Even though insurers set their own criteria for calculating premium rates, there are certain key factors that affect how a person will be rated. Knowing what these factors are not only gives you an idea of where you stand, but also allows you to find an insurer that bests suits your needs.
While driving record carries a lot weight from an insurer’s perspective, other things also factor into rate determinations. Ultimately, risk (or the lack thereof) dictates how low or how high a premium rate will go. That being said, insurers must still abide by government-set laws and regulations when setting premium rates.
Canadian Loss Experience Automobile Rating
In Canada, insurers follow a country-wide set of guidelines known as the Canadian Loss Experience Automobile Rating or CLEAR. Administered by the Insurance Bureau of Canada, these guidelines place a heavy emphasis on vehicle types with specific groups of vehicles rated according to their associated risks.
CLEAR groups cars according to the following variables –
- Safety features, such as theft deterrent systems
Based on past performance, CLEAR looks at the likelihood a claim will be filed and the cost of repairs when rating each vehicle or group type.
These guidelines greatly affect provinces that have a no-fault insurance requirement to the point where 80 percent of your premium rating are assigned by CLEAR guidelines. This information can be useful when it comes time to make a new car purchase. In effect, drivers can help lower their rates by simply purchasing vehicle types that have low-risk profiles.
Factors Affecting Premium Rates
- Where a person lives, such as a big city versus a rural area, affects rates since accidents and thefts are more likely to occur in a city.
- Car usage, in terms of whether you use it for long distance driving or going to work every day can raise or lower premium rates.
- As far as driving record goes, someone with no accidents or speeding tickets will pay considerably lower rates than someone with multiple accidents or violations.
- Type of car
- Drivers fall into different statistical groups based on things like age, location and gender. The claims history of each group has a bearing on how insurers figure your premium rates.
- Government regulations
- Competition within the insurance marketplace also has a bearing on premium rate calculations.
In addition to these factors, each insurance company has its own history of claims to go by, which accounts for why different insurance companies charge different rates for the same types of coverage. This bodes well for the consumer as online quote comparisons can quickly reveal where the cheapest rates can be found.
To a certain extent, consumers have control over most of the factors insurers use to calculate car insurance premium rates. By modifying one or more of your most risky factors, you can expect to pay lower insurance rates either through your existing insurance company or with another insurer. This type of information gives consumers the ammunition they need when it comes time to shop for a new car insurance provider.