Anyone can get auto insurance quotes from a number of ways. The most popular of ways is by checking online or calling insurance companies directly. But what makes such a difference between rates from one company to the next? And is there one company that is considered a cheap auto insurance company?
The ability to operate competitively in the free market allows insurance companies to structure their organization to attract particular companies. There are companies who cater to the high-risk group knowing they have to get insurance somewhere. Typically their rates are going to be higher than a company who will only accept low-risk customers, but their service is just as needed and necessary.
While insurance companies are completely regulated by the state, the state doesn't dictate how they rate, they only approve it or disapprove it. Otherwise it might as well be government insurance and everyone would be charged the same with no way to shop for better rates.
This allows insurance companies to invent their own ways to rate and charge customers. The sweet spot they all look for is a way to attract and keep customers. There are three main considerations all companies look for when calculating rates. Thus, there is not one single cheap auto insurance company. Rates depend on many factors including these two main ones:
1. Rating requirements.
Most companies have sub-companies under the main umbrella of their organization, which is why you will see different names for the same company. There is State Farm Mutual Insurance (a standard company) and State Farm Mutual Fire Insurance (non-standard). State Farm Mutual is a cheap auto insurance company for low-risk drivers. State Farm Mutual Fire might seem like a cheap auto insurance company to someone who has one or two accidents because of a better rate than the mutual company.
2. Risk factors.
Insurance companies design risk factors for consistent results for determining eligibility and premiums. Surcharges are calculated for each type of violation and claim, and included with premiums.
Each company decides how much risk they are willing to take. They decide what makes someone ineligible and what they will accept for eligible customers. That is why one company will not allow more than one moving violation to get their best rates while another will allow up to two violations.
This should give you confidence that your insurance company is not making up your premium amount by some random lottery-style guesstimate. You know you are being rated equally as others who have the same driving record, driving experience, and other factors. This also goes to prove that there is not one cheap auto insurance company. The rates will be based on a number of factors so some are cheaper than others for the same person.
