Study Shows How Risk Affects Insurance Premiums


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The National Insurance Crime Bureau published a report recently which flagged the city with the best likelihood of car theft in California to be Fresno. Based on that assumption, Cheapest Car Insurance in California performed a study where they compared the costs of an auto insurance policy in cities with increased vehicle theft and cities with low chances of vehicle theft. Their findings confirm that someone who resides in a safer place will get much better prices for their auto insurance quotes, especially if they want to get comprehensive coverage.

This is due to the fact that several factors are being considered whenever insurance companies establish the prices for their rates and premiums. One of these factors is risk level. Those that live in cities with more auto related crime will have higher premiums. However, it goes beyond that, as people who live in areas of a city with increased traffic and more accidents will get a higher premium than those that live in a less congested area of the same city. Furthermore, the mileage that a car gets on a yearly basis will also affect the premiums, so those drivers that use their car on a daily basis can also expect to pay more for their insurance rates. Finally, the place where the car is stored, whether it is in a garage or not will also influence the costs of the insurance policy. All of these circumstances are considered as part of your vehicle’s risk factor.

During their study, Cheapest Car Insurance in California took the same driver profile, placed it in two different cities which were at the extremes of the crime levels and generated 30 different insurance quotes for a one year using that profile, in order to see the differences in pricing. In order for the results to be as clear as possible the cities chosen had to be as far apart as possible. In this case, Fresno was chosen because it had one vehicle theft for every 94 residents and, on the opposite side of the spectrum, San Luis Obispo, which had only one vehicle theft for every 850 residents.

The results concluded that where the driver lives will seriously affect their premiums. For a basic basic policies, the difference was minimal: only $7 extra for those in the high risk city that wanted a liability-only insurance policy. However, when comprehensive coverage is added to the mix, over a six month period, the difference between the two cities skyrockets to $305. That is a staggering 25% increase in the overall price of the insurance policy for the same theoretical driver, the only difference being the city where they live. Good driver or not, this study shows that risk factors will inevitably have an impact on one’s car insurance premiums.

Creative Commons License photo credit: swansalot

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