Although there are many variables that determine auto insurance premiums, they are built on a foundation of loss experience and trend factors such as those resulting from inflation. Your personal or family situation also comes into play. The following are some of the key factors that influence auto premiums from a consumer standpoint.

In most states, age, sex and marital status are recognized as reliable ratemaking criteria. Who can argue with the fact that the highest premiums are assigned to youthful drivers, who as a group have the worst driving record? According to the Insurance Services Office, unmarried women ages 17-20 paid 47% above the adult base rate for auto insurance in 1980. By 1995, they paid 115% above the base rate. During the same period, young male driver premiums declined from 187% to 185%, still well above the adult base rate.

As a general guideline, families can expect their auto insurance premiums to at least double when adding a new teen driver to their policy.

Of the estimated 185.5 million licensed US drivers in 1998, about 50.5% were males. Males account for about 63% of the miles driven each year and have a higher fatal accident involvement rate than females. According to the National Safety Council (NSC), 73% of the 1998 vehicle fatalities were caused by male drivers. However, for all crashes, female drivers have higher involvement rates than males. Per 10 million miles driven, the female involvement rate in crashes was 90, and the male rate was 77. According to the Insurance Institute for Highway Safety, since 1975 female deaths rose 17%, while male motor vehicle crash deaths declined 16%.

The premiums that insurance companies charge youthful drivers are based on years of statistical information. For example, 1998 NSC statistics show that 29 out of every 100 licensed drivers age 19 and under, and 18 out of every 100 licensed drivers 20-24 years of age, were involved in accidents. NSC data also shows that people under 25 represented 13.8% of the nation's driving population, but 26.9% of drivers involved in crashes.

In states that use the driver's sex as a factor, women are generally better risks on the road than men and pay less for insurance. Recently, though, this gap has begun to narrow. Still, male youthful drivers may wind up paying about 40% higher premiums than their female counterparts, on average.

Most companies offer safe driver discounts to policyholders who remain accident-free for a set period of time. Others allow for one minor traffic citation before raising premiums. One company announced such a program in early 2000. The company began offering Ohio drivers its safe driver discount even with one minor moving violation. These would typically be categorized as one- or two-point traffic offenses, such as some speeding violations.

Lower-priced sedans cost less to replace and typically less to repair than sport utilities, and luxury or sports car models. The overall premiums paid for liability insurance, medical payments and uninsured/underinsured motorists coverages are not affected by the type of car you drive. Industry-wide, only collision and other than collision coverages (comprehensive) are affected by the make and model.

As noted in the previous section on factors from a company standpoint, this is currently being studied as possible future rating criteria for liability insurance due to the increased popularity of sport utility vehicles and the potential damage they can inflict.

Some companies use the age of cars when determining insurance premiums. Current model year cars fall into one category, those from the previous year entail the second category, and so on. Others use the Model Year Rating System, which assigns a rate to each model year. This recognizes that costs to repair older cars are subject to the same inflationary factors as newer ones.

Another rating method uses new vehicle price ranges as guidelines.

Another approach, introduced in the late 1970s, ties premiums to the damage and actual loss experience of autos by model year and type. Since certain cars sustain less damage on the average than others, repair costs are adjusted accordingly.

If the "little old lady who only drove to church on Sundays" truly existed, she would be charged a lower premium than most. Cars driven to and from work are more vulnerable to crashes than those driven strictly for pleasure. Most work-related driving is usually in heavier traffic conditions than pleasure driving.

Some insurance companies look at such variables as the number of miles a car is driven annually, using 12,000 miles per year as the average. This is because the chance of becoming involved in an accident increases with the number of miles that are driven annually. So, if the vehicle is used for business (not to be confused with driving to and from the principal place of employment), the additional mileage could influence coverage costs.

Conversely, most farmers enjoy lower rates because their vehicles are seldom driven in heavy traffic. This discount does not apply to vehicles used by farm family members engaged in occupations outside of farming that require transportation to and from work.

At least one major auto insurer is experimenting with basing premiums on how much a car is driven and under what conditions. Through a tracking box mounted to the vehicle, the insurer can monitor the driving habits of the vehicle owner. The device uses cellular phone and satellite technology to capture data such as how many miles are driven daily and at what time of day. This program, which is strictly voluntary, is being tested in Houston. The insurer says that some drivers have seen premium reductions of 25%.

Theft claims, according to the study, are more than twice as high in densely populated areas compared to the least densely populated areas of the country.

Rating territories are designated geographical areas used by auto insurance companies to accumulate statistics such as population density, traffic congestion and other factors affecting exposure to accidents. The arbitrary division of Ohio into territories for rate development is as necessary as the boundaries developed for tax structuring. An insurance company cannot divide a city into separate territories. But it can have different rates for each city in a county and dozens of territories across the state.

The National Safety Council reported that 93.4% of all crashes in 1996 occurred in the drivers' home state. Although the data is no longer available, NSC previously reported that over 80% of traffic accidents occurred within 25 miles of drivers' homes. In addition, about 59% of all vehicle fatalities occurred in rural areas versus about 41% in urban areas. A territory's insurance claim record generally is affected by traffic patterns, road conditions, the quality of traffic law enforcement and local costs associated with auto repairs and hospital and medical services.

Motorists can generate savings on insurance by maintaining a safe driving record and committing to certain lifestyle changes. Good driver discounts can mean a savings in the 10-20% range off the bottom line of an auto insurance premium. Most insurance companies offer auto insurance discounts, though they vary from state to state and company to company. Among them are:

• Driver training discount: For young drivers who have completed driver training courses.
• Good student discount: Limited to high school or full-time college students over the age of 16, and is usually contingent on maintaining a B or better grade average. Discounts could range from 5-25%.
• Multi-car discount: Usually available to those who insure two or more cars with the same company.
• Multiple policy discount: Available from some companies to individuals carrying more than one policy (i.e., auto, home, life and/or health) with the same company. Savings could be in the 15-20% range.
• Resident student discount: Offered by some companies to an insured whose family includes a resident student, without a car, at a college more than 100 miles from home. A premium reduction might also be available to those taking a car, depending on the college location.
• Safety feature discount: Available from some companies to drivers of cars with airbags, since studies show that they have reduced injuries to vehicle occupants. A few provide discounts for antilock brakes (ABS); however, some have discontinued this practice since there is no sound evidence that ABS has reduced claims.
• Antitheft device discount: Available from some companies to insureds whose vehicles are equipped with alarms or disabling devices that reduce exposure to theft.
• Nondrinker and/or nonsmoker discounts: These are becoming increasingly popular.
• Completion of a state-approved senior driver defensive course: Senior drivers 60 and older can obtain a discount by completing an accident prevention course. See next page for a list of state-approved programs.
• Commuter or carpools: If you drive just a few miles to take public transportation to work or carpool, ask if a mileage discount is available.

(Portions excerpted from the Insurance Information Institute's Sharing the Risk and Fact Book 2000, and Kiplinger's Smart Ways to Save on Insurance, Winter, 1997)