How do we set premiums? That’s for us to know and you to find out

As insurers continue to adopt complex pricing systems, not everyone is seeing savings. Why the disparity? For starters, premiums vary widely by state.According to a 2007 study from the National?Association?of? Insurance?Commissioners, the average year-long policy in 2005 cost $949—ranging from a low of $664 in Iowa to a high of $1,343 in the District of Columbia.

What’s muddied the waters even further are the formulas used to set premiums for individuals. Twenty years ago most insurers sorted customers into four or five pricing tiers, based on where they lived, their age, and their driving record. Over the past decade, hundreds of variables have been added to the mix, including credit history, homeownership, and limits on past policies. Since each insurer interprets these variables differently, it’s even tougher for consumers to get a handle on the system.

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