Property Casualty Insurance and How Demographics Effect Rates

The cost of your property casualty insurance will vary with a number of factors such as the age, condition and location of your home and the amount of coverage you want. However, insurers also adjust the premium up or down in relation to the demographic categories into which you fall.

Evaluating Your Home

The location of your home is among the first factors considered by insurance companies in determining the monthly premium for your property and casualty insurance. Location is a key factor in the value of your home and therefore the cost of repairing or replacing your home.

Regardless of location, the age and condition of your home will move the value up or down in relation to other homes in your neighborhood.

Your Specific Coverage

After determining what it will cost to repair or replace your home, your property casualty insurance premium is affected by the specific terms of your policy. Your policy will have damage, liability and personal possession coverage, but each of these aspects can be adjusted with higher coverage amounts, more items covered, and higher or lower deductibles.

Evaluating You

You also are a factor in determining your property casualty insurance premium. Insurers will run a credit check on you and adjust your premium based on the strength of your credit score.

But you will also be evaluated by the various demographic groups you fall into. By looking at the claims and payment histories of large groups of similar people, the insurers assign certain categories of risk to certain categories of people. Insurance premiums are adjusted in relation to this.

Studying the Statistics

In life insurance, the insurance companies study the statistics of large numbers of people to help them understand when a person is statistically likely to die and, therefore, when the insurance company is likely to pay a claim. This is a determining factor in the premium.

Similarly with property casualty insurance, the insurance companies study the behaviors of their customers, breaking it down by type of customer. Among many demographic categories are marital status, age and gender.

Insurers will always be examining data on their customers to determine what type of customer is most likely or least likely to file a claim, dispute a claim, stay with the company, increase coverage and make premium payments on time. The companies adjust premiums based on that data.

Insurers Want to Know Customers

As an example, insurers have found that people who bundle various types of insurance coverage with one company are more likely to stay with that company than others. Those who have auto, health and life with one company have a higher retention rate. That allows insurers to offer more competitive rates to people in that demographic.

Similarly, married customers have a higher retention rate than single customers. This is not indicative of good or bad behavior. Some groups shop more often for a new insurance carrier than others.


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