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- California is the sixth state to ban car insurance companies from determining auto rates based on gender, according to The New York Times.
- While it could equalize rates for both genders, teen boys are expected to benefit the most with an average 5% decrease in their auto rates.
- Auto rates are determined by a variety of factors, including safety records, driving experience, your career, your vehicle’s safety features, and the cost to repair or replace the vehicle.
California has become the sixth state to ban car insurance companies from using gender to determine rates, reported Ann Carrns of The New York Times.
The move is an attempt to focus on factors that drivers can control, like their driving record, and to prevent unfair and inconsistent gender influences in pricing — some car insurers determined that girls were more high-risk drivers than boys, while others deemed the opposite to be true, Carrns reported.
Hawaii, Massachusetts, Montana, North Carolina, and Pennsylvania have also banned using gender to set rates.
In California, it looks like one gender will benefit the most from this change in law: teen boys.
“Removing the gender factor could in effect equalize rates for inexperienced drivers: Younger men, who have typically paid higher rates, on average might see declines, while younger women could see increases,” Carrns wrote.
“In an economic analysis of the change, the Insurance Department estimated that female drivers with three or fewer years of driving experience were expected to see the biggest impact, with rates going up 6% on average. Male drivers with similar driving experience could have a corresponding decrease of about 5%.”
The analysis was based on 17 companies that comprised roughly 66% of the state’s consumer car insurance market. Carrns noted that actual rates could vary depending on the individual and their chosen insurance company and coverage plan. Insurers will have to submit for review new “gender-neutral” plans by July, Cairns wrote.
Currently, the national average for annual car insurance premiums is $1,365, according to an analysis by insurance information That’s around $113 a month. California exceeds that average, with an annual premium of $1,731 or monthly premium of nearly $145, Business Insider previously reported.
It currently requires car insurers to prioritize drivers’ safety records and amount of driving experience in determining auto rates, Carrns reported, but there are additional factors at play.
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Your career can influence your car insurance payment by as much as nearly doubling it, according to figures from comparethemarket.com, Business Insider’s Lindsay Dodgson previously reported.
“Insurers use a complex algorithm to determine an individual’s premium, with profession making a big impact on the annual cost of an individual’s car insurance,” Simon McCulloch, the director of insurance at comparethemarket.com, said.
“An assumption on the time of day a professional is likely to be on the road, plus the number of hours behind the wheel, may be taken into consideration, in addition to the insurer’s claims experience with each job category,” McCulloch said.
Auto insurance companies also set rates based on a vehicle’s safety features and the cost to repair or replace the vehicle — but the color of the car doesn’t affect the rate, which is a common car insurance myth.
Regardless of the price of your car insurance premium, it’s illegal to drive without it. And aside from keeping you covered in the event of an accident, insurance also has unexpected benefits— like covering damages caused by riots, space junk, and rodents, as well as paying for your pet’s injuries.
When shopping for car insurance, it can be tempting to reduce your rates by choosing lower amounts of coverage or by raising your deductibles. These are, of course, the two most obvious factors that affect the cost of your auto insurance.
You may not realize it, but your overall rate is also affected by many more different factors – some of which you can control and many of which you cannot. However, knowing what affects your rate can help you make a more informed decision when purchasing insurance, and can help you know exactly what to do to lower your expenses.
Your gender, age, marital status, geographical location, and credit score all affect your insurance rates in different ways.
1. Gender and Age
Young men usually incur higher rates than young women as statistically, more male teenagers have accidents than female teenagers. However, older men generally have better rates than older women. Some evidence suggests that older women are in more minor accidents than older men – through the difference in premium costs usually isn’t drastic.
2. Marital Status
Married people tend to have fewer accidents than single people; therefore, getting married (especially for men) can significantly lower your rate. How much your rate decreases depends on your previous driving history – if you are a man who has never been in an accident and has a clean driving record, you could see your rates nearly halved.
3. Where You Live
Because most traffic accidents occur close to home, the area you live in greatly affects your rates. More densely populated neighborhoods with more cars mean you are at a higher risk of accidents, theft, and collisions with injuries.
Repairing your car also costs more in some areas, and some areas have higher rates of theft. Plus, in this economy, many urban areas with high unemployment rates have a lot of uninsured drivers, as many people can’t afford to ensure their cars. Detroit and Philadelphia are two of the most expensive cities in which to ensure a car, as they both have high traffic density and high rates of uninsured drivers.
4. Credit Score
Many insurance companies take your credit score into account when determining your rate. There is no specific point at which your credit score begins to affect your rate, but in general, lower scores mean higher insurance premiums.
Auto insurance companies may also make correlations between a person’s risk of accident and their profession, and they can adjust your premium accordingly if they think you’re more likely to get in an accident. For example, delivery drivers and journalists are on the road constantly and thus are more likely to be in an accident, whereas airline pilots often just drive between the airport and home, and don’t spend much time on the road. Others, such as police officers, paramedics, nuns, and insurance underwriters, often receive a good rate, as they are seen to be more careful than the average driver.
The car you drive significantly affects your rate, since some cars are more likely to be stolen, lack safety features that prevent accidents, or cost more to repair.
6. Safety Rating
Owning a vehicle with a high safety rating means there is a lower chance of needing to pay for your or your passengers’ medical bills – therefore, your rate will be lower. Owning a car with a lower safety rating, however, will usually result in a higher cost.
The safety rating is based on several factors, including the likelihood of the car’s owner getting into an accident, and also how likely a passenger is to be injured in an accident. Safety features such as airbags, automatic seat belts, and traction control help make your car safer, which makes you less likely to get in an accident, as well as making it less dangerous.
7. Vehicle Size
Larger cars are generally safer than smaller cars in an accident. Therefore, many larger cars with good safety ratings have lower premiums than smaller cars with otherwise similar ratings. However, cars with larger engines relative to body size tend to have higher rates – for instance, insurance for a sports car with a V8 engine costs much more than a small car with a V4 engine.
8. Age of the Car
Though the repair costs of an older vehicle are similar to the costs of a newer vehicle, an older car is more likely to be “totaled” in an accident. This is because the cost of significant repairs needed for an older car can often be higher than the vehicle’s entire worth. Therefore, it is likely that the owner would simply discard the vehicle and replace it, rather than paying for repairs.
Since the cost to replace a new car is much higher than to replace an old car, newer cars are not considered to be totaled as often, and generally, have much higher collision coverage rates than older autos. The higher coverage translates to a higher premium for a newer car.
However, if your car is quite old, you could probably drop the collision coverage altogether and simply save the money to buy a replacement jalopy if you get in an accident.
9. Likelihood of Theft
Some cars are more attractive to thieves than others, and a car model that hits the top 10 most stolen list is likely to have higher rates than one that’s not a likely target. But if you have a car alarm or other anti-theft features, this can lower the premium.
Personal Driving Habits
While the above items do influence your overall rate, the most important factor in determining your insurance costs is your personal driving record.
10. Driving History
If you have been in accidents, received any tickets, or made previous auto insurance claims, the insurance company has learned that you’re more likely to make another claim that a similar driver who doesn’t have any blemishes on their record. If your driving record is bad enough, some insurance companies will refuse to give you insurance at all.
Fortunately, these blemishes tend to become less important over time. So if you had some wild years with a few tickets or accidents in your past, making an effort to drive more slowly and carefully in order to avoid future problems can pay off in time. Most tickets and non-injury accidents stop affecting your rate after three years, and injury accidents generally do not affect your rate after five years. A DUI ticket can affect your premium for up to 10 years, however, and many companies won’t insure someone with one.
11. Driving Activity
Some companies can alter your rate based on what you use your car for, the distance you drive, and where and when you drive. Business commuters usually put more miles on their car, and the more you’re on the road, the more likely you are to get in an accident. You may be able to get a discount on your insurance if you don’t drive the car much, or don’t use it to commute to work. Plus, if you can keep your car in a secure location, such as a garage, it’s less likely to incur damage, which lowers your rate further.
Paying for car insurance is a major part of the cost of owning a car, so anything you can do to lower the rate is beneficial for your budget. Many insurance companies also offer additional discounts if you also purchase renter’s insurance, homeowner’s insurance, or other types of insurance as part of a bundle, or if you use alumni or fraternal group associations to get discounts.