The new popularity of a "tier system" in car and truck insurance means that auto insurance companies can pursue individual customers with a more sophisticated rate table, based on the risk that they calculate for any given driver or household. this gives more tools to the insurers and a better set of options to consumers who buy their needed auto insurance according to the best deal on the market.
The Legal Background
New legislation in some states has been moving auto insurance into a tiered system. The previous system was one where a standard rate was applied to all drivers, with a "surcharge" applied to those drivers who got into accidents or high-risk categories. The tiered system does away with surcharges, replacing this with a set of risk ratings, starting with the standard rating, and going progressively higher according to a variety of calculations.
What Affects Auto Insurance Tiers
A driver may be placed in a specific level of an auto insurance tier system based on a variety of factors, including what accidents or DUI/DWI convictions are in a driver's history, whether he or she is driving a relatively high risk sports or luxury vehicle and whether the driver is located in what constitutes a high risk area (often an urban area with higher traffic accident statistics).
Results of a Tiered System
A tiered auto insurance system means that one accident taken out of context will not make a driver's individual or household policy skyrocket overnight. It means insurers will be using a more precisely defined set of metrics to find out what kind of a risk the driver really represents on the road.
Being in a high-risk category or 'tier' doesn't mean a driver can't shop for auto insurance rates, it just means they won't be eligible for the standard insurance rate until they can provide other data to prove a better context for their driving history. As a driver history gradually "washes clean," that driver will be more eligible for lower tiers and lower insurance ratings, and that translates into better premiums for future years.
In many states, auto insurance companies are required to show a customer what tier he or she falls into on their actual policy documentation. This is a reference for writers who want to monitor their risk rating on an ongoing basis in order to renegotiate insurance rates later. However, the number of tiers that an auto insurance company may have is not set, and some companies may have more tiered ratings than others.
Knowing the background of this kind of auto insurance system will help drivers make good decisions about which company to purchase their insurance from. Be sure to ask insurance company representatives how their company offers standard or premium rates to the best drivers, and how they can help lower costs over time for those drivers who have been negatively impacted by some part of their driving history.