: The higher number of accidents in a populous area will raise both your liability and collision premiums, while higher crime rates in urban areas can raise your comprehensive premiums. The law allows companies to base your rate on your address (garaging territory), even though you may drive to a more urban or rural area.

Driving patterns: The more miles you drive, the higher your rates will be. A car used for a total of 7,000 miles a year would normally have lower rates than a car driven 15,000 miles a year. Your work commuting distance will mean additional miles on top of non-commuting , “pleasure”, miles.

Your driving record and claims history: Most companies apply a surcharge to drivers who have been involved in an accident or convicted of multiple traffic violations. Also, the more claims you have made, the higher your rates are likely to be. (CLUE)

Credit Scoring: An insurance score uses information from your credit report to determine how stable or financially responsible you are. There is strong statistical evidence, based on years of analysis, that people with high insurance scores - that is, people with superior credit histories - file fewer or smaller claims. The opposite is also true. People with lower insurance scores as a group tend to file more or larger claims. (Credit Scoring)

As a Consumer, You Do Have Choices.

From: Washington Insurance Commissioner Fact Sheet