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Insurance: The Statistics War – Are Consumers Losing?
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| Guest post by: John Clark |
Article Overview: Back in the days before computers, auto insurance was personal and subjective. The insurance agent actually talked to the man he knew in the main office, called in a few favors, and got their best customers the best rates. Male drivers under 25 were charged a lot. Young females, being perceived as less risk, were charged much less.
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Insurance: The Statistics War – Are Consumers Losing?
Back in the days before computers, auto insurance was personal and
subjective. The insurance agent actually talked to the man he knew in
the main office, called in a few favors, and got their best customers
the best rates. Male drivers under 25 were charged a lot. Young females,
being perceived as less risk, were charged much less.
Now, in the
computer age, auto insurance companies have large databases of accident
and claims records. By number-crunching these records they can tell
what type of person is more likely to be a good driver and what type of
person is more likely to be an accident risk. This ‘Black Box’
technology gives them insights into the background and behavior of the
people who they think should pay more for their auto insurance. For
example, people who carry minimum limits of liability are actually a
greater risk than those who carry at least 50/100 ($50,000 per person,
$100,000 per accident). And statistics have shown that those with bad
credit scores are more likely to be involved in accidents.
In
Texas, the minimum liability limit on auto insurance is 20/40. Yep.
$20,000 per person, $40,000 per accident. Not much is it? And if that
weren’t bad enough, the minimum property damage is $15,000. Guess who
makes up the difference if you’re in an accident that’s your fault?
In
most states, auto insurance is regulated by the state. But that is only
the beginning. The state uses tables of ‘loss ratios’, exposure, and
other conjuring words, to justify what the auto insurance companies want
you to pay. Every once in a while, just to throw you off, they will
even announce a state-wide REDUCTION in auto rates. When they do, hold
onto your wallet!
After the state sets the base rate, the
individual companies negotiate with them to adjust their particular
rates, claiming either a better or worse loss ratio than average. So,
after the elections are over, the legislature allows exceptions,
amendments, and endorsements to jack them back up to something the auto
insurance companies can make a ton of money from.
And there’s
more. Most states allow individual companies to set their own rules to
determine who gets charged what. So, one auto insurance company rates a
particular driver one way, while another company rates the same driver
differently. Each company sets those underwriting rules.
So how
are auto insurance rates determined? First, the state usually gets
involved. Then companies toss the dice between staying competitive and
making as much profit as they can for their stockholders. And finally,
now that the ‘Black Box’ is here, auto insurance companies are taking a
closer look at every driver. Career, credit score, past record, even the
city you live in helps ‘drive’ the rates. They have even found that
those who select low limits of liability are greater risks than those
who select higher limits. So, by raising your liability limits, you may
actually lower your auto insurance rate.
For some, the new ‘Black
Box’ technology reduces rates by as much as 20% over those companies not
using it. The bad news is, since credit scoring does play a part in ALL
auto insurance rating, the worse your credit score, the higher your
auto insurance will go. No more ‘discounts’, no more ‘loyal customer’
credits, and the like. You will be rated right down to your underwear,
placed in a group of drivers almost identical to you, and charged
accordingly.
Article Tags: auto insurance statistics, car insurance statistics, consumer car insurance guide, consumer insurance, consumer insurance guide, insurance companies and statistics
Referred by: http://www.franchisefix.com/
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About the Author: John Clark RSS for John's articles - Visit John's website John Clark started numerous websites including SaveOnQuotes.com which allows you consumers to compare car insurance quotes, health insurance, life insurance, home insurance, 4g internet and much more. Expert resources to help consumers save money on life's big decisions. Click here to visit John's website Car Insurance A Guide To Liability Car Insurance Coverage Assurant Health Insurance | Health Insurance Company Guide Are Cell Phone Insurance Plans Worth It Whole Life Insurance Quotes Pollen and Mold Allergy |
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