Auto Insurers Now Consider Many Factors to Set Rates

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  • There has been considerable debate in the last few weeks about the ways in which auto insurers set rates for policyholders, thanks to a study which found that those with lower income levels and less in the way of educational background pay more for the same coverage than more affluent people with more schooling. However, experts also point out that these are just some of the many things auto insurance policy issuers consider when it comes to setting rates, and agents may want to educate their clients about the ways in which this is done.

    While most states have laws which dictate what auto insurance companies cannot consider when setting consumers’ rates, those firms still have a wide range of data from which they can draw, especially these days, according to a report from the New York Times. Especially in this age of social media, when so much information about people is readily available online, insurance companies say that it’s so much easier to set the most predictive – and therefore fair – rates possible.

    “In general, there’s a trend to use more factors,” Robert Hartwig, president of the Insurance Information Institute, told the newspaper.

    What is and isn’t considered?
    When it comes to this kind of issue, it’s important the use of race, religion, or income cannot be considered when it comes to setting auto insurance rates, but critics say that in the case of income, other things, such as occupation, can still be used to circumvent that requirement, the report said. In addition, the vast majority of states across the country do allow for factors such as a driver’s home ZIP code, age, driving record, how much they drive, and the kind of vehicle they own, as well as marital status and gender. Only three states across the country (California, Hawaii, and Massachusetts), meanwhile, do not allow companies to consider a driver’s credit score, and only California prohibits the use of education level or occupation from the equation.

    Therefore, it might be wise for insurance agents to carefully review what is and is not considered in the case of any policyholder who has a question about how their rates are set. This might allow them to figure out what they might be able to do to improve their rates and potentially keep them more satisfied with their coverage. 

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