- Car insurance companies use various methods to calculate the amount of premium that is paid for an insurance policy. Most insurers use sophisticated computer programs to calculate the premiums based on given demographic and personal data.
- An individual's driving history contains a record of tickets and violations received within a 5-year period. An individual's driving history is known as a Motor Vehicle Report, or MVR for short. Many insurers look at the number and type of violations on an MVR as a basis of eligibility for insurance.
- When an insurer runs an MVR report the company assign a certain number of eligibility points based on the severity of a violation. Points on tickets usually drop off within 2 years, but the violation will remain on an MVR report longer. If an individual has too many violations or eligibility points on her driving history she can be denied insurance coverage.
- A discount that is applied to a car insurance policy causes the premium being charged for a policy to go down. A discount can be applied for having vehicle options such as anti-lock brakes, air bags or an anti-theft device. A discount can also be applied for belonging to an approved group, such as an alumni association.
- The premium for a car insurance policy is calculated using a base rate that applies to all insured drivers and vehicles on a policy. The base rate is determined by actuaries using various mathematical and statistical tools to determine the value. An insurance company cannot increase the base rate without first making a rate filing request with the Department of Insurance in the state in which an insurer wants to raise their rates.
