Insurance Rates & Insurance Premiums

Why do insurance quotes vary depending on the company?

There are a couple reasons insurance policy premiums vary depending on the company offering the coverage. Insurance companies calculate policy premiums differently buy most are calculated using past risk assumptions and an equation actuaries use to assume risks.

Past risk assumption is what some may refer to as trends the company has seen in it's data that a particular occurrence may be a result of a particular factor such as age and location. A good example to explain the use of trends is in car insurance. Car insurance premiums can differ greatly depending on the company. I have received quotes for a car that ranged from $500 to $1100 every six months. All policies were the same as far as coverage is concerned and all companies were highly rated. So why is my policy $500 per six month for one insurance company and $1100 for another? For my particular quote, the company that quoted $1100 per six months evidently found issuing my policy to be significantly riskier than the company that quoted $500 per six months. The $1100 company must have had less than favorable returns on policy holders with the same variables as my age, car and location. Believe it or not, insurance companies are in business because it is a profitable business. They are in this business to make money and insuring a higher risk policy has the potential to cost the company more money therefore these premiums are more expensive.

Actuaries take these trends and either implement them into the equation or associate them with the equation used to generate policy premiums. The equation used is likely somewhat different for every company. It may not be an equation at all but a table with several factors of an insured when tabulated present an insurance premium. Each insurance company and there Actuaries develop algorithms or equations to calculate risk and insurance premiums. For this reason alone is why insurance premium rates differ depending on the insurance company. Shop around, find a policy offered by a reputable company that is affordable.