I Bet You Didn’t Know How Auto Insurance Rates are Calculated

Someone using a calculatorAuto insurance companies do not disclose to the public their formulas used to calculate premiums. Consumer Reports was curious about how it works. They created different profiles all with standard data: perfect driving history, vehicle, miles driven annually, coverage, and excellent credit, then tweaked some factors like age, gender, teen drivers, marital status, etc., one quote at a time to determine how insurance companies really determine your premiums.

The Results are Shocking!

The amount you pay for auto insurance hinges more on your credit score than your driving history! Since the 90s insurance companies have been analyzing credit scores to predict who will file a claim. California, Hawaii and Massachusetts are the ONLY states that prohibit use of the credit score in setting insurance premiums.

Consumer Reports found an average difference of $214 between drivers with good and excellent credit. In some states the difference was as high as $526 per year and others as low as $38.


Adding a moving violation in the past year to the record of a driver with excellent credit only increased the premium by $122 per year, but the same driver with no moving violations and a change from excellent to good credit saw a price hike of $233!

So Much for Loyalty Rewards

Think you are getting a good loyalty discount for staying with the same company for 20 years?

Although plenty of companies boast of discounts for loyal customers, others may actually penalize you for sticking with the same company. Some insurers are testing your sensitivity to price by implementing periodic increases to see if you will call other companies to compare prices. They jack up the prices because they know you think you are getting a great deal for being loyal!

As it becomes time to renew policies, make sure you are getting your insurance at a fair rate. Call other providers for quotes to compare prices whenever you are up for renewal or plan to change your coverage.

Not all companies take part in this. Check out the Consumer Report and see for yourself.

If you are curious about your insurance policy and whether or not you have enough coverage, we offer a FREE Florida Auto Insurance Review. Simply download our form and mail it in or email it to us and we'll let you know.

Jim Dodson
A Florida injury lawyer, family man and avid cyclist who clients have trusted for over 25 years.
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