What determines motor insurance premium

Do you know that you do not always get the same premium whenever you renew your vehicle's insurance? Different insurance companies might also quote different premiums for the same car and driver. This is because the premium charge hinges on a number of factors, which are determined by the individual companies based on their own assessment.

The guide below will give you an insight on how insurance companies derive the premium they quote. If you were thinking of filling in some false details in order to lower your premium, think again. This is because if any provided information is inaccurate, the insurance company could refuse to pay for damages when necessary.


Factors affecting insurance premium
 
'Comprehensive' packages are the most expensive. That is followed by 'Third party fire and theft'. 'Third party' packages are the cheapest. Additional options such as 'windscreen protection' and 'NCD protector' will increase the premium charges.

Vehicle's age

The newer the car, the more expensive it is to insure it. Older cars are cheaper to insure as insurance companies usually use reconditioned old parts to repair cars more than three years old.  

Vehicle capacity

The larger your engine capacity, the more expensive your premium. Higher capacity cars tend to be more expensive models and will be more costly to repair. It is also more difficult to control higher capacity cars and rate of accident is higher. When accidents occur, they tend to be more heavily damaged due to their higher power.

Type of vehicle

Coupes and turbo-charged cars are expensive to insure for very much the same reason as high-capacity cars. Off-peak cars cost lower to insure as they are seldom on the roads, and are thus of lower risk.

Vehicle model

This may be surprising, but insurers do quote different premiums for different makes and models of vehicles. This is a very ambiguous field. The insurance companies have their own records of which car makes are more frequently involved in accidents, which car makes cost more to repair and so forth. They will then quote based on their database.

Driver's driving experience

Inexperienced drivers with less than two years of experience are charged heavily due to their perceived high risk. For those with driving experience of two years or more, premiums are usually low. However, there is a limit as to how much the premium goes down by with driving experience. Usually, there is no difference between the premium of a driver with 30 years experience and one with only three years.

Driver's age

Young drivers are perceived to be hot-blooded and reckless. As such, those below 26 years of age pay significantly higher premiums than older drivers. The cap for the decrease in premium with age is about 40 years old. Above that, premiums usually stay the same.

Driver's gender

Female drivers usually receive a lower quote for premiums. Perhaps they are perceived to be safer drivers.

Driver's occupation

Occupations, which require the driver to drive often will incur higher premiums. Jobs which involve a higher risk of damage to the vehicle will naturally incur higher premiums too. Examples of such are outdoor sales, construction site related jobs, renovation work, etc.

Driver's previous claim

A driver who has made numerous claims in the near past cannot expect to have a low premium as he will be classified as a high-risk driver. The insurance companies will usually ask the driver to declare his claims over the past two years.