Auto insurance rates vary significantly, but a recent survey sheds some light on the methods that agents often use to determine a driver’s monthly premium. Many of the metrics have absolutely nothing to do with driving habits.
Most all people assume that companies offer a loyalty discount, but the opposite is often true. Some companies raise rates for customers who have had their policies for more than 15 years; the theory is that these customers do not shop around. In a similar vein, some companies use a statistical buying analysis (price optimization) to determine how much of a rate increase certain customers will tolerate. In addition to auto insurance shopping habits, a company may consider the number of luxury items that customers purchase. Finally, a low credit score often means higher rates, as the firm assumes that people with money problems are more likely to file fraudulent claims.
In California, insurance companies cannot legally perform a price optimization check or consider credit scores.
The restrictions on insurance companies in The Golden State are basically a two-edged sword. While it’s a good thing that companies set rates on how you drive as opposed to who you are, traffic tickets are about the only way for the company to assess risk, so their effects are magnified.
Texting While Driving: Although it is a non-point violation, this infraction still appears on your driving record if you’re convicted. Statistically, distracted driving is about as dangerous as drunk driving (although if you quit texting or get off the phone, you’re immediately back to normal. That doesn’t happen when you have been drinking alcohol) and some companies will raise your rates commensurately.
Speeding: Some companies may overlook one ticket for 15mph or less over the limit for a valued customer, but two or more in three or fewer years causes up to a 50 percent rate increase.
As a rule of thumb, the actual price of a California traffic ticket is twenty times the base fine, thanks largely to higher insurance rates. The lookback period is usually at least three years, and can be much longer, in some cases.