There are many reports utilized by insurance companies to determine what to charge you for your car insurance coverage. They include motor vehicle history reports, MVR (personal driving record), C.L.U.E. and financial responsibility reports.
Your “vehicle history report” is a record of the following:
Car title issues
Number of previous owners
You may recognize the name CARFAX; they are one of the leading vehicle history report providers.
So how can this information possibly affect your car insurance rate?
Insurers attempt to predict future losses, or insurance claims they will have to pay, using any information possible. Ultimately, if any data point, or piece of information collected about a person or type of vehicle demonstrates tendencies toward an increase in claims frequency or severity, an insurer will charge that person or the vehicle owner more for coverage.
Vehicle history reports reveal that drivers who own vehicles involved in previous serious accidents tend to file more claims than those who own vehicles with no previously reported serious damage.
It may be that drivers who cannot afford to repair their vehicles out-of-pocket file more claims for damage repairs, or that they tend to be more accident prone. The data doesn’t provide a definitive answer; it only proves that there is a correlation between previous accidents and future claims filed.
This may sound like another negative, but in reality, it lowers rates for those of us who don’t fit those categories identified as having more claims. The insurance company’s goal is to charge the least amount possible to those who have the fewest overall claims and vice versa.
Essentially, those who file more claims are charged more. However, insurance companies cannot simply make up rates or false rating factors. Each state has a department of insurance that governs what insurance companies can charge for insurance. The insurer has to prove the information they use to calculate their rates is legitimate.