Insurers consider a wide variety of criteria in developing their premiums. Each of the criteria assists the insurer in predicting the likelihood that you will be in an accident or otherwise incur damages resulting in filing a claim. The criteria that insurers consider commonly include age, sex, marital status, number of miles driven annually, driving record, credit history, whether the insured vehicle is used for business, pleasure or both, the type of vehicle insured, and the location where the vehicle is principally garaged. These criteria are also referred to as underwriting guidelines. People who have similar characteristics are placed in the same group and charged the same premium.
While many insurers have defensive driver plans, also known as surcharge plans, that make policyholders who receive tickets or are involved in accidents pay an additional premium, often the surcharges may not be enough to cover the insurer’s losses. Sometimes, based upon the experience of the group, the premiums collected may not be sufficient to support the projected costs of the claims. When this occurs, an insurer may file with the Maryland Insurance Administration a plan to implement a general rate increase. The insurer is required to collect premiums in accordance with the plans if they justify their rates.
In general, the more stringent the insurer’s underwriting criteria (no losses, or one loss within three years, no tickets, etc.), the lower the premium for the policyholders as the insurer is limiting its exposure to losses.
For more information on factors that insurance companies use when determining premiums, refer to our publication, A Consumer’s Guide to Automobile Insurance, which is available on our website at www.insurance.maryland.gov, or by calling us at 410-468-2000.
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