Auto insurance risk selection is the process by which vehicle insurers determine whether or not to insure an individual and what insurance premium to charge. Depending on the jurisdiction, the insurance premium can be either mandated by the government or determined by the insurance company in accordance to a framework of regulations set by the government. Often, the insurer will have more freedom to set the price on physical damage coverages than on mandatory liability coverages.
When the premium is not mandated by the government, it is usually derived from the calculations of an actuary based on statistical data. The premium can vary depending on many factors that are believed to affect the expected cost of future claims.[1] Those factors can include the car characteristics, the coverage selected (deductible, limit, covered perils), the profile of the driver (age, gender, driving history) and the usage of the car (commute to work or not, predicted annual distance driven).[2][3][4][5][6]
^McClenahan, Charles. "Ratemaking" (PDF). Casualty Actuarial Society. Archived (PDF) from the original on 14 May 2006. Retrieved 11 May 2006.
^"What determines the price of my policy?". Insurance Information Institute. Retrieved 11 May 2006.
^"How Are Auto Insurance Rates Calculated?". Countrywide Insurance Services. Archived from the original on 8 February 2006. Retrieved 11 May 2006.
^IVS 1 – Market Value Basis of Valuation, Seventh Edition
^"Cars-value factors". Archived from the original on 21 October 2016. Retrieved 27 October 2016.
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