How insurance companies determine auto rates

If an insurance company wants to change its rates, it must submit its request to the Office of the Insurance Commissioner. The filing must include enough statistical, financial, and other information to show the change is necessary. If the company can show the requested change is justified and we determine the proposed rates are not excessive, inadequate or unfairly discriminatory, then according to state law, we must approve them.

How rates are determined
Insurance companies can rate all licensed drivers in the household — including your spouse and other members in your household, whether or not they are related by blood. This includes roommates. Insurance companies calculate auto insurance rates by starting with a dollar amount (base rate). Your base rate is adjusted according to certain factors such as your age, sex, marital status, driving pattern, claims history, geographical area, credit history and the make, model and year of your vehicle.

Your age: Statistics show that drivers under age 25 are involved in more accidents than adults between age 25 and 65. Companies generally consider them a higher risk. Families with younger drivers in the household may pay more for their insurance. Statistics also show that senior citizens present a higher-than-average risk to insurance companies.

Your sex: Insurance companies can discriminate on the basis of sex if that discrimination is based on statistical evidence, proving one sex is a higher risk. For example, young men — especially those under age 25 — are involved in more accidents and typically pay higher insurance rates.