One question customers are always asking us is, “Why do prices vary so much between different insurance companies for the same coverage?” The short answer is: because insurance premiums depend on the characteristics of the insurance company almost as much as your profile. First, each company analyzes risk differently, and so the pricing they provide will vary. Also, while most people know where they live, their driving history, and the type of car being insured will affect their insurance premium, many don’t realize that the other customers insured by the insurance company also affect the price they pay. On top of that, each insurer also needs to account for their expenses, so a company needs to charge a margin to cover their costs. That is why it is so important to shop around and find the right insurer for you.
Insurance pricing is not standardized across companies. The price sensitivity of risk factors including years of experience, credit score (in some states), and geographical location, among others, varies in each insurer’s models. For example, it might be the case that Allstate views Toyota Corollas as higher risk when compared to State Farm.
This also has to do with the company’s experience as much as the analysis itself. If you are a 25-year-old male that drives a Honda Civic, and Geico has experienced higher rates of claims for other people like you, then this will cause your insurance to increase with them. Progressive may have good experiences with low claims for the exact same set of factors, which means they will likely be able to provide better pricing. Insurance companies look to spread the risk across a pool of customers, and so the characteristics and histories of those customers are considered when a company provides an insurance quote.
Lastly, most insurance are for profit institutions, and so they need to consider their cost structure when pricing insurance policies. If a company generates most of its business through high-cost brick and mortar stores, this means that they will need to charge more to remain profitable than a company that is completely online and has lower expenses. Some mutual insurers do not have the burden of profit, but nonetheless must cover their expenses, so the same reasoning applies.
Sigo is not only here to help you find insurance but to understand insurance. It is important that when you are comparing insurance quotes you ensure that the comparison is “apples to apples” as they say. Not only the type of coverage you select, but other things like how much the deductible you are willing to pay will affect your quote. A company offering you a lower price today does not mean they will still be the lowest when it comes time to renew your policy.