How Demographics Can Hurt Your Auto Insurance Premiums

Even if the company you have an auto insurance policy with says that they treat you as an individual, the sad fact of the matter is that everyone is regarded according to an enormous databank of statistics that help the actuaries crunch out the numbers.

The benefits you gain with having one insurance company for a long span of time can sometimes be very overrated. Large corporations are profilers of unequalled stature in the modern world – and among the modern companies, insurance companies are the elite.

Let us take an example of Mr. Smith, as we shall call him, who has been with his auto insurance company for quite sometime. In the last 33 years he has been with the company, he has always paid his insurance premium on time, without fail. The premiums he is paying have gone up over the years, but taking inflation into account will show that he is actually paying less in real terms than when he started. So it is true that the insurance company will reward you if you keep your nose clean.

However, on his last monthly statement, Mr. Smith’s premium has jumped a considerable amount! Now, Mr. Smith phones the company to find out what is behind this latest and very bizarre increase. The nice lady in the call centre tells him that – his zip code has been moved into a higher risk category and that there is unfortunately nothing they can do to lower the premiums.

Now to a typical good customer such as Mr. Smith, this news is quite astounding. Surely his past history, his relationship with the insurance company and the mere fact that he has been loyal to them should count for something? The typical response follows – “Mr. Smith, XYZ Auto Insurers acknowledges your fine record and we always strive to keep customers happy. Unfortunately there is nothing we can do as the latest findings show you are in a dangerous area and we have in fact increased your premiums to benefit you!” Which loosely translated into layman’s English means – don’t complain, it’s done and there is nothing at all you can do about it.

There are – as always – two sides to this story. The insurance company has all the latest data concerning auto related incidences in the country and they use it in the most efficient way possible. It is true that Mr. Smith could now be closer to areas that have recently popped up on the radar as hotspots for car theft. It is true that Mr. Smith might be at more risk of being hit by someone driving through a red light. Surely, though – he should not be punished?

Insurance has always been about shared risk and some people might just view this as the way of the world – something that you cannot get out of. It has always been held to be true that even the safest drivers are not safe from the unsafest drivers. The chance of Mr. Smith encountering one is just more likely and the insurance company want to make sure they are covered – right?

However, the second side of the story – the side no one wants you to know however – is that all companies might try to take advantage of a “locked-in” customer. Someone who has never threatened to move, someone who has never given them any problems, in fact someone who they think wouldn’t even move if they hiked the insurance premium – all in the name of profit.

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