OT. Kinda. Long.

[Howard Agency]

Insurance rates are figured in rare and mysterious ways. Here's a blurb from our web site describing how rates are made. Quick and dirty, applies to CA, but will give you an idea.

How does an insurance company determine my auto premium?

They track their losses by driver, car, and location. All combine to produce your rate. You are profiled by age, years of driving experience, tickets and accidents, and how much you drive. Cars are by value, cost of repair, and frequency/severity of losses. The most controversial portion of the rating system is by territory. Politicians make press with this, call it redlining, but the fact remains that densly populated areas have more traffic and therefore, more claims.

Hey, that's not fair, I've never had an accident!

Go to the head of the class. That's the flaw in any averaging system (know anyone with 1.7 kids?) But the laws of large numbers take over: a hundred people who are 40, with no tickets, drive Camry's, and live in the country have lower claim costs than the hundred who are 20, have two tickets, drive Corvettes, and live in the city.

But there are other factors, too.

After a 5 year legal battle, the California Department of Insurance has ruled against Mercury (and several other companies) that offer a 'persistency' discount.

This discount applies to policyholders that have kept their coverage in force for the last x number of years; longer = more discount. The companies say this has been one good indicator of claims frequency, but the Department ruled that since a new customer was charged more and this was tantamount to a surcharge on those who did not qualify. All I know is our best long time clients will be taking a hit.

Don't get me wrong; this is good for me. The rates go up and I make more money. The rates will be lower for new clients, so we will attract more clients and grow. But the logic of 'unfair discounts' just eludes me. Other discounts on the line are 'good student' (hey, ya charge my kid more cauz he cant speel??) homeowners, alarm systems, and more.

I'm gonna go read Ayn Rand again.

[Joe Bob]

They'll figure out something....they always do. Insurance companies aren't rich fer being dummies.