Are Arizona Car Insurance Rates Criminal?
September 3, 2009
I saw a question online that asked why insurance companies are allowed to get away with criminal practices. I thought that was a funny question but understand the frustration and anger many people experience with their insurance companies. We hear these complaints when people call in for quotes.
While it may seem criminal for a company to raise your rates if you move to an area with more claims, have a teenage driver, or because you had an accident, there is a lot more to your rates than the insurance company wanting to take a knife and cut out your heart.
Insurance companies pay a lot of money for research and track every bit of claims activity they have on their policy holders. They don’t look at your individual policy and say, “Did you notice Joe in Phoenix Arizona looks like he should be charged more because of (name reason here)? Let’s raise his rates.” In fact, you as an individual are probably not even noticed by the company.
Insurance companies lump you in with a group of people and don’t rate “you” as an individual. The principle is to have a large pool of people pay a little amount each year to pay for the few people of this pool that have large claims. Generally, this is where people get ugly about the idea of insurance because they don’t want to pay for other people’s claims. What they don’t realize is you don’t need to buy insurance for anything…really.
If you want, the state of Arizona requires you to carry liability insurance on your vehicles in case you’re at-fault for an accident. However, you can post a bond or proof of financial stability and put $40,000 away for the state minimums, you don’t need to buy insurance. However, if you want to finance a new car then the lender will require coverage but you can pay cash for your car and not buy insurance.
Now, back to the criminal nature of insurance companies. Here’s a list of some of the important rating factors:
- The zip code you live and garage your cars in
- Your financial stability (aka your credit information)
- Do you have prior insurance and what are your prior liability limits?
- The driver’s ages
- Accidents and claims
- Married or single
- Types of vehicles insured
- Miles driven annually
- Some even use education level and current career as rating factors
This list isn’t every rating factor for all insurance companies but it’s a ‘big chunk’ most companies use to start rating your policy. Credit, prior insurance, and where you live are the big factors to consider when starting to rate your policy and establishing the base rate. Tickets and claims are only discounts or surcharges against that base rate and, while they’re important, they’re not the fist place insurance companies look to start your rates.
This is where it can be very important to shop your rates occasionally. While the company you’re with had great rates when you switched to them, they may have had many losses and other factors that have justified them to creep your rates up over time. There are other companies that may have lowered their rates or have a better loss experience for you and your situation which would allow you to save money today. So, don’t be afraid to shop around occasionally. We make it easy here so take 3 minutes and fill out our quote form to compare your rates.