The premium charged for all forms of insurance, including car insurance is based on the actual experience of a given insurance company (premiums paid in versus claims paid out) and certain risk factors of the individual policyholder that can be predictors of potential loss. The premiums that insurance companies are no longer developed by simple charts in a rate book, rather by complex algorithms and formulas that are proprietary and held closely held by each insurance company. Much of the overall experience is beyond one’s individual control.
Examples of experience factors beyond your control include:
· There are more elderly drivers on the road who have slower reaction times than a middle aged person might have.
· There are an increased number of youthful drivers on the road and, while their reaction times are amazingly fast, they may not yet have developed the experience needed to be a safe driver.
· Distractions have increased many times over. Cars are filled with more gadgets – complicated audio and video system, navigation systems, not to mention cell phones, texting, etc. There are all kinds of distractions that never existed before and can pull one’s attention away from the road.
· There are more cars on the road. Some sources say 17.6 million new cars were sold in 2016 alone – a number that has increased steadily over recent years.
· The price of gas is lower than years past making it easier for more people to travel by car and leading to more congested roadways.
· Michigan is the only state that pays for 100% of auto-related medical claims WITH NO DOLLAR LIMIT! Your own insurance company is responsible for the first $555,000 in medical expenses resulting from an auto-related injury and then they are reimbursed by the Michigan Catastrophic Claims Association (MCCA) for expenses above that amount. The fact is that very few claims exceed the $555,000 but, when they do, the sky is the limit. Most claims where an insurance company receives reimbursement from the MCCA are catastrophic in nature involving injury to the brain and/or spinal cord which results in serious and permanent disability such as paralysis, coma, and reasoning ability.1
Examples of risk factors that you can control include:
· Your driving record will affect your premium. Multiple traffic violations or accidents can be a predictor of future claims.
· A change in drivers within your household. Adding younger or older drivers can add risk. Even changing the number of drivers can affect your premium. More drivers usually mean the car is on the road more frequently.
· Have you moved to a different address recently? Insurance company experience and individual driving factors can increase substantially in densly populated areas or areas that are more or less prone to crime.
· Have you recently retired or changed jobs to where you are driving a shorter or longer distance to/from home?
· Some insurance companies offer multi-policy discounts so rates can increase if you change to just one policy.
· Insurance score. This is not the same as a financial credit score used for lending decisions; rather factors from the credit scoreto predict risk.
For further information or a quote on your auto, homeowner or business insurance, contact us at 800-220-5582 or CLICK HERE to visit us on the web today!
1 Michigan Catastrophic Claims Association