Insurance companies use all of the data they have about their clients past claims to determine what they need to charge for insurance today. When you receive an insurance quote, algorithms used your data to calculate how ‘risky’ you are to their company and the amount of money they require to have you as a customer.
Every company will have their own set of data and rules as to how the data should be interpreted. This is why you will get a different price from every insurance company.
Also note that different areas of insurance are regulated by the government. The government wants to make sure companies are offering a high enough price that they wont go bankrupt if a catastrophic accident does occur and they can’t pay out claims.
There are lots of costs insurance companies have to manage. Similar to the stock market, insurance companies do not like unknowns. Here are 2 areas where costs have been increasing and become more unpredictable:
- Severe weather has had a material impact on insurance costs. Colorado had 4 natural disasters from 1980-1999 in Colorado. From 2000-2017 there were 58 natural disasters and additional large hail storms in 2018 & 2019.
- The increase in social inflation. Juries are awarding larger sums of money to those that were injured in an accident, also known as nuclear verdicts. As insurance companies pay out more those costs are past through to the customer.
Due to the above factors, insurance costs in Colorado have increased for several years. The best way to manage or reduce your insurance costs is to get quotes from multiple insurance companies every 3-5 years.