Do Cars with Better Safety Ratings Get Lower Insurance Rates?
When shopping for a new or used car, many consumers look at the safety of the vehicle. And one of the best ways to tell if a car is safe is how it scores on crash tests conducted by organizations like the Insurance Institute for Highway Safety (IIHS) and its affiliate organization, the Highway Loss Data Institute (HLDI). When cars rate highly on the IIHS tests, it's often reported that they could save lives and money.
But according to the Insurance Information Institute, the fact is while the cars may help save lives, a higher rating doesn't mean lower auto insurance rates. Rather, rates are generally more tied to the driver. With help from Michael Barry at the Insurance Information Institute, we explain why a person's driving record matters much more than how well their vehicle performs on crash tests:
1. So the car I'm buying just performed well in a crash test. Does scoring well in a crash test (like the IIHS's small overlap crash test) lead to lower or higher insurance rates?
"No. Auto insurers base their rates on a number of variables, one of which is the make/model of the policyholder's car."
"Crash test ratings from IIHS do NOT directly affect insurance rates. Auto insurers assess the claims they receive, and drill down to determine whether there are any trends tied to specific vehicles, so data compiled by the Highway Data Loss Institute (HDLI), is definitely of interest to underwriters. At the same time, consumers can use this information to make buying decisions, too.
2. So I can buy a super-fast sports car that scored horribly on a crash test and it would be about the same price to cover as a 4-door sedan that is slow and safe?
"Auto insurers, first and foremost, want to know if they're covering a safe driver. Yet the make/model of a vehicle is going to be factored into the equation, too. Another thing to consider: a sports car may cost more to insure not only because it has a history of being associated with a claims filing but also because certain sports cars may also be more expensive to repair."
3. So, besides informing consumers of what vehicles are safer, why do these tests matter at all?
"The insurance industry funds the Insurance Institute for Highway Safety (IIHS) so it closely tracks the IIHS's work. Moreover, the IIHS consistently offers the type of research and analysis auto insurers benefit from when calculating whether a claim might be filed after a policyholder buys a certain vehicle. When determining what to charge a policyholder, their vehicle's actual claims filing history is a significant rating criterion."
4. So the crash tests help let the IIHS get a sense of which cars may be claims headaches down the line?
"The IIHS and the HDLI contribute greatly to the body of knowledge about the vehicles on U.S. roadways and how many claims are being filed in any given year. Indeed, the IIHS was founded by insurers to reduce the deaths, injuries, and property damage that occur because of motor vehicle crashes. The IIHS crash tests, and all of their other safety research, is aimed at doing that."
Summary: While buying a car that performs well on crash-tests may bring peace of mind to the motorist, it doesn't necessarily mean it will bring savings to the auto insurance policyholder. Indeed, the best way for motorists to see savings based on safety is to be a safe driver, whatever car you may own.