Posted On: March 27, 2006, 5:59 pm CST

Posted By: Underwriter

I am an underwriting manager at a large insurer -- I haven't heard from any other underwriters, so thought I could at least provide insight about this debate.

First off -- the color of the vehicle is NOT used in underwriting, rate-making or tier/market placement.

Secondly -- education, occupation, your credit bureau information, your driving history, type of vehicle you drive, whether or not you own/rent, where you live and how far you commute daily are only a portion of the dozens of rating factors.

Thirdly -- those rating factors are used when your policy is issued. In other words, they determine what tier and market your policy falls into. They are not used when your policy renews. Very few rating factors actual influence your renewal premium; most certainly, education and occupation are not among those that are used. Your driving history, changes in credit (and usually only positive changes), and specific rating factors (vehicles, residence location etc,) are those that will count in the future.

Fourth -- each company has a proprietary blending of the individual rating factors. I am making up numbers here because the actual formulas are known by only a select few indivuals at each company; one company might say that credit is only 5% while another says it's 2.5%. One company might weight driving record at 15%, another at 11.67%. Each company puts together a rating package that is based upon its actual loss experience.

Fifth -- the average American thinks that his insurance agent is his insurance company. Most Americans do believe that the color of their car affects their premiums. Most Americans refuse to understand the implication of "claims padding" and other fraudulent activites.

From my experience, the more data that are used in calculating premiums, the better companies can splice and risk. The more segmentation there is, the more accurately companies can determine premium. It is a good thing for the consumer. In the "old" days, insurance companies knew they had good risks and they had not as good of risks. They had one price for everybody and the folks who deserved a lower premium paid for the folks who didn't.

Every piece of information an insurance company uses is based upon statistical analysis and claims experience. A trucker with a high school education who has a clean driving record will get a better rate than a medical doctor with a accidents/tickets every single time.

Shame on this consumer group for trying to stir folks into a frenzy. Shame on you if you fell for it.