When it comes to purchasing car insurance, consumers have a vast selection of companies to choose from. Most states in the country have a very competitive auto insurance market, which can benefit motorists by pressuring insurers to earn business by keeping rates affordable, offering the best customer service, and remaining financially solvent. There’s no single coverage provider that meets the needs of all drivers.
The majority of companies use the same basic formula when calculating the premiums of potential policyholders, but different companies target different types of drivers, so each insurer’s pricing structure will be unique. Because of this, it’s important to shop around and get quotes from multiple insurers.
Consumers should be aware that certain companies compete in the “preferred” market, some direct their services toward the "standard" market, and others may target "nonstandard" clientele.
Generally, insurers who target the preferred market are aiming their business toward drivers who are viewed as lower-than-average liabilities. Drivers are considered to be a below-average liability if they have a clean driving record with few or no violations, accidents, or claims, along with having other characteristics common among drivers who file claims at lower-than-average rates. As a result, many insurers offer lower premiums to drivers classified as “preferred.”
Insurers targeting the standard market seek to insure drivers that have claims rates that are about average. These drivers may have a couple negative items in their driver profile, but other positive aspects of their profile may cancel out the negative ones. Drivers classified as “standard” are likely to see premiums that are about average when compared with other drivers.
Nonstandard insurers provide coverage to motorists who have a history of major violations, accidents, prior cancellations, claims, and/or convictions of driving under the influence of drugs or alcohol. New drivers and those with high performance vehicles may also fall into this category. Generally, nonstandard policies are offered at a higher rate and are only purchased by individuals who have not been able to locate a company that can offer them standard rates. Most insurers will ask for higher premiums from drivers classified as “nonstandard,” but there may be some insurers in your state that don’t have a problem insuring nonstandard drivers and may offer a lower premium than most coverage providers.
There are a couple different ways that insurers are rated: by customer service, by price, by financial stability, etc. Visit our page on the best-rated auto insurance companies to learn more about finding the best-rated insurer for you.
Many insurers have to get approval from a state’s insurance regulatory office before making changes to their pricing formulas.