Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Oct 18, 2020

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Key takeaways...

  • Many different factors affect what determines your auto rates, such as driving record, car model, credit score, etc
  • All car insurance companies employ internal departments of mathematical experts who spend hours analyzing data and creating, refining and introducing components to the formula for calculating car insurance premiums
  • If you are denied car insurance coverage you need to (a) find out the reason why and (b) expand your car insurance comparison search to at least a handful of auto insurance providers

The job of a car insurance company is to create a profit winning formula for its shareholders much like any industry.

The main formula for success in insurance, however, is simply collecting more in policy premiums than the amount of money paid out on claims.

This formula for arriving at a profit, however, is very complex and unique to each car insurance company. Car insurance rates differ from one car insurance company to another but why?

To find and compare auto insurance rates, enter your ZIP code into the FREE quote tool above!

Table of Contents

What is policyholder risk?

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Policyholder risk is the result of analyzing all factors a car insurance company uses to assess your risk for potentially filing a future claim.

Car insurance companies often evaluate more than 100 items for every applicant in order to finalize a risk profile and assign car insurance premiums. Some of these factors include:

  • Where the vehicle is registered
  • How the vehicle will be used
  • Your driving record
  • Model of the car
  • Your credit score
  • Your age/experience behind the wheel
  • Prior claims history
  • Amount of additional drivers in the household

Almost all factors are even studied down to the very basics such as your zip code of residence, the color of the vehicle and more.

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Who determines car insurance risk?

All car insurance companies employ internal departments of mathematical experts (Actuaries) who spend countless hours analyzing data and creating, refining and introducing components to the formula for calculating car insurance premiums.

In fact, actuary jobs are some of the most wanted and highest paid jobs in America with salaries potentially exceeding $100,000 straight out of college!

Can a car insurance company declare a driver high risk and deny insurance?

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Absolutely. While states require drivers to carry minimum mandatory car insurance coverage requirements they do not require car insurance companies to insure every applicant.

If your driving history has a DUI charge or countless reckless driving charges or other high-risk features car insurance companies may very well deny your application for auto insurance.

Some states, such as Oklahoma, have state-funded programs to provide high-risk drivers with insurance should they be denied car insurance however many more states have no such requirement.

If you are denied car insurance coverage you need to (a) find out the reason why and (b) expand your car insurance comparison search to at least a handful of auto insurance providers.

How do I start car insurance comparison?

Thankfully the internet has empowered all consumers to have access to a wealth of information online including lists of local car insurance companies.

Drivers should learn about auto insurance, make note of the coverage they need and then look for a list of car insurance companies in their particular state.

Ready to compare car insurance companies? Get FREE car insurance quotes online today!

References:

  1. http://www.iii.org/article/nine-ways-to-lower-your-auto-insurance-costs
  2. https://www.iwillteachyoutoberich.com/blog/tip-13-negotiate-your-car-insurance/
  3. https://www.thebalance.com/lower-your-auto-insurance-premium-1387716
  4. http://www.beanactuary.org/what/
  5. https://www.forbes.com/sites/robertharrow/2016/04/25/is-your-credit-score-affecting-your-insurance-premiums/#160bdf3720df