Question

Vance is an insurance agent and wants to get his younger accident-prone brother Nav some insurance. Because Vance is a partner at the company he is allowed to get his brother special rates and have other aspects of his brother’s driving past overlooked. The insurance company tells Vance that he only has to use historical data on accident rates of drivers in his brother’s age group to determine the premium his brother will have to pay.  Which of the risks is Vance analyzing to determine the premium?

Answer 1

Driving without insurance is considered irresponsible and so it results in higher premiums. Automobile insurance is required by every state. While you cannot be penalized for driving an uninsured vehicle after the fact, insurance underwriters correctly view this as illegal.

Men typically drive more miles than women and more often engage in risky driving practices including not using seat belts, driving while impaired by alcohol, and speeding.

However in this case insurance company has tell Vance to use historical data on accident rates of drivers in his brother’s age group to determine the premium his brother will have to pay. So the insurance company is analyzing Risk related to Age.

Younger drivers have been proven to be more accident-prone than experienced drivers. Consequently, it is a blanket rule that drivers are charged higher premiums until age 25.

If company believes that Vance brother is a low-risk driver in spite of your age, then he can take advantage of discounts offered by insurers. Students with good grades, for example, are often offered a discount to offset the high premium. Discounts may also be offered to teens at age 21 if the driver has maintained a clean driving record.