Education of motorists does affect the premiums they are charged for vehicle insurance. There are various studies that show the rates can be lower for people with university degrees or a respectable profession compared to high school graduates with low income jobs. This post will look at why and how it became relevant. So, if you have it why not see if you can save because of it.
Changes in Factors Affecting Vehicle Insurance Rates
Lately companies use many factors that area not related to driving. These are mainly based on extensive studies on past claim and accident statistics. When they see a consistent relation between claims and certain input they may include it in programs. Since the calculations are done by computers they can include much more data in quote programs.
As the competition in the market intensifies carriers have to judge the risk accurately. If they over price they lose the competitive edge and they lose money when they are too cheap. Adding some more variables into the equation allow them to be sharper in calculations. When they offer extra discounts to certain people it does not mean that the others will lose out. It just means that they cannot get the particular discounts if they do not make the cut.
Is It a Discrimination or Is It Even Legal?
State and federal laws against discrimination due to age, color, sex and occupation and background protect consumers. The last two relates to it directly. This means that companies cannot refuse to cover, renew or cancel a policy based on these details. Nonetheless, they are allowed to differentiate rates using many factors like age, gender, occupation and credit history.
They have problems in some states for using various determinants. However, they are expected to justify decisions to include these factors like education and profession. It must be based on actuarial data and clear evidence must be shown.
Companies make decisions based on the probability of suffering a loss due to claims. They cannot be choosy for other reasons. If people with degrees caused a lot more accidents they would have paid higher premiums.
Studies Supporting the Use of Education as Indicator
There are various researches on various non-driving related factors. For example Federal Trade Commission (FTC) studied the effects of credit-based insurance scores on possibility of claims and they found a strong relation. Therefore, use of credit scores is allowed in most states.
New Jersey Department of Insurance carried out a study on use of education and occupation in premium calculations. It concluded based on the detailed loss data that claim levels were different. Therefore they would not have any objection to use of such information.
When someone is getting cheap auto insurance rates because they finished university it doesn’t mean that you will be penalized for it. Maybe you will get enough discounts and affordable prices for other reasons.
Motorists should keep in mind that there are many companies that either do not care much about education or do not place much importance on it when they give a quote. It is best to get several quotes to determine who will offer you the best deals in current circumstances.