The Risky Business of Auto Insurance Policies
When standardized risk assessment is a roadblock to personalization
“Good ol’ cheap but effective auto insurance, far more transparent than all my exes.” — said no one, ever.
“Where did that come from?” — everyone, ever.
Adulting on a base level is hard enough without having to both acquire and pay for auto insurance. Roll in a heavy slew of factors that affect the amount of dough you have to dish out each month and you might as well just call it a day and take a nap.
What are these elements that can drive up the cost of your policy? While they are wide and varied, we’ll cover two common culprits of higher policies.
Your Occupation
This list ranks average policy price for various occupations, with professional drivers and chefs paying the most and administrators and mechanics paying the least.
According to this UK study, individuals with “high-risk” occupations (life-or-death stakes, including doctors and nurses) tend to be more risk-averse — however, The Guardian reported that healthcare workers are one of the top 10 most car accident-prone fields. The general belief is that doctors and nurses experience high stress and work long hours, which might impair their ability on the road.
Continuing with the UK study, those in “white collar” occupations tend to have a higher propensity for risk-taking. Finance is highlighted as being a field that is chock full of risk-takers which, if you ever peruse r/wallstreetbets, is no surprise.
Individuals working in finance are shown as being charged less (on average) for policies than those in the medical field. But is this the way it should be? If your occupation is going to impact the cost of your policy, exactly what elements of it should be evaluated?
Education
Carriers consider education when building policyholders’ risk profiles. The higher the level of education, the less you pay. Is this discriminatory? Many think so. Those who possess a high school diploma pay $300 less on average than those who don’t, those who have a BA pay $300 less than a high school grad, etcetera — though PhDs only pay about $30 less than those who tapped out after a Master’s.
But what if a PhD has impulsivity issues that could potentially result in auto kerfluffles? What about the high school grads that are far more risk averse in comparison to the average PhD? Many things to consider.
Do you think level of education should factor into the cost of your policy?
Consumers deserve better than to have risk profiles based off of factors that may or may not be correlated with risky behavioral traits. Since insurtech innovation is on the rise, however, so are improved methods of risk assessment. So fear not. Your insurance company won’t misunderstand you forever.
