3 non-driving variables that raise auto insurance costs

Many believe non-driving variables should be left out of auto underwriting, but these factors still affect your client’s bottom line.

Insurance News


A consumer advocate report from the New York Public Interest Research Group (NYPIRG) sparked controversy recently when it revealed three of the nation’s largest insurers use education and occupation as underwriting factors, resulting in significantly higher premiums for traditional “blue-collar” workers even when they boast a flawless driving record.

J. Robert Hunter, Director of Insurance for the Consumer Federation of America and former Texas Insurance Commissioner, rejected the underwriting variables as unfair, saying state-required insurance should be rated on driving-related factors only.

“Actuaries must look for some logical connection to risk,” Hunter said. “Good classifications have both correlation and a good thesis—they need to logically relate.”

Despite that premise, however, auto insurers continue to consider a wide variety of factors when crafting individualized premiums, some of which are more obviously defensible than others. A recent insuranceQuotes.com report revealed three more variables not related to driving that nevertheless have a huge potential to affect rates.

1. Age
For both men and women, the average cost of auto insurance declines each year until age 60. The thesis there is logical, though the disparity in rates is somewhat surprising. A 25-year-old single male, for example, pays an average of 49% less for car insurance than a 20-year-old male. A 25-year-old single woman pays a similar 39% less than a 20-year-old single woman.

After age 60, premiums rise a small percentage each year for men and women.

2. Gender
Perhaps unsurprisingly, female drivers typically pay less for car insurance than their male counterparts. According to the study results, a 20-year-old single man pays roughly 23% more than the average 20-year-old woman for the same policy.

These trends hold true—though with shrinking gaps in payment—through age 30, when average premiums are just slightly lower for men. That trend flips after age 65, where women again have the edge, paying 1% less than men.

3. Marital status
Finally, a policyholder’s marital status can play a large role in how munch they’re paying in insurance. A married 20-year-old woman pays a whopping 28% less for auto insurance than a single 20-year-old woman. The difference for men is about 24%.

Fortunately, however, the gap narrows with age. By age 25, married women are paying just 7% less than single women and married men are paying 9% less than their married counterparts. The gap gets even smaller after that.

The insuranceQuotes.com findings are true in all states apart from Hawaii, where laws restrict car insurers to use age, gender or length of driving experience to set rates.

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