A flashy sports car costs more to insure than an economy
hatchback, and a luxury SUV costs more to insure than a basic
minivan.
These common-sense notions and reality often line up. But
sometimes they don't.
For example, the MX-5 Miata, a two-door convertible sports car,
is less expensive to insure than the utilitarian Volkswagen Golf
two-door hatchback, according to data gathered by Quadrant
Information Services on some 900 new 2012 models. The $19,000,
180-horsepower Scion TC coupe is about as expensive to insure as a
$35,000, 412-horsepower Ford Mustang GT convertible. (See "
How to insure a new car
.")
What gives?
Premium differences are based on the history of insured losses
for each make and model for each type of insurance:
collision
,
comprehensive
,
property damage
and bodily injury liability, personal injury protection and medical
payments. The Highway Loss Data Institute (HLDI) maintains a
database that insurance companies consult to help determine
premiums.
"Overall losses depend on two factors -- how often claims occur,
and how much they cost when they do occur," says Matt Moore, HLDI
vice president.
A cheap car that's expensive to repair can skew the loss
numbers. Some cars become favored targets of thieves, and others
are owned mainly by young drivers.
Of course, your car is only one of several factors that can
greatly affect your rates. Where you live matters a lot, and so do
your own driving record and history of filing claims. And every
insurer looks at the data differently, which means premiums that
can differ by hundreds, if not thousands, of dollars. (See "Save
$1,102 just by shopping around.")
More is sometimes less
Conventional wisdom used to hold that losses for collision
coverage were higher for larger cars. But the institute's research
found that smaller cars generally have higher collision coverage
losses than larger vehicles.
That's because, in general, claims occur more frequently for
smaller cars than for larger cars, even when loss data is adjusted
to reduce possible skewing from factors such as age, gender or
marital status, Moore says. That could be due in part to the better
gas mileage of small cars, which makes them the preferred choice
for commuting. More miles on the road means more chances for
collisions.
People used to assume the maneuverability of small cars would
make them less likely to be involved in crashes. But the opposite
appears to be true.
"Like my boss (HLDI Senior Vice President Kim Hazelbaker) likes
to say, the next time you're on a highway, look at the car that
cuts you off -- it's going to be a small car," Moore says.
But for every rule, there's an exception.
No vehicle is as maneuverable as a sports car. Yet the number of
claims for many sports cars is below average, Moore says. Sports
cars are often used for recreational purposes only, so they spend
most of their time in the garage.
"A sports car has a lower crash risk because it's driven less,"
he says.
Expensive to repair, expensive to insure
But the likelihood of crashes is just one factor. The cost to
repair or replace a vehicle once it's damaged is another.
The institute expresses insured losses in relative terms, with
100 as an average for vehicle makes and models. Among 2008-2010
model year sports cars, the Chevrolet Corvette convertible, Ford
Mustang convertible and the Ford Mustang Shelby GT500 all have loss
results in the 70s for collision coverage. On the other end of the
spectrum is the Nissan GT-R four-wheel-drive supercar, with a loss
result of 292. (You can look up insurance losses by make and model
on the institute's website.)
A likely reason for the Nissan GT-R's higher losses is its
staggering sticker price, which starts at roughly $100,000; prices
for a Ford Mustang convertible start at under $40,000.
"The cost of repair plays a huge role in the overall insurance
equation," Moore says.
Many expensive safety features can send repair costs soaring
(See "How many air bags does a car need?"). Some have a direct
effect on insured losses; others don't. HLDI found that antilock
braking systems don't necessarily reduce crashes, for instance, but
electronic stability-control systems cut crashes by 15 percent to
17 percent.
Collision-avoidance systems and "steerable" headlights have
risen to the top of the list of new safety features that prevent
crashes. A 2011 HLDI study found that owners of Volvo SUVs equipped
with an advanced forward-collision avoidance system called City
Safety filed 27 percent fewer property-damage liability claims than
drivers of other luxury SUVs without such a system. Such claims,
when not accompanied by a bodily injury liability claim, are
typically seen as rear-enders.
The likelihood of theft also influences insurance rates. The
Cadillac Escalade is six times as likely as the average vehicle to
be stolen, and theft losses for the Escalade are 10 times the
average, according to HLDI.
Your car's unique personality
Meanwhile, the individual history of your vehicle someday could
also be part of the premium formula. Claudine Modlin, a senior
consultant for Towers Watson, a global research and consulting
group, says insurance companies are studying whether such variables
as failed emissions tests, previous use as a rental vehicle or
number of previous owners are correlated with risk.
Insurers use statistical techniques and computer power to sift
through huge amounts of data to find factors that predict risk.
Vehicle history information from vendors, such as Carfax, is one
source of the data insurers are poring through, Modlin says.