Auto Insurance

Auto Insurance Rating Factors

A common question among all insurers is why do my rates go up? What is involved in changing my rates? Figuring out the factors that are used by various insurance companies to calculate rate increases and decreases can be difficult to understand but luckily not impossible.

All insurance companies do not have to the same rate increases at the same time.Insurance companies can do this because they use different risk assessors or variables for deciding about rate increases and when they are going to happen. This being true, it is still found that most companies typically use the same concept when factoring out rates.

If you ask an insurance agent how exactly the rates go up or why it might be hard for them to explain. This is because most insurance companies have devised their own mathematical algorithm. The company then feeds the insured’s information into a computer which checks through information and spits out an answer. This algorithm itself is much too complicated for the average insurance representative to discuss.

What the computer basically does is add and subtract different factors and points to come up with a final number that matches with a value. That value points to what the rate increase or decrease should be. How is this value determined?Many insurance companies use the information or propositions found in the Insurance Services Office (ISO) manual.

The ISO is a statistical and actuarial reporting group. The manual they publish is used by many insurers and agents. This manual helps the insurance company to assign a certain point value to each infraction that a driver acquires.This then becomes part of a company’s algorithm.

This complex way in which to factor rates may be too much for a lay person, such as you or I, to understand but it is indeed understood by the people that set it in place. To make sure that the insurance companies are rating people properly they must file their rates with each state’s insurance department. In this report they must include how they determined their rates as well.

If you are now thoroughly confused about the rating system, the algorithm and/or the filing of the rates you can contact your state’s insurance regulator for more information. A state’s regulator for this is usually, but not always, called the Department of Insurance. Never fear looking up these regulatory departments online is much easier than understanding how the rating system is set up.