1. Measuring the "risk factor" of a driver by studying the common characteristics of those who have filed claims in the past.

Example; If a company studies 1000 drivers who have been involved in an accident and determines that 80% of them had a history of prior accidents and traffic violation citations, they can conclude that drivers with such history have a higher probability of a future loss; therefore, indicating a high risk factor giving them a reason to increase rates.

Since the above factors suggest a higher risk than their counterparts, anyone falling into these descriptions may pay a bit more in premium.  Don't be worried if you do, the difference may not be significant and OnlineAutoInsurance.com can help drivers find low rates by completing an instant rate comparison from different quality companies.

2. Through a measurement of profit and loss.

Example; If a company has had good profits from receiving more in premium than paying out in claims, they may choose to file a rate change request with the governing agency usually operated by each state. The state then approves or denies the rate change based on the presented information. Vise versa, if companies have paid out more than they received resulting in a loss, they may file a rate increase to balance out their profits and losses. Since each carrier has unique experiences, they all have different premiums; that's why an auto insurance comparison is recommended when looking for reasonable rates.