In General, What Affects Insurance Company Premiums?
Free Insurance Quote Comparison
Secured with SHA-256 Encryption
UPDATED: Sep 15, 2020
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.
The key factor in setting car insurance rates is the expense of paying for accidents and the costs associated with settling them. Other expenses relate to marketing the insurance (agent and broker salaries, commissions, expenses, and advertising), and general overhead (management and staff salaries and offices expenses). Expenses are partially offset by investment earnings on the premium dollars that have been received from customers but not yet spent.
Car insurance underwriting results usually follow a cycle that lasts several years. They tend to have a number of good years followed by a few bad years and then back to some good years. If investment earnings are good, they may offset expenses and losses in underwriting. Companies prefer to have surpluses beyond underwriting and expenses so that investment earnings can build profits. Many states also require insurance companies to have minimum cash reserves, which can effect premiums.