How Much Are You Treated as an Individual for Car Insurance?

Written by on 2016-01-25 6:56 AM . It has 0 Comments.

More than you Might Think.

Technology advances have created new innovative ways to do business.   The insurance industry is no different.  The availability of “big data” and analytical tools have paved the way for insurance companies to change how they underwrite policies.  It has become far more individually focused than you may realize.   And at times, far more complex.   This article will provide details about what individualized rating is, but always remember to speak with a licensed broker about your specific insurance needs.  

In the past insurance companies used 5 or 6 different variables to determine what your car insurance premium will be. This system relied on a series of broad classes such as whether you drove to work or used your car for pleasure use only.   They also looked at the how far you drove annually.  After a few simple questions, your broker could calculate an insurance estimate.  Now a broker needs to really consider your unique insurance needs and shop the market to find the best solution, specifically for you.

Technology has changed the Insurance Industry

Now, with individualized auto rating, insurance companies look at 10 or more variables and instead rely on complex algorithms to calculate specific premiums for each individual. For example, each extra kilometre you drive to work will increase your premium incrementally. For each 1,000 kilometres you drive each year your premium will be raised. Individualized rating also looks at:

  • The date you were first licensed
  • How old are any traffic convictions
  • How many years it has been since you’ve had an at-fault accident
  • Your date of birth
  • The vehicle you’re driving
  • Where you live and drive
  • The specific coverages you require

Different insurance companies use different variables or use the same variables differently. What these new individualized rating algorithms mean is that brokers can no longer simply look up rates and provide a quote. The algorithms are too complex to make rating tables viable.

Some companies might rely more heavily on age, marital status and gender when determining rates, while others might rely more on annual driving, distance driven to work, driving experience, convictions and accidents.  As a result, one company might consider you a lower risk and offer you a low rate, while another company might consider you a higher risk and assign a higher premium.  A personal insurance expert from Erb and Erb Insurance Brokers Ltd. can shop the market to find the best option for your specific situation.

Why Would Insurance Companies Move to This Method?

Having a more sophisticated analysis of data, such as individualized auto rating, means insurance companies can track millions of different variable combinations to understand and predict the nature of claims. The better an insurance company can predict the potential for claims the better they can adjust their premiums to match.

Based on the results of the individualized auto rating programs insurers can then see which policyholders are more likely to have a claim, raising their premiums, and which policyholders are less likely to have a claim, reducing their premiums.

Where Does These New Analytics Take Us?

In the future more and more companies are going to introduce individualized property rating algorithms for home, condo and tenant’s insurance. The goal is to have more data with which to predict claims.  This means the premium you pay will more closely align with the specific risk of you experiencing a claim.

When it comes to technology, nothing stands still for long!  The insurance industry is still evolving and in time we will see more and more options for usage based insurance. This is type of insurance utilizes a device, plugged into your car, which tracks your actual driving or usage of your vehicle.

Insurance is a complex product and requires consideration. Don’t put your assets and family’s well-being at risk. Having the wrong insurance can be as detrimental as having no insurance at all. Speak with a professional licensed insurance broker to get the information you need to make informed, sound decisions.  

Related Read: The Future of Insurance: Telematics

Want a second opinion on your car insurance? Visit here to learn more about your options.

Have any questions? We’d love to see your questions below.

Thanks for reading.


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