If you have ever spent time shopping around for car insurance online at http://autoinsuranceape.com/, you know that rates can vary widely between companies. In fact, rates can differ by hundreds, or even thousands of dollars per year for the exact same car and driver. It doesn’t seem to make sense. After all, wouldn’t the same person have the same risk of getting in an accident no matter which company they choose?
The picture becomes a little bit clearer when you understand how car insurance companies calculate their rates. The following section looks more closely at why the rate can vary so much between companies.
Car insurance companies each develop their own individual algorithms for determining rates. These algorithms are generally based on data that they have collected and compiled from claims made by other customers throughout the years.
Imagine if you will that one company had a high number of claims from a particular neighborhood, while another company did not. If you happened to live in that neighborhood and got a quote for insurance, the first company would consider your neighborhood high risk based on their data. As a result, you would wind up paying a higher rate. The second company, on the other hand, would not consider your neighborhood high risk, and therefore would charge a lower rate.
Discounts are another factor that can affect your rate between companies. Car insurance is a highly competitive industry. Each company offers a variety of different discounts to lure in new business and retain customers. You may find that your rate changes if you qualify for a discount with one company that is not offered by another company.
Understanding how car insurance companies determine their prices makes it easier to understand how rates can vary so much between companies. As you can see, it really pays to get quotes from multiple companies instead of just settling on the first policy you find.