People ask me this question all the time. When I started as an insurance agent back in 1988, there weren’t many factors that went into rating your policy. Your age, your driving record and your sex was pretty much all the insurance companies reviewed. I could rate a policy by looking it up in a book. The agent used a column to look up single or married, your age was grouped , looked down a column and there was a rate for liability. Now a computer is needed to rate a policy. Insurance companies look at as many as 16 or more different factors when determining rates. The most important factor is your credit.
Everything is done on a tier system. The better your credit score the better rate. Your credit score is the first factor used to determine a rate even before your driving record. So someone with an excellent credit score, but, has a speeding ticket will get a better rate then someone with bad credit, but, a clean driving record. Insurance companies use statistics to determine that people with better credit will maintain their car, i.e will get new tires and/or new brakes and have them done right away as opposed to someone with bad credit, who may put off potential repairs, thus causing an accident down the road.
Obviously age is still a factor. Drivers under the age of 25 cause 25% of all the accidents on the road today, but, did you know that older drivers, also, see their rates go up. Once you hit 70, you will see your rates go up again simply because statistics show you are a higher risk because your reflexes start to slow down. Where you live is another factor; the more people, the more traffic and the higher risk of having an accident. The sex of the driver, also, influences rates. Insurance companies will say male drivers have a “show off” factor. They will try to impress their friends or a girlfriend and will drive more aggressively. Married people tend to stay home more than single people so married people will get a better rate. Then another factor for high rates is all the lawsuits. We all know people who sued when they get tapped by someone in an accident. Of course, there are always exceptions to these rules, but, when an insurance company is trying to figure out who is going to have an accident and who isn’t, a “few bad apples can spoil the bunch”.