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Individual Auto Policies

With the continued competitive nature of automobile insurance, individualized automobile insurance policies may be coming. No longer will drivers be grouped into one class, solely based on age or other demographics.

Currently many states rate on basic categories, age, years driving, and other factors not really individualized to each driver. A very controversial method of rating drivers is based on an individuals credit score. It assumes higher rates for drivers with bad credit scores. This has been criticized as being discriminatory to the poor and most notably minorities, and marked as a bad practice by carriers similar to the banned practice of “red lining”, where companies used to not insure in bad neighborhoods. Currently several states do not allow this practice with regards to automobile insurance, such as Massachusetts.

Another such way of favoring good drivers uniquely is persistency rating. Persistency rating offers discounts for drivers who continuously have insurance with any insurance carrier for five or more years. Per the website Ballotpedia, California voted against such a proposition, currently California offers persistency or “loyalty” discounts to existing customers only. This is deemed discriminatory against the poor as well. For one financial reason or another perhaps an individual could not afford insurance in one of the previous five years. Although it was voted down, it was not by a large margin, and could always be introduced to the voters again.   

All the other historical factors will most likely still be rated for. Driving to and from work or not, driver training, married, years driving, etc. Driver experience and good or bad driving records will of course still be accounted for. Someone with perfect credit but a horrible accident record will still pay more. The good driver will still be rewarded; continuous good driving will still lead to lower rates, and perks such as vanishing deductibles for no at fault accidents over a number of years.

These along with Pay as You Drive programs will truly take the “cookie cutter” insurance policy out of the picture. No longer will very different drivers pay practically the same in insurance premiums. Of course with more individualized policies the competition will become even fiercer, with all the automobile insurance carriers vying for new business. With so much competition and the ease of attaining quotes online, not only will carriers continue build up huge internet presence, they will make quoting as easy as possible, and offer as many discounts as possible to keep their business, with as simple a discount as going online for the quote.

The increased competition is good for the consumer, but should also help encourage better driving habits. The best way for a driver to lower their premium is to drive safely.