I just got insurance for my car, it’s a Volvo 2022, in other countries it has been pretty straightforward, they don’t care who drives it, they insure based on the state and price of the car, not by age, demographic etc etc like in the states, why is this?
Like if my 80 year old grandpa buys the same car as me, we pay the same in insurance.
Why is insurance so personalized in the USA?
byu/brprer inInsurance
Posted by brprer
4 Comments
Not sure where your experiences have been; but in the United States, insurers have mountains of data going back decades that they can mine to try to better accurately model risk.
If other countries schemes only care about state and price of car, that’s a lot less data points which means that pricing is not going to be near as precise as what can be offered in the United States. That being said, liability laws and healthcare prices in other countries may also play a role in the need for auto insurance as well.
America loves to litigate.
The US healthcare system makes automobile liability extremely expensive. It’s easy for a simple accident to exceed $100,000 damages. That makes the risk of the individual driver a major factor in the cost of insurance. And individual drivers differ widely in risk based on age, sex, experience, location, amount of driving, type of driving, etc.
If you charge the same for all drivers and I charge good drivers less than bad drivers, I’ll get all the good drivers and you’ll be stuck with only bad drivers, so your company will have to raise it’s rates even more.
The majority of the US population just…drives. Everywhere. For every little thing. They have to find a way to personalize or else everyone would pay VERY high rates as a baseline. Tony who is 80 and drives 2 miles a week has to pay the same as 19 year old Tim who drives 400 miles a week and just got his license? Since insurance is a pooled risk and risk varies so wildly here, it just wouldn’t work.