How auto insurance companies manage risk ?

Hello there!

Auto insurance companies manage risk by charging low-risk drivers with lower rates, while charging higher-risk drivers with higher rates.

This is pretty much known as a "trust" thing with the driver and the auto insurance company.

Auto insurance companies charge lower rates for low-risk drivers because they can "trust" them more. Since the low-risk driver has a lower chance of getting into an accident, insurance doesn't need to get a lot of money from them for a accident. These drivers tend to have more experience on the road, good driving records, lower value cars, etc. There are many factors that lead to a insurance company charging a person lower rates.

Auto insurance companies charge higher rates for high-risk drivers because they have a higher chance of getting into an accident. You can probably say that insurance companies "do not trust" these drivers that much, therefore charging them with higher rates. There are different factors that make insurance rates high for someone. People who are teenagers, expensive cars, bad driving record, etc. Let's give you a more realistic example: I own a Lamborghini Huracan (the one in my profile picture) and I pay about $5,700 in total for a year for that car alone. The reason why it's so high is because expensive cars have a higher chance of getting into a accident, due to it being very fast and parts for the car are not cheap.

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