Why do rates vary so much?

Those who want to appear wise always come out with the type of remark that sounds wise. Except, when you think about it, the remark turns out to be a "so what" idea. Like, "You can't change where you're born." or "Where you're born is an accident." Ignoring the desire of some parents to have their children born inside the US for nationality purposes, this is all part of a more general theme in our culture that runs along the lines that, if you can't change something, you should just suck it up and make the best of it. It's a kind a fatalism, tinged with optimism. Why start here? you ask. Well, every now and again, the Insurance Information Institute and other national organizations come out with eye-catching numbers. In this instance, there's just been a survey of insurance rates around the nation. The researchers took a standard male driver, aged 40 with a short daily commuting run. He volunteered to accept a $500 deductible and was then touted round to leading insurers in every state in all the standard makes and models of vehicles. The results show a big difference in average premium rates.

At the top of the rate league come states like Michigan and Louisiana where you are looking at a ballpark $2,500 per year. But if you live and drive in Maine, the same basic policy will cost you less than $1000. At first sight this is a stunning difference. Indeed, applying our wiseacre's thoughts, we should all dismantle our tents and move to Maine. It's going to save us a bundle on insurance. Except that's a major overreaction and there's no guarantee you will make any savings when you add in all the other costs of the move.

Why move at all? you ask. Well, that's the weird thing. Whereas you can buy one-hundred-and-one things from a company like Amazon no matter where you live, you can't buy insurance across state lines. Every state is a captive market and only insurers with a local license can sell you a policy. The only way to get the savings is to move your residence across the border to a state with lower rates. So why is there such a big difference?

The answer all depends on local conditions. Since every state sets its own rates, they directly reflect the number of drivers, the road conditions, the theft and vandalism rates, the weather, etc. As a generalization, crowded roads in big cities have higher rates than rural states which have low numbers of drivers. Louisiana is out on its own because its courts have a strange rule encouraging the settlement of car insurance claims at higher than average levels. There are other anomalies like states requiring the purchase of expensive medical expenses insurance and so on. Perhaps you should use this site to get car insurance quotes from the insurers in your own state. Then google the list of the highest and lowest, and see where your state ranks. That will give you a clearer picture of whether you are being overcharged. If there's a chance you are being gouged, you can decide whether to do anything about it.