Why Is My Car Insurance So High?!

One of the most frustrating aspects of purchasing a vehicle is applying for and purchasing car insurance. In Kentucky, the prospective owner of a new vehicle must provide proof of insurance coverage prior to transferring the vehicle. The amount of insurance coverage purchased MUST meet the following minimum policy limits: Bodily Injury coverage in the amount of $25,000 per person and no less than $50,000 per incident, no less than $25,000 for property damage coverage, and $10,000 for personal injury protection (PIP) benefits (although PIP can be waived by meeting certain requirements ***THIS IS NOT RECOMMENDED). The owner must maintain insurance coverage at all times the vehicle is operated and driving without insurance carries a penalty of $500-$1,000 and/or up to ninety (90) days in jail.

How Are Insurance Rates Calculated?

So, how are insurance rates calculated? Similar to your credit score, insurance companies rely on calculations of various factors to generate your insurance score. Unlike the credit score, which requires credit reporting bureaus to provide a detailed credit report to each consumer, insurance companies are not required to tell you how they calculated your score. Kentucky law, however, requires insurance companies guidance on what they can consider when determining your credit score. Factors considered may include the type of car, driving record, age of drivers in the household, city vs. rural, nearby hospitals, crime in the area, and YOUR CREDIT SCORE.

Credit Score

While Kentucky law prohibits insurance companies from making insurance underwriting decisions based solely on your credit score, it does not prohibit them from using your credit score in the calculation. Data scraped from your credit score often includes payment history, bankruptcies, collections, outstanding debt, length of credit history, and types of credit. Any of these negative aspects of your credit score will likely cause your insurance rates to surge.

Social Scoring May Be Next

BUT WAIT, there’s more! Insurance companies are all about assessing risk. While some argue credit, scoring is a poor method for calculating insurance risk (several states such as Massachusetts and California have an outright ban on the use of credit score in auto insurance underwriting), social scoring may be the next move for insurance companies. Social scoring is a method used by some insurance companies to review your online presence for risk-related activities. Do you post selfies while behind the wheel? Twitter and Facebook are littered with social guru videos created while driving down the road. Do you think your insurance company approves? The answer is a strong NO. How about the awesome photos of you skydiving, base jumping, or that wild night at the bar? The social score trend is heating up and insurance companies are taking notice, prying into our lives through the web. Some insurance companies now have dedicated arms of private investigators to dig through your online presence prior to writing auto, home, and life insurance policies. Consumers should take action by making wise choices when publishing content on social media.

  1. KRS: 304.39-110 https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=46758
  2. KRS 304.99-060 https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=30285
  3. Kentucky Department of Insurance Consumer Guide http://insurance.ky.gov/Documents/autohomeratescombined.pdf
  4. https://www.wsj.com/articles/can-a-facebook-post-make-your-insurance-cost-more-11552915222

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