Unlocking the Mystery of Auto Insurance Pricing: How Rating Factors Impact Your Premiums

The Role of Rating Factors in Auto Insurance Pricing

Lower-risk drivers should pay less for auto insurance, and premiums have closely tracked broader U.S. economic trends for decades, Triple-I told the U.S. Treasury Department’s Federal Insurance Office (FIO) this week.

Accuracy and Reliability of Rating Factors

In a letter responding to a federal Request for Information, Triple-I said U.S. auto insurers accurately price their policies by using a wide variety of rating factors.  All these factors must conform to the laws and regulations of the state in which the auto insurance policies are sold.

The Impact of Eliminating Rating Factors

Critics of U.S. auto insurer pricing practices have expressed concerns that certain rating factors, such as credit-based insurance scores and the geographic location of the customer’s residence, discriminate against lower-income drivers and minority groups. Triple-I explained that eliminating any rating factor – for whatever reason – forces those with less risk to overpay for auto insurance and allows those with greater risk to pay less than they should for auto insurance.