How Does My Driving Record Impact My Car Insurance Premium?
Insurance company actuaries and mathematicians build sophisticated models to price auto insurance policies. When they construct these pricing models, they research risk characteristics and try to determine which of those risk characteristics appear to be the most valuable for predicting future losses. Some of the risk characteristics that have been proven to be of high importance in predicting future loss activity are:
- Your credit history – drivers who pay their bills in a timely manner tend to be more cautious drivers;
- Your history of moving violations and accidents (your driving record) – if you have been a frequent offender in the past, you are more likely to have losses in the future. Your driving record includes your history of Driving Under The Influence – drivers with such offenses, particularly with multiple such offenses, tend to have much higher loss costs;
- Number of years of driving experience – youthful and inexperienced drivers tend to be involved in more accidents;
- The type of vehicle you drive – performance vehicles, for example, may have higher loss costs (particularly with youthful or inexperienced drivers);
- How many miles per year you drive;
- Where you live – driving in a densely populated city is generally higher risk than driving in a very rural area;
- Your age, sex, and marital status.
In addition to determining which risk characteristics are highly predictive of loss performance, actuaries and mathematicians also study how these variables interrelate with each other. For example, having two speeding tickets in the past three years might increase your chances of an insurance claim by 10%. Having poor credit might increase your chances of an insurance claim by 10%. However, having both two tickets and poor credit might increase your chances of having an insurance claim by 50%. There is a lot of high powered math that goes into creating the sophisticated pricing models that insurance companies use. Because of the interrelation between the risk characteristics (called covariance) it is difficult to say how much one speeding ticket might impact your insurance premium. As shown in the made up example above, it depends on your other risk characteristics.
While your driving record can positively or negatively impact your auto insurance premiums, it is always important to talk with your professional insurance agent about the possible discounts that you may qualify for. Make sure you are taking advantage of those for which you may be eligible. To read more about the discounts you may qualify for, click here.
Why Is Your Driving Record Predictive Of Future Losses?
While there is always some degree of luck involved in whether you receive a ticket or are involved in an accident, your past performance on the road is generally indicative of your future performance. Your aggressiveness behind the wheel, attentiveness, degree to which you use your cell phone, your willingness to drive in rough weather, and your willingness to drive while under the influence or late at night are all behavioral traits that tend to be fairly consistent over time. Therefore, your past driving record is usually a good indication of your future driving record – and of your chances for having insurance losses.
What Is A Driving Record?
Your driving record is a combination of two things: your history of accidents and violations (which insurers get from the state department of motor vehicles), and your insurance claims loss history (which insurers get from their own records and from databases that insurers share with each other).
How Long Do Violations and Accidents Remain On My Record?
States have different time periods as respects how long accidents and violations remain on your driving record. In general, it ranges from 3 to 10 years. However, the states also vary as respects how long they allow an insurer to count a prior incident against you when pricing your policy. In general, the states limit the ability of insurers to surcharge your policy for accidents or violations to those accidents or violations that occurred within the most recent 3 to 7 years. If you are in a state with a seven year ability to surcharge, and you have a number of accidents and serious violations, you may face significant surcharges for a long period of time.
What Aspects Of My Driving Record Are Most Likely To Result In Significant Premium Surcharges?
In general, the types of infractions that demonstrate a lack of judgment or recklessness will drive the highest surcharges. Examples include:
- Reckless Driving;
- Driving Under The Influence/Implied Consent;
- Leaving The Scene Of An Accident;
- Vehicular Homicide;
- Major Speeding Violations (20+ over the limit);
- Fleeing A Police Officer.
Repeat speeding offenders will also likely be hit with a significant policy surcharge. Drivers who speed often tend to be in significantly more accidents.
As mentioned earlier your driving record also includes your insurance loss history. Your insurance company keeps track of your reported losses. Your insurance company also likely has access to a shared industry database where insurers share loss history with each other. So, your insurance company probably has a complete record of your loss history. (Click here for information on the shared database, C.L.U.E., that many insurers use.)
Most insurers look backwards between 3 and 7 years when assessing your driving record. If you have multiple prior losses, you will likely face significant surcharges. While a number of insurers have rating plans with “first accident forgiveness,” where they do not surcharge the first accident you have with them, subsequent accidents will likely result in significant surcharges.
How Do I Improve My Driving Record?
Your driving record is historical. The way to improve it moving forward is to change your behaviors and habits.
- Obey all traffic signals and signs;
- Don’t drive aggressively;
- Check cross traffic twice before proceeding through intersections (and remember to look for pedestrians and not just cars);
- Do not speed or travel at unsafe speeds for conditions;
- Don’t be a distracted driver – don’t text, email, read, put on makeup etc. while driving;
- Follow the two second rule for safe following distance;
- Make sure your rear and side mirrors are properly adjusted;
- Make sure your tires have adequate tread remaining;
- Don’t drink and drive;
- Reduce your driving at night and during inclement weather to the degree that you can.
One way to reduce aggressive driving is to make a game out of increasing your gas mileage. If your vehicle monitors your miles per gallon, you can challenge yourself to see how high you can get it. Aggressive driving burns much more fuel. By playing this game, you will reduce your aggressive driving while saving money on gas and reducing your vehicle emissions.
Can My Insurance Company Non-Renew Me If My Driving Record Is Bad?
Yes. Insurers have eligibility standards that they file with the various states. If you no longer meet those standards due to your driving record, your insurance company may non-renew you. If your driving record is bad enough, you may no longer meet the eligibility requirements for standard insurers and may need to seek coverage in the non-standard auto insurance marketplace. In the non-standard marketplace, pricing is often high and coverage is often restricted.
The rules on pricing automobile insurance vary by state and are complex. You should consult your professional insurance agent to find out what the rules are in your state and to determine the best coverage and pricing options for your individual situation.
Other Enhanced Insurance articles related to Insurance Premiums:
Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.
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