Working to Improve Your Auto Insurance Premium

Updated: 01/30/2013 7:13 AM By: Tim Sherno

A report from the Consumer Federation of America says it obtained quotes from large insurance providers that in some cases offered higher premiums to good drivers with lower incomes than premiums offered to high earners with a recent accident.

Professor David Vang from the University of St. Thomas says premiums are calculated with massive amounts of data, "They use lots of statistical models they get data from lots and lots of sources."

Vang says data is used to make predictions about risk within a large group but cannot make predictions about individuals, "You have all these factors that predict you should be a horrible driver, but you're actually a good driver, the system can't predict who you are, they just know you're in there, but they have to take the average."

Mark Kulda is Vice President of Public Affairs for the Insurance Federation of Minnesota and he says the report highlights the need for consumers to shop around for the best insurance premiums, "The real value of this study is to show there's a wide variety of insurance premiums and it's up to consumers to constantly check quotes from different companies."

Kulda says that there are several factors considered in calculating an insurance premium that are beyond control of a consumer, but there are some that can be improved, a consumer's credit score is an example, "If you have a high credit score, the stats show you're much less likely to have an accident, so if you have a high credit score you'd get a premium discount based on that model."

Kulda says Minnesota requires insurance providers must re-calculate a costumer’s premium upon request. According to Kulda, if someone gets married, celebrates his or her 26th birthday or drives substantially fewer miles, that person would probably be eligible for a lower insurance premium.