Use of Gender and Background for Auto Insurance

One of the worst things a company can do is to discriminate their customers based on their background and gender. Even suspicion of discrimination can ruin the reputation of a company. Nonetheless, it is widely accepted that car insurers can use gender as one of the factors to determine risk and premiums charged. Further factors that look at the background and current financial status of the applicant is accepted as well. How could this be possible and why nobody says anything?

Technically, companies cannot refuse to offer policies to someone due to background, gender or age. These are considered discrimination. However, they can charge you more because of any of them and that seems to be fine. How could they justify their action and explain themselves?

Companies operate on a simple principle of risk. For whatever reason you appear to be more riskier than the other person they can charge you more money. In order to determine the risk they group drivers and look at accident statistics and try to find a relation between claims and age, gender and background of drivers involved in.

car insurance for ladiesTherefore, they can say that they are charging more to male drivers because they are the ones that are causing most of the accidents, not female drivers. Based on this logic alone it appears that ladies deserve lower rates and they get them in most cases. Sometimes these figures can really be strong. In the case of accident figures, about 95% of all fatal accidents are caused by male drivers. When you put it like this you feel justified if companies hammer male drivers with high premiums.

Another good example is the background. Many companies offer special discounts based on applicants background. For example, certain professions get as much as 15% discounts from some companies. Furthermore, home ownership, living in a nice part of the town and even education levels can be used to offer discounts to certain groups while people outside this group is getting charged more.

Looking at credit history of the motorists is widely used factor for premium calculations as well. Again this past through many state authorities and accepted as a legitimate determinant. Companies are allowed to pull credit score of applicants from credit agencies and use it in their risk analysis. They use different formulas than the ones used by lending institutions. It is not considered as a credit pull and doesn’t affect your score.

Overall affects of all these considerations would mean that a well educated female driver who lives in a nice neighborhood will be charged much less than the male driver from blue color background. In the same way, a well off person with perfect credit score would be paying a lot less than someone who has been struggling with his/her bills.

At least, you could make the competition work for you. A motorists who shops for the best vehicle insurance deals can save a lot more money than the one who is with the same company for years. Next time you need a policy you should remember this and get a few quotes before think about loyalty and staying with the current provider.