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Road rage, region, the colour red: Factors that affect your auto insurance premium

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You just graduated from college and you’ve decided it’s time. You’re 22 years old and you need your own car. How long will you be bound to these shackles of having to take others’ schedules into consideration? You want your freedom and you want it now. You also want it in the shape of a fire-engine red Mini Cooper.    

So you’re going to buy a car. By which, of course, I mean that your parents are going to buy a car for you. What’s the first and possibly most important thing that you’re going to need? (Hint: it’s not racing stripes). It’s auto insurance. And boy is it going to cost you. More so because of your age and your, rather expensive, tastes.

Auto insurance companies, and insurance companies in general, are master statisticians and they must weigh the costs of having you (someone who enjoys an overly intimate relationship with their accelerator) as a customer. This includes taking into account pretty much everything about you - down to what colour shoes you wear.

 

Statistics on various groups (categorized by age, gender, marital status etc.) allow insurance companies to classify you either as a high or low risk client -- The higher the risk, the higher the premium.

WHO OFFERS WHAT

 

Royal Sundaram

HDFC Ergo

ICICI Lombard

Bharti AXA

Driving experience

Yes

Yes

Yes

Yes

Age

No

Yes

Yes

Yes

Gender

No

Yes

No

Yes

Region

Yes

Yes

No

Yes

Type of car

Yes

Yes

Yes

Yes

Occupation

No

Yes

No

No

Car colour

No

No

No

No

Safety features

Yes

Yes

Yes

Yes

Fuel option

Yes

Yes

Yes

Yes

Parking

No

No

No

Yes

For example, younger males, say from 18 to 25 years old, are considered a higher risk than females of the same age. No, they’re not just out to get you. Statistics prove that younger males drive more than younger females and take more chances when behind the wheel.

Due to the various factors that must be taken into consideration, “no two car insurance premiums can be and will be the same”, says Ajay Bimbhet, Managing Director of Royal Sundaram Alliance Insurance Company.

Similarly, no two insurance companies will place the same amount of emphasis on all the same factors. For example, according to head-strategist Mukesh Kumar, HDFC ERGO takes into account factors relating both to the type of car and the driver’s profile. However, ICICI Lombar focuses more on the vehicle itself rather than say, the gender or occupation of the driver, says Sanjay Dutta, head of customer service.

 

1. Past driving record and experience:

This is the obvious one. Insurers will look back 3 to 5 years. Accidents and major violations will count against you but all those parking tickets you and the cop “came to an agreement” about, will not. Additionally, the longer you’ve been driving, the less of a risk you (hopefully) are.

2. Age:

For insurance purposes, age is a direct predictor of recklessness. The younger the driver, the higher a risk he is. It is also an indicator of your driving experience. Both ICICI Lombard and Bharti AXA offer reductions if a driver has had over 5 years of driving experience.

3. Gender:

Women are statistically safer drivers. Let me say that again: women are statistically safer drivers than men. Got that? Good. Enough said.

4. Region:

Locales with higher rates of accidents or theft can result in a higher premium.

5. New vs. used cars:

There's a simple formula when it comes to assessing insurance premiums on cars: The greater the value, the higher the premium. (This is the part where you have to decide whether impressing your friends is more important than getting a car at all). Also keep in mind that having a used car means that a lesser proportion of the expenses can be claimed from the insurance company.

6. Occupation:

How much you use your car is often directly related to your occupation. Generally speaking, people in sales may have to travel more often than people with more sedentary jobs. There are also some interesting statistics here. Occupations that require a meticulous nature and attention to detail (scientists, pilots, even actors) may translate to safe driving habits and thus pay lower premiums. This starkly opposes the sometimes exorbitant premiums paid by those who have high-stress jobs and face sleep deprivation (doctors, lawyers, executives).

Bharti AXA has a slightly different take on this one. According to CEO Amarnath Ananthanarayanan, the occupation of the driver is secondary to whether the car is chauffeured or self-driven.

7. Car colour:

Statistics show that the colour of the car is a proxy for buyer behaviour and can usually accurately determine the nature of the owner. White cars are often bought by middle-aged or older individuals who just want to get home in one piece (otherwise known as the tiny specks in your rear-view mirror shaking their fists going “grumble grumble young whippersnappers! grumble grumble”.) Red cars, on the other hand, are the ones preferred by the rash, young whippersnappers (otherwise known as you).

8. Safety features:

The better the safety features, the safer the car. Drivers who install anti-theft devices, air bags, cruise control, and tyre pressure monitoring systems will benefit from a lower auto insurance quote, since they’re reducing the risk of theft and in-car injuries.

9. Fuel option:

The premium for cars that run on petrol is less than the premium for those that run on diesel, CNG or LPG.

10. Parking:

If a car is parked in a garage, the chances of its bearing scratches and dents will be lower than a vehicle that is habitually parked out on the street.

This is just the beginning of a long list of factors insurance companies must consider for each of their customers. There is no auto insurance company that offers the lowest premium to everyone. And the same company that offers you the lowest premium now may not be the same one in 6 months. But, somewhere out there in the great beyond, is an insurance company that offers the lowest premium to you specifically. You just have to find it.