Mar 13
adminArticles Accident Victims, Accidents, Actuaries, City Streets, Female Drivers, Ford Contour, Gender Equality, Insurance Industry, Last Detail, Local Newspapers, Many Men, New Moon, Pack Rats, Police Report, Premium Rate, Premiums, Red Ford, Safety Record, Sincerity, Statistical Evidence
Whenever you ask a talking head paid by the insurance industry, “How do you calculate the premium rate?” the answer is always the same. There’s a big smile of sincerity and that reassuring voice says, “We look at the driver. It’s all about who you are and what you drive.” And that, of course, is how it should be. Actuaries are paid to estimate the risk of accidents and, as they keep telling us, the statistics never lie. These actuaries are like pack rats. They collect every last detail of every accident that gets reported. It doesn’t matter whether it’s a police report, a claim to the insurers from a hospital for treating accident victims, or reports in local newspapers. They have information about accidents going back to the time we were switching over from real horses to horse-powered engines. So ask how many men aged 33 have had an accident at 2 a.m. while driving a red Ford Contour in the rain with a new moon and, with the click of a mouse, you will have the answer by return. It’s the detail that’s so impressive. More importantly it shows exactly how many claims are made by male as opposed to female drivers, and what the average value of the claims is.
All around the world, the statistical evidence shows women making fewer claims and, when they are involved in accidents, the amount claimed tends to be lower.
The reason for this is that, in general, women drive within the law. They do not try to beat the lights or drive too fast on city streets so, if there is an accident, they are traveling more slowly and the impact is less damaging both to the vehicles and the people inside. Not surprisingly, this excellent safety record has been rewarded by lower premiums. Where the risk is lower, drivers pay less. Except, in Europe, this will change next year.
The European Court for Human Rights has just ruled that men and women must pay the same premiums. At the end of 2012, there must be a new system in place to calculate premiums without relying on gender as a key factor. So what’s going on? Well, ask yourself, is it fair to charge someone more to insure their vehicle just because they are male. No one asks to be born male or female so why penalize all those who have the bad luck to be born male? Keeping this real, men don’t crash because their sexual apparatus gets caught in the steering wheel. People get into accidents because they drive badly. There’s no point in forcing people to pay more because of something they are powerless to control. There’s every reason to base auto insurance quotes on actual driving records because, if the record is bad and the premium rate is high, it gives those drivers an incentive to improve their driving. Calculating premiums should be very personal, looking at how well each individual drives. Grouping everyone together on the basis of their gender for issuing auto insurance quotes is arbitrary and unfair (at least, in Europe).
Jun 08
adminArticles Actuaries, Ambulance Crews, Auto Insurance, Bad News, Firefighters, Health Insurance, Insurance Companies, Insurance Company, Insurance Quotes, Insurer, Loyalty, Premiums, Probability, Right Direction, Risk Assessment, Safe Car, Time Of Day, Unfortunate Accidents, Vehicle Insurance, Wonks
The main thing to understand about discounts is the thinking behind them. The insurance companies want to encourage you to act in ways that favor them. If you are contrary and do the opposite, you will probably cost them money so your premium rates will be higher. Let’s take a few examples and see how it works. Obviously the point of insurance is that, if you have one of those unfortunate accidents or someone steals your vehicle, you get to claim money from the insurance company. From the insurer’s point of view, this is bad news. It wants to be able to treat all your cash as profit. The more it has to pay out, the more it should raise premiums. Except, at some point, you throw up your hands and say, “We’re not going to pay that.” So a balance has to be struck. The insurer wants all the safe drivers like you, and aims to discourage all the drivers with bad records – they are the ones who get the really big premium hikes. Although loyalty bonuses go some way in the right direction, there are more ways in which the insurer can save money. It all starts with the make and model of vehicle you are driving.
Risk assessment is done by the actuaries. These are the math wonks who collect details of every accident reported in the US. This is not just the data from claims on vehicle insurance. This is every incident reported to the police, attended by the firefighters or ambulance crews, or dealt with through claims on health insurance. Put all this together and the actuaries can tell you the probability of an accident in any make and model of vehicle, given its color, whether it was fitted with any additional features, who it was driven by, the time of day or night, whether the driver and passengers were badly injured, so on. Yes, it’s that detailed. Turning this around, if you drive a vehicle that’s statistically unlikely to be involved in an accident or stolen, your premium will be lower than average. Put a safe driver in a safe car and the chances of the insurer having to pay out are small and the profit is higher. Everyone is happy. So how do you find out which are the safest vehicles with the lowest premium rates? Well, you start with http://www.safercar.gov/, a site run by the National Highway Traffic Safety Administration. This allows you to get the safety ratings from all the tests carried out by the NHTSA. There’s a guide published at http://www.nhtsa.dot.gov/staticfiles/DOT/NHTSA/Vehicle%20Safety/Articles/Associated%20Files/2009_Insurance_Costs_Comparison.pdf which is also helpful. Finally, the Insurance Institute for Highway Safety publishes its own list of safe vehicles at http://www.iihs.org/ratings/
The safer the vehicle you drive, the greater the discount on the premium rate. So when you are filling out the questionnaire for those auto insurance quotes, aim to have a safe vehicle. If you vehicle is not safe and you cannot afford to change it, try to upgrade it by fitting safety features. Look at the questions asked in the questionnaire and talk to insurance agents to find out what features save the most money. Similarly, fit better locks and any systems making your vehicle more difficult to steal. Anything you can do to reduce the risk of a claim will be reflected in low rates in the auto insurance quotes you receive.
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