Auto Insurance Rates: Hidden Factors You Should Know

There was a time when auto insurance rates were based on two simple factors: your accident history and the type of car you were insuring. Over the years additional factors got added, such as where you lived and age factors. Today, auto insurance rates can take into account any number of factors and are closely guarded secrets of the insurance companies. Though state regulations require that insurance companies publish their rate tables, they are under no obligation to publish the formulas they use to determine what rate group you might fall under.

With the advent of technology insurance companies began using factors such as how far you drive in a year, what type of credit history you have, prior repair history on a car even before you owned it, previous late payment history and even the number of times you called about a potential claim – not necessarily filed one. Insurance companies claim that they must use these complex formulas because of the rising number of claims being made and that it is the only fair way to have people who are more likely to file claims pay a higher premium than those who aren’t as likely to file a claim.

A recent trend insurance companies have adopted is to use your credit report in determining part of the risk factor. They claim that people with poor credit are more likely to be in an accident versus those who have a higher credit score. Though consumer advocacy groups decry this as a way of pushing higher rates onto the poor and those who may have had financial problems in the past, insurance companies show no signs of stopping this questionable practice. Did you know that you can get a free copy of your credit report once a year?

The longer you are on the road, the more likely you are to have an accident. That is why for decades now that insurance companies have asked customers how far they drive back and forth to work and for leisure when figuring rate scores. Of course, people tend to fudge the numbers a little and insurance companies are well aware of this. Now, thanks to technology, insurers are running vehicle history reports on cars when it is time to renew a policy. Many of these reports, provided by third party companies, contain mileage readings that are obtained when you have your annual vehicle inspection performed or have other work done to it at certain locations. If you say you drive 5 miles a day and they find that you are logging 36,000 miles a year on the vehicle get ready for a nice premium increase.

Factors beyond your control can have an influence on your rates. Insurers are looking at the prior repair record on a car – even if these repairs occurred before you owned the vehicle. A car that has had multiple repairs technically may be not as road worthy than one who has a squeak clean record. Again, consumer advocacy groups question this practice – especially since it takes facts into account you have absolutely no control over – but more and more insurance companies are signing on to add this as part of their rating formula.

Even if you have had it with your current insurance company raising your rates and decide to switch you may be in for a surprise – your entire claims history follows you around in your CLUE report, which is similar to your credit report. Insurers can see who you have had insurance with and what claims – even inquiries – you made to the previous insurance company.

So what are the best ways to fight back against these rating tactics? Other than keeping the car parked in the garage and making sure that you never pay a bill late you should shop around often for auto insurance rates. Every year as your policy comes up for renewal get quotes for other companies. As the market becomes more competitive some insurance companies are bucking these trends and using traditional rating formulas.

Finally, think twice about making a claims inquiry to your current insurance company. Even inquiries can affect your rating even if the insurance company never pays out. If it’s a small claim take care of the damage yourself and mum is the word. You could be saving yourself hundreds of dollars.