Car insurance companies use different techniques of assessing the risks that they are taking for insuring its policy shoppers. But all of these different techniques and procedures are collectively included in risk pooling. Risk pooling is the generic way of policy providing companies to assess whether they are making an investment or a liability by insuring specific policy shoppers. This process is also the key for getting lower premium rates; simply because knowing the weight of these factors to premium rate determination can allow policy shoppers to get cheaper policies.
- Age is considered as one of the most common indicators of safe driving. As supported by statistical data, insured drivers between the ages of 25 to 50 are less likely to be involved in accidents as compared to younger generations such as student drivers.
- Gender plays a role in the determination of premium rates since it is proven that women are less likely to be involved in road incidents. This gives them lower premium rates as compared to men.
- Married individuals pay fewer premiums as a part of the discounts because of marital status.
- The residence addresses of policy shoppers play a great part in the determination of his or her premium rates since there are places which are riskier as compared to others. Policy shoppers with garage in their residences are most likely to pay less since their cars are not much exposed to theft and vandalism.
- Driving violations also indicate the risks that the car insurance companies are taking in behalf of its policy holders. Those who have more traffic violations are seen as riskier which will later translate to higher premium rates.
- Safer vehicle models can make premium rates go down dramatically/ Sports cars, SUVs, and luxury cars on the other hand will increase the premium rate of its owners.
- Credit scores and credit reports also bear a lot in the determination of premium rates. Having nor and bad credit history will result to higher premium rates, since they are indicators of poor credit worthiness.
- The type of occupation that the policy shopper has also bears a huge weight in the computation of premium rates. The jobs which are considered to be riskier will automatically mean higher premium rates.
- Academic excellence also has a great bearing in the computation of premium rates since studies show that those who excel in classes are less risky than those who did not excel much.
Aside from these major factors, additional factors such as driving distance to work, miles driven each year, years of driving experience, business use of the vehicle, theft protection devices and multiple cars and drivers are also considered by insurance companies in the computation of premium rates.