Auto insurance premiums calculations seen as unfair

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Survey shows that drivers and insurers are not aligned in their concept of how rates are decided.

According to the latest results of a Consumer Federation of America (CFA) study, auto insurance companies and policyholders have a very different opinion about what should and should not be used to calculate a driver’s premiums.

There were 1,010 people who participated in the nonprofit consumer watchdog group’s survey.

Most of the respondents said thAuto Insurance Surveyat they felt that their premiums should be calculated based on their actual driving history and behaviors. At the moment, auto insurance companies use a number of different factors – including those that are not directly related to driving – in order to set their rates. These can include everything from a customer’s ZIP code to his or her credit history, depending on state regulations and the individual insurer.

New Hampshire is the only state that does not require drivers to carry proof of their auto insurance or financial responsibility.

The following is the percentage rating for a number of the calculation factors that are commonly used by auto insurance companies, which were deemed either “somewhat fair” or “very fair” by the survey participants:

• Gender – 30 percent
• Credit score – 31 percent
• Level of education – 31 percent
• No previous auto insurance as no car was owned – 32 percent
• Occupation – 33 percent
• Location of residence – 45 percent
• Number of miles driven – 61 percent
• Age – 66 percent
• Number of years with a driver’s license – 74 percent
• Moving violations (for example, speeding tickets) – 85 percent
• Traffic accidents (in which the policyholder was at fault) – 87 percent

According to the spokesperson for the CFA, Stephen Brobeck, “Insurers are permitted to use factors such as education and occupation in setting prices even though these factors have nothing to do with driving and discriminate against lower-income drivers.” He went on to state that the premiums that a driver pays should greatly reflect factors over which drivers have some control, and which will have a direct impact on the auto insurance costs faced by insurers. These include miles driven, traffic accidents that were caused by the driver, and speeding tickets.

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