Change in Calif. Auto Insurance Emphasizes Difficulty in Determining Rates

    RANCHO CUCAMONGA, CA, August 02, 2010 /24-7PressRelease/ -- The calculation of the cost of car insurance can appear to be a perplexing process to the average consumer. That's because the weight that is placed on a variety of factors used to determine premiums differs with each company. A recently made agreement between a major California auto insurer and the California Department of Insurance, which will lower rates for many customers in the Golden State, has highlighted the level of complexity involved in premium calculation.

The issue that sparked the need for the rate-changing agreement is the extent to which car insurance companies can use geographical location as a factor in premium calculation. All states allow insurers to factor in the geographic location of the driver; a motorist living in a dense urban area will likely encounter more traffic congestion and higher accident rates than a driver who is in a rural area, and insurers calculate risk accordingly.

However, Californians in 1988 voted to approve Proposition 103, which set in place a detailed structure that California auto insurance companies are required to use when calculating premiums in the state. Under the provisions of Prop. 103, insurance providers must put the most weight on three primary factors -- driving history, years of driving experience and number of miles driven annually. In addition to these are 16 secondary factors that can be used. Among these factors are statistics relating to the area in which a driver's car is usually parked. Prop. 103 made it so that these geographic factors must carry the least weight and that driving experience must carry the most weight.

Source: http://www.cga.ct.gov/2006/rpt/2006-R-0542.htm

The recently made agreement, which will reportedly amount to approximately $72 million in savings from reduced auto insurance premiums, puts the insurer's practices in line with current California law.

Even though the primary components of a premium calculation were strictly outlined with the passage of Prop. 103, insurers in the state still assign varying levels of weight to 14 other categories. That means that rates in California, like all other states, vary from carrier to carrier. Websites like http://www.onlineautoinsurance.com/ offer instantly generated, personalized quote comparisons for free, making it easier for a consumer to get more quotes and to make an informed decision about which insurer is the best to go with.

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