The car insurance premiums charged by different insurance companies are different for the same car and driver. The factors taken into account by different companies may be the same, but the assessment of each company on the risks is different. That is how the rates differ from company to company.
Rating factors
Age of the driver and the driver’s history of driving are two major factors affecting the rates. If you are a teenager, the chances are that you have to pay a higher insurance premium. But the silver lining is that if you are a student with a good GPA rating, you are in for a considerable reduction in premium. Those who are having a good driving history also get a discount. The purpose for which the car is used is a determining factor of car insurance premium.
The locality where you live, your profession and your claim history also play their parts. If the locality and your profession are accident prone, the premium will be higher. But if your claim history is good a proportional discount is made. If you have a poor claim history it will affect your premium for at least three years. Your FICO credit score and insurance credit score also influence the determination of the premium. The distance and frequency of your daily driving have also a bearing. The more you drive, the more is the chance for an accident. Other factors affecting the rates are your drinking and smoking habits.
Normally insurance companies group together all the people with the same negative factor and charge them equally. Each applicant’s negative charges under each count are added to the basic charges and the gross total is arrived at. Discounts for good driving record, loyalty and others are deducted from the gross. That is how the premiums are determined. The perspective of each company on these factors is different from that of others. Thus the rates differ from company to company.
Profit margins and competitiveness
Like any other industry car insurance aim at profit. If there is no profit no one will come forward to do that business. In addition to pay outs on claims the insurance companies take into account the profit margins aimed at, the selling costs and their overhead expenses are also taken into account while computing the premiums. Those companies which can keep their overheads low may be able to offer a better rate than others. But the consumer rates the company not by the amount of premium alone. The company’s will and ability to discharge the claims also count. However, since all the companies desire to remain in business, definitely, they will try to be competitive in the rates.
Coverage levels
In most of the states in the US insurance cover is mandatory for personal injury and property damages of others called the third party insurance. Penalties for not taking out such cover differ from state to state like revocation of driving license, hefty fines and jail sentences. In all states cover for owner’s personal injury and property is optional.
Each insurance company has its own norms to follow when determining the premium for each type of cover.