The world of insurance premiums is a complex place. Identical coverage for the same person can vary greatly. What causes these variations? Back in 2003 two authors at the University of California, researched this exact question. With the help of the Lewis Center for Regional Policy Studies, they were able to pinpoint many interesting causes. The full report can be found at http://www.uctc.net/papers/654.pdf . This paper explains many reasons for California car insurance cost differences.
Geographic area seems to be a huge factor in car insurance rate variations. Inner cities have the highest accident and crime incidences and subsequently the highest costs for insurance. People living in suburban and rural areas may have insurance costs hundreds of dollars lower than urban dwellers. Geographic regions can be split by zip codes or area codes. To find out which your California car insurance company utilizes, give them a call.
Income range is also a major factor in rate quotes. There are higher incidences of late payments and non-payments in the lower income range. Insurance companies try to offset the missed payments by charging higher rates among these individuals. Some states have taken steps to try and alleviate this borderline discriminatory practice.
The two factors, geographic region and income range, target poor inner city non-whites the most. This has led some to try and regulate what basis premiums are set by. Voters have approved propositions to limit insurance determination factors to age, record, and years driving, but courts continue to overrule them. To date it remains controversial and California car insurance companies continue to be allowed to use zip codes as premium determinations.
In the insurance company’s defense, insurance is a business. They should be allowed to recoup their costs in higher risk areas. If they paid more out than they brought in, the company would go out of business. It doesn’t seem that they are targeting minorities on purpose, it just happens that the majority of residents in a targeted area fall into certain ethnic categories.
California car insurance companies use many determinations in car insurance rate quotes. Saving money on your policy may be as simple as moving out of the city into a suburban or rural area. Searching for and landing a better paying job may also save you a few hundred dollars. If this is not possible or you like your current employer, job longevity will also help bring your rates down.