How Customers Affect their Car Insurance Premium
There is a global misunderstanding that the insurance premium is determined by insurers without any benchmarks or guidelines. Well, that is not the case. Insurers go to great lengths while assessing the customer's premium. It involves extensive background research, going through financial statements, and numerous meetings. Therefore, if you have a higher premium than your friend, it does not mean that the insurer acted arbitrarily. Instead, they must have found certain information that led them to give you a higher premium.
This misunderstanding is quite reasonable. After all, the insurance provider does not disclose the reasons while setting out the premium. This makes most customers believe that the process is futile and meaningless. Another interesting to note is that car owners themselves are oblivious to how they affect the premium. Our readers & customers would be surprised to know that the premium is also determined by the car owners. Let’s take a look at how this is done.
1. How Far You Drive
Most car owners would not know about this but how far you drive does have an impact on your premium. During meetings, the representative might casually ask for what purposes is the car used for? If the answer is occasional driving, then the premium might be lower. On the other hand, if you answer that the car is used for daily transport, the premium would be higher. The reason is that the car will be on the road more, meaning that there is an increased likelihood of things going wrong. Many car insurance providers in the UAE and world over have gone digital. It means that car owners can easily get insurance cover online. Therefore, you might not be asked such questions if you opt for online insurance.
2. Area of Residence
There are several reasons why auto insurance providers ask for residential details. One reason is to determine the premium. You might be surprised to know that many insurance providers in the UAE keep details on claims per residential area. For example, they would know the number of accidents in Area A, car thefts in Area B and so on. They use this data when determining the premium. Therefore, if you live in an area with a high number of claims, the premium would be higher.
3. Vehicle Type
Insurance providers also keep data on car models. Therefore, the type of vehicle you own also impacts the premium. For instance, certain vehicles are safer than others. They have built-in features that ensure a safe driving experience. For instance, many modern vehicles come with collision warning systems. As soon as they think that a collision is about to happen, brakes are applied automatically. Likewise, steering control is another feature that prevents swerving. All these features reduce the probability of accidents. Hence, you might end up with a lower premium. Similarly, car thieves prefer certain types of car models. If you own that mode, unfortunately, the premium will go up.
4. Previous Claims
When applying for a new job, the employer might ask for references of previous employers. It is done to get an idea about your work ethics and skills. It is quite a natural thing to do. After all, the employer has to pay you money. Therefore, they have to ensure that they are hiring the right person. In a similar manner, insurance providers also ask about car owners about their previous claims. If a person has no or very little claims, it means that they are a safe driver. The insurance provider takes this into account and gives a low premium. On the other hand, if your driving history is full of claims, expect a higher premium. The insurance company would consider you as a risk and they offset it by offering higher rates.
5. Previous Driving Convictions
A car owner who has a long list of driving convictions would be given a higher premium. People with driving convictions have a higher tendency to claim insurance than those with a clean driving record.
6. Credit History
Drivers with a good credit score can get low premiums as compared to drivers with poor credit history. Not all countries allow insurance providers to ask for credit history.
7. Gender, Age, Marital Status, Profession
Basing a premium on gender is considered a violation of equality laws which states that no discrimination can be done based on gender. However, insurance providers have found ways of bypassing it. Similarly, age is also a factor in determining the insurance premium. Young drivers are charged more as they are considered more aggressive. Similarly, available data shows that married drivers have lower claims than single persons. Thus, the premium for married drivers would be lower. Certain professionals are associated with higher risks and are charged higher premiums.
8. Number of People Driving the Vehicle
Car insurance in UAE and various other countries are taken out on the car instead of the person. Therefore, insurance providers enquire about the number of people who will be driving the car along with details mentioned in Point 7. If the number of drivers is high, the rate would be high. Likewise, if they are all single, it would further go up.
Wrap Up
This concludes our article today. We hope that you are now more informed about how car insurers determine the insurance premium. If you want the rate to be lower, drive safely. Lastly, PitStopArabia recommends contacting multiple providers at once and asking for discounts to get the best rates.