Online Auto Insurance: Insurer’s Vehicle Ratings Shed Light on a Large Pricing Factor

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State Farm's recent makeover of its vehicle premium index allows consumers to get an updated view of how large claims payments tend to be for certain types of autos, a major factor in the ratemaking process.

The recent announcement that State Farm is updating and making public its annual vehicle insurance ratings for particular makes and models highlights the fact that the kind of car you drive is one of the many important factors that decide how much you pay in monthly premiums, according to Online Auto Insurance (OAI).

The Illinois-based coverage provider uses its own claims data each year to assess risks—including damage, theft and injury—associated with various vehicles. Officials say the ratings can help new car shoppers estimate coverage costs, which can come in handy if you’re doing auto insurance comparisons in Florida or other states.

State Farm says most policyholders won’t even notice whatever minimal increase or decrease brought by the update may mean for their monthly payments, and they point out that insurers consider a wide range of factors when figuring out how much to charge customers.

But a review of the ratings shows claims and premium trends can vary widely based on the type of auto.

State Farm’s ratings—as well as the ratemaking formulas for most companies—look at claims trends in four areas:
—    Collision claims
—    Claims for theft or non-collision damage
—    Medical claims for occupants of the insured vehicle
—    Liability claims for other people’s damages that are caused by the policyholder

The auto insurer's public ratings do not give specific discount or surcharge rates for individual vehicles; they shows how a vehicle’s premiums compares with the standard for all vehicles with A-through-E ratings.

A release from the company says having a significantly better or worse record tends to impact premiums by between 10 and 40 percent.

But vehicle type is only one component in pricing.

According to the Insurance Information Institute (III), perhaps the most important of those factors is a person’s driving history. The fewer accidents and other blemishes on your record, the lower your premiums are likely to be.

The number of miles a motorist logs each year also impacts policy rates. Drivers with below-average mileage are less likely to get into a vehicle crash, and insurers often reward them with lower premiums.

The area in which you live—and the statistical likelihood of accidents, car thefts and lawsuits—plays a big part as well, as do a driver’s age, amount of coverage and—in many states—credit history. Insurers say a person with no late payments, bankruptcies or other credit dings is a lesser risk to cover than someone who has run into those issues.

Industry experts say consumers can take certain steps that may help lower their coverage costs, including:
—    Installing anti-theft devices that can assist in locating your car if it’s stolen
—    Choosing a vehicle that is equipped with safety devices like anti-lock brakes and side air bags
—    Asking your coverage provider about any discounts for which you may be eligible, including multicar, mature driver and good student price breaks for younger motorists


To learn more about this and other coverage issues, readers can go to where you’ll find informative resource pages and a rate-comparison generator that can quickly evaluate coverage options.


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Gregor McGavin
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