Why Car Insurance Companies Put So Much Value In Statistics
In the car insurance business, statistics are the name of the game. A car insurance company will keep and study statistics for a wide range of applications, including some that may even seem obscure to the untrained eye. This attention to statistical details enables an insurer to more accurately assess risk and risk is what the car insurance business is all about. Higher risk means a higher probability of a claim being filed by the insured. To counterbalance this greater financial exposure the insurance company is assuming by underwriting a policy, higher premiums will and must be charged. A car insurance company profitability position depends on getting this risk/reward ratio correct, at least the majority of the time.
Male drivers are, according to the statistics, more likely than female drivers to be involved in an incident that results in the filing of a claim against his insurer. Because of this fact, male drivers are deemed riskier than their female counterparts and are automatically charged more for a car insurance policy, all other underwriting factors being equal. Obscure statistics would include things like the color of the vehicle being insured. According to statistics, red is a riskier color than white. If your car is red, you can expect to pay more for your coverage.
Statistically, sports cars and motorcycles are much more likely to be involved in a claims-paying collision than the standard family sedan. Because of this, a sports car's insurance policy will be more expensive to obtain than that of a more 'sedate' model. And, if you have a sports car that also happens to be the color red, you'll pay even more.
Car insurance company statistics indicate that traffic accidents are the leading cause of death among Americans between the ages of six and 27 years. It comes as no surprise, then, that car insurance costs more for a driver under the age of 27, compared to what it costs someone 28 years or older. Some insurance companies also charge higher premiums to those drivers who have reached their golden years as they, too, start to present a higher risk of financial loss to car insurance providers.
There are also statistics that work to the advantage of certain car insurance policyholders. Graduating from an approved defensive driving program, for example, will usually give you a discount on your car insurance premiums. The reason for this is that, statistically, defensive driving school graduates file fewer claims because they have fewer accidents.
Insurance companies also refer to statistics regarding the neighborhood in which a policyholder lives. Higher crime rates, more vehicle theft and more vandalism in a certain location will almost certainly cause policy rates to rise.