Automobile Insurance Rates: What Impacts My Cost & What Can I Do About It

When you apply for auto insurance, the insurer will ask for information about you to evaluate your individual risk characteristics. These individual risk characteristics assist insurers in determining whether you will be in an auto accident in the future or will file a claim for damages. Insurers evaluate these characteristics to see whether their guidelines, known as underwriting guidelines, permit them to write a policy for you.

If the insurer’s underwriting guidelines allow a policy to be written for you, the insurer will then charge a rate based on your individual risk characteristics. Some risk characteristics that insurers rely on to determine rates include:

Your driving record. Insurers are not allowed to increase your rate based on accidents or traffic violations that are more than three years old. Insurers may consider traffic accidents and traffic violations that have happened in the past three years in determining your risk. If your driving record is less than perfect, then you will be considered a higher risk and will pay a higher premium.
Geographic area. The number of claims filed by policyholders in your geographic area affects the rates charged by insurers. Counties or zip codes are commonly used geographic areas.
Gender and age. Males and young adults are more likely to have accidents; therefore, your gender and age will affect your rate. Rates generally decrease at age 25 and may increase as you approach age 50 or 55.
Marital Status. Married individuals are less likely to have accidents and claims; therefore, married individuals generally pay lower premiums than single people.
Prior insurance coverage. Most insurers ask about your insurance history, including whether or not you currently have coverage or whether or not you have ever been cancelled or nonrenewed. Some insurers require individuals to pay higher premiums if there has been any lapse in insurance coverage. However, insurers are prohibited by law from denying insurance because an applicant was previously insured by the Maryland Automobile Insurance Fund.
Annual mileage. Insurers will also calculate your premium based on the average distance you drive on an annual basis. If your annual mileage is high, then insurers will consider you a greater risk and will charge you a higher premium.
Age, make and model of vehicle. Premiums are also based on your vehicle’s age, make, model and value. Certain makes and models of vehicles – when involved in accidents cause or permit greater levels of bodily injury, sustain greater levels of damage, and are more difficult and costly to repair. Insurers charge a higher premium to insure those makes and models.
Credit history. Some insurers review an individual’s credit history when determining that person’s premium. For instance, bankruptcies, late payments and the number of credit cards you have may result in a higher premium. Insurers must follow specific laws when using a consumer’s credit history to underwrite or rate an auto insurance policy.

Those laws state that an insurer may not:

Increase a renewal premium based on the credit history of the insured;
Apply a surcharge of more than 40% based on credit history; or
Use the following factors to rate a policy: the absence of or inability to obtain credit history, the number of credit inquiries, or any factor that is more than 5 years old.

Additionally, you have the right to request that your insurer recheck your credit history once per policy period. If your credit history has improved, the renewal premium may be reduced. However, if your credit history has deteriorated, this information cannot be used to increase your premium.

You can review your credit report to become informed about your standing when you apply for certain credit and certain types of insurance. You also may correct any errors you discover in your report. You can review these reports at no charge every 12 months. For questions, to make corrections to your credit report, or to access information about how to obtain free copies of your credit reports, you should contact the Federal Trade Commission.

Compare the premium you are paying to what another company might charge you. Refer to our “Automobile Insurance: A Comparison Guide to Insurance Rates” on our website or call 410-468-2000 to obtain a copy. You can also use our Interactive Auto Insurance Rate Guide. Make sure you compare policies that have the same coverage.

Many insurers offer discounts. You should ask your insurance company or insurance producer (agent or broker) about any available discounts before purchasing or renewing your auto insurance policy. Not all insurers offer the same discounts but some of the most common ones include:

Good driving record. Insurers may consider traffic accidents and traffic violations that have occurred in the past three years in determining what to charge you. If your driving record is less than perfect, then you may be considered a higher risk and might pay a higher premium.
Safety devices. Frequently discounts are offered for devices that limit bodily injury or property damage caused by accidents. Such devices can include anti-lock brakes, automatic safety belts or air bags.
Anti-theft devices. Car alarms and other theft-deterrent devices may also result in a discount.
Multiple policies. Although an insurer cannot require you to buy a homeowners insurance policy when you purchase an automobile insurance policy, some insurers offer discounts to policyholders who purchase both automobile and homeowners policies. In addition, insurers may offer discounts if you have more than one vehicle insured with the insurer.
Good student. Many insurers offer discounts to students who maintain at least a B average.
Driver Education Courses. Many insurers offer discounts for the completion of a driver education course.
Renewal Discount. Some insurers offer a discount to policyholders who have maintained continuous coverage with the insurer for a specified number of years.
Memberships or employment discounts. Insurers may offer discounts to members of certain organizations such as credit unions, shopper’s clubs or alumni associations. You also may be eligible to receive a discount through your employer.
Consider whether you want to maintain comprehensive and/or collision coverage. If your vehicle is older and has been paid off, you may want to consider dropping these coverages to reduce your premium. However, if you drop these coverages and your vehicle is damaged in an accident that you cause, or if it is stolen, vandalized or you collide with an animal, you must pay for the repair.
Review your deductible. The deductible is the amount you agree to pay in the event your vehicle is damaged. Raising the deductible on your policy generally will decrease your premium. If you select a high deductible, you will pay more money out of pocket for any damage; however, your insurance premium generally will be lower.

Frequently Asked Questions:

The Maryland Insurance Administration (MIA) frequently hears from consumers that they feel their auto insurance rates increase at every renewal, even if they have been with their insurer for a long time and have not filed any claims. The consumers want to know why this has happened. They also asked: What can be done about this increase? We will try to answer these questions and other frequently asked questions (FAQs) that we receive from consumers about auto insurance premium rate increases.

I have not received any tickets or filed any claims, but I just received my policy renewal offer and my rates increased. How can they raise my rates if I haven’t made a claim or gotten a ticket?

Your auto insurance rate can increase due to general rate increases even if you haven’t made a claim or gotten a ticket. These are increases assessed to all policyholders. If your renewal notice shows your premiums are increasing and the notice does not indicate this increase is as a result of a surcharge for an accident or ticket, it is usually a general rate increase. If you have a question about the increase, you should speak with your insurance producer (agent or broker) or insurer. If you still have questions, you may contact the MIA.

My insurance producer told me that the MIA required this rate increase. Is this correct?

This is incorrect. The law requires insurers to file their rates and any rate increase requests with the MIA. The MIA reviews the filings (which include the insurer’s data justifying the amount of their premiums and any proposed increase) to be certain that the increases and rates are not excessive, inadequate or unfairly discriminatory. The law also requires the MIA to make certain that insurers remain financially stable in order to protect their policyholders so they have enough funds available to settle claims.

I have been told that insurers are subsidized by the government.

Private commercial insurers do not receive any government subsidies. Maryland Automobile Insurance, which was created by the Maryland General Assembly to provide coverage to Marylanders who cannot obtain auto insurance from other insurers, also does not receive state funds, but is instead funded by premiums, revenues, and annual assessments on insurers imposed by state law.

I still don’t understand why my rates increased. It seems like price gouging to me. What exactly caused this?

General rate increases can be necessary for a number of reasons and are not price gouging. For example, insurers are impacted by rising costs and inflation, just like other businesses and Maryland residents have been. The cost of repairs and parts have increased. The value of used cars has gone up so the cost to settle a total loss claim has increased. Business costs from the cost electricity to wages to the cost to mail policy documents – have increased as well. If an insurer expends more money than they receive, they could become insolvent and unable to pay claims. The MIA’s responsibility is to make sure these companies stay financially strong so they are able to pay claims. Another factor that impacts rates is the requirement that insurers maintain a reserve, that is funds held in the event of a catastrophic loss, such as a hurricane. Generally, these funds are invested and the insurers earn money off these investments. If the stock market is down, the earnings from these investments are also down. Again, to remain solvent and financially strong, the insurers must increase their premium rates to offset this loss in revenue.

My rate increased because of a claim, and not a general rate increase. I don’t think I was at fault. Is there anything I can do?

If you think your rate is being improperly increased because, for example, you were not at fault for the accident, you can contact your insurance producer or insurer and ask them to review the rate increase to ensure it is correct. You may also file a complaint with the MIA within 30 days of the date of mailing on the notice from your insurer that the premium is being increased due to a claim or change in the insured’s driving record, such as a ticket.

The directions (called a “Right to Protest”) will also be included in the notice of premium increase you should receive. Under state law, an insurer is required to mail a notice of renewal premium increase at least 45 days before the renewal policy goes into effect. This notice may be sent with the renewal package or separately. If you file your complaint with the MIA on time, the MIA will review the increase to make certain that the increase and notice comply with the law. A written determination will be issued once the MIA’s investigation is complete. You will be required to pay the premium amount being billed while this investigation is being completed. If it is later determined that the increase is improper, the MIA will require the insurer to reimburse you for any overpayment.

If my premium increase is not due to a claim or a change in driving history, but I still want to protest the increase, is there anything I can do?

Generally, no. If your policy rate increase is due to a general rate increase that has been properly filed with the MIA, there may be nothing we can do to require your insurer to remove the increase. However, you certainly may file a complaint, either on the MIA’s website, or by writing to the MIA directly. The MIA will be glad to review the increase to make certain it complies with Maryland’s insurance laws. You will receive a written determination following that investigation.

What factors impact how much my insurer charges me for my auto policy?

There are many factors that go into how your premium is calculated. Some of the factors that insurers use to determine a policyholder’s rate include age, gender, length of time as a licensed driver, where you live, type of car, and how it is used, as well as driving and claims history. For instance, a teenage driver will generally have rates much higher than an older driver because the crash rate for younger drivers is statistically higher than that for older drivers. Another factor that impacts a rate is where you live. A policyholder who lives in a densely populated area with a lot of traffic and who must park their car on the street is statistically more likely to present a claim.

So what can I do to lower my rates?

You may ask your insurance producer if you are getting all the discounts you qualify for. One way to lower your premium is to bundle multiple policies with the same insurer, called a multi-policy discount. This applies when you pair your auto insurance along with your home or renters policy through the same insurer. Your insurer may also offer a discount for safe driver, good student, claims free and/or safety equipment your car may have. You may also want to ask your insurance producer to review your policy to make sure it is based on your current driving habits and coverage needs. For example, are you retired or mainly telework? Let your insurance producer know that and the approximate number of miles you put on your car in a year. You might also want to discuss the amount of your coverages and deductibles. While it is true that lower coverages may be less expensive, if you have a loss which you are liable for and don’t have enough coverage to fully settle the claim, you could be held personally responsible for that additional amount. The purpose of insurance is to protect you in the event you have an at-fault loss. A deductible is the amount you are willing to pay in the event you have a loss. Both comprehensive and collision coverage usually have a deductible. The higher the deductible, the lower your rate. When choosing the amount of your deductible, think about what you can afford to pay if your car is disabled by a covered peril. Comprehensive coverage is less costly than collision coverage so many people select a lower deductible for comprehensive than collision coverage.

I spoke with my insurance producer and we reviewed my policy. I am still not happy with my rates. What else can I do?

Different insurers may offer more competitive rates for the same insurance coverages so you can shop around to see if you can get a better rate. When shopping, be sure you are comparing apples to apples. It is advisable to have the current copy of your policy available when speaking with other insurers so you obtain a quote with the same coverages that your current policy provides. The MIA provides a rate guide which may be viewed on our website, or you may request to have one mailed to you. The rate guide has several scenarios broken down by geographic location. This allows you to compare the rates of approximately 50 different companies. There is also an interactive comparison guide on our website.

If you still have questions about this topic, or even another insurance-related questions or need further assistance, please contact us at 410-468-2000 or toll free at 1-800-492-6116 or visit our website.