Great question! All insurances work off of assumed risk. The higher the risk, the more expensive the rates. The insurance companies use a variety of statistical information to determine the levels of risk. They also make some assumptions that may or may not be true to you personally, but tend to hold true over the general population of the group. For example, the assumption is that if you smoke, your health risks are higher. The mortality statistics bear that out, as do statistics on cancer, and smoking related diseases. Therefore, life insurance rates are higher for smokers. The risk for someone unemployed is similarly higher than someone with employment. Someone who is unemployed will have a harder time making their premium payment, and the risk for the company to lose money is higher. They are going to try to minimize that risk by charging enough to quickly cover their costs. I hope that answers your question, if you would like to discuss it further, please contact me, I'm happy to help. Thanks for asking!
There are two reasons why unemployed people may pay more for auto insurance: persistency, and claims.
Issuing policies to new customers is costly. Agent commissions are heavily front loaded, and the company has to carry marketing and underwriting costs on new policies. Policies that stay on the books longer are more profitable than those that lapse shortly after being issued. People who are unemployed tend to have shorter persistency rates due to a lack of income.
Many people become unemployed through no fault of their own, while others are chronically out of work for a reason. People with mental ilnesses and/or substance abuse problems often have a hard time staying employed. This population is also more likely to be involved in an auto accident. Sometimes those temporarily out of work get lumped into this category.
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Issuing policies to new customers is costly. Agent commissions are heavily front loaded, and the company has to carry marketing and underwriting costs on new policies. Policies that stay on the books longer are more profitable than those that lapse shortly after being issued. People who are unemployed tend to have shorter persistency rates due to a lack of income.
Many people become unemployed through no fault of their own, while others are chronically out of work for a reason. People with mental ilnesses and/or substance abuse problems often have a hard time staying employed. This population is also more likely to be involved in an auto accident. Sometimes those temporarily out of work get lumped into this category.