Lower Car Insurance Premiums with this Policy


NEW YORK (MainStreet) — Drivers with poor insurance scores pay 91% more for car insurance than those with outstanding credit-based insurance scores, according to a new study.

"Considering all of the factors that go into car insurance rates, credit is actually one of the easiest to control," said Laura Adams, senior insurance analyst with InsuranceQuotes.com.

An InsuranceQuotes.com report discovered that drivers with median credit pay 24% more.

Information in credit reports, like late payments, credit card balances and credit inquiries, are used by insurers to predict the likelihood of a future insurance loss.

"Responsible habits, such as paying your bills on time and minimizing debt, pay off in many ways, including lower premiums for car insurance," said Adams.

Rather than FICO credit scores, insurers generally use a proprietary scoring model, which includes factors such as driving record, age, gender, credit and past claims, to evaluate risk and determine premiums.

"Consumers should monitor their credit report at least once per year, get errors corrected and notify property insurers about positive changes. This could lead to hundreds of dollars in annual savings," Adams said.

Another way to save on car insurance premiums is with pay as you drive insurance.

At least seven of the top ten auto insurers in the U.S. have implemented usage-based or pay as you go programs in at least one state, according to a Towers Watson survey.

"The idea behind usage-based programs is to give drivers a financial incentive to drive less and depending on the information that is monitored to drive more carefully," said Michael Barry, vice president with the Insurance Information Institute. "The more positively they react to the incentive, the less a driver pays for their auto insurance."

About two-thirds of drivers who sign up for pay-as-you-drive car insurance are saving money but 58% of Americans don't even know what pay-as-you-drive car insurance is.

"There seems to be a general lack of awareness and confusion about these programs. That's too bad because drivers are missing opportunities to save," Adams said. "Signing up can only help you. It can't raise your premium."

Some auto insurers also consider driving behavior using a telematic device installed in the car to monitor and relay information about when and how a car is being driven.

When it came to factors these programs track, only 35% were aware that drinking and driving are not monitored, 37% knew that hard braking is tracked and a whopping 42% were aware that the time of day driven was tracked.

Privacy is very much of a concern for about one quarter, according to an October 2013 survey of auto insurance shoppers by comScore. "Most Americans consider themselves better drivers than others but few are willing to test their abilities with a pay-as-you-drive insurance program," Adams said.

About 37% say they would never consider getting pay-as-you-drive insurance while 35% would only sign up for it if they were offered a premium discount of 25% or greater. Pay as you drive policies currently on the market include Progressive Insurance' Snapshot, Allstate's Drivewise and State Farm's Drive Safe & Save.

--Written by Juliette Fairley for MainStreet

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