Understand How Auto Insurance Rates Are Determined

RANCHO CUCAMONGA, CA, September 21, 2010 (Press-News.org) Auto insurance companies go to great lengths in order to assess the levels of risk posed by motorists. The formulas developed by insurers usually end up being so complex and vary so greatly among companies that it might be hard for a consumer to understand what factors could have led to the determination of his or her rates. But, by looking at the provisions of a California state law that has been in place since 1988, consumers can get a better idea of what insurers are looking at when calculating their premiums.

Voters in the end of the 1980s passed proposition 103 to, among other things, more strictly regulate how insurers calculate California auto insurance prices. Prior to the law's enactment, the state regulators did not require car insurance providers to submit their rating formulas for approval. This had been a requirement for health and life insurance, but not auto. In addition to requiring insurers to submit their formulas for approval, the law outlined a set of factors that insurance companies were restricted to using when calculating premiums.

To be in accordance with the law, insurers in the state must place the most weight on -- in decreasing order of importance -- a driver's safety record, number of miles driven annually and years of driving history. Insurers in the state also can use any of 16 additional factors in calculating rates. The factors that must have the least weight are severity and frequency of claims in a given geographical location -- in other words, the car insurance claims history of a driver's surrounding area.

Another fourteen factors are included, but are not given specific weight, and what those factors include may surprise some consumers. For instance, insurers are permitted take into account a driver's gender, marital status, academic standing, smoker status and reasons for driving the vehicle.

Source: http://www.cga.ct.gov/2006/rpt/2006-R-0542.htm

Although the provisions of Proposition 103 only apply to insurers in the Golden State, many of the factors are similar to those used across the country.

To learn more about and shop for California car insurance, consumers can visit http://www.onlineautoinsurance.com/california/ to access informational articles and the free online quote-comparison generator.