Car insurance quote question.

Factual Questions
1

Got an email offering car insurance. There wasn’t much doing with me at the moment on so I clicked on the link and filled out the questions, sort of.

I thought it would be fun to see what a real high risk driver would be charged.

So, “Bob Smith,” age 16 as of January 3, 2009 applied. He drives a BMW and has had a one DUI arrest and one wreck with no injuries (two different events). I think there were a couple of other things but I forget what they were but the above should be ample to drive up the old rate.

Got the following email this morning.

Dear Bob Smith,

Thank you for shopping for auto insurance with CarInsurance.com, the leading Online Insurance Marketplace™, partnering with NetQuote.

Below you will find your auto insurance rates. If you’d like to buy one of these policies, click the Purchase link below or call us at 1-800-964-4859.

You are only a few minutes away from starting your policy:

Company Length Price Payments* Verify Rate
or Purchase

6 months $5,531 $1,561 down and 5 payments of $942

It says it’s 6 months for $5,531. But 5 months at $942 is $4,710. Add the $1,561 and you have a total of $6,271. This is $740 more than the 6 month quote.

So what gives?

Is this just so blatant a con job that they figure “Bob’s” so hard up for insurance that he won’t do the math and just buy the thing?

If there something about how higher risk insurance is priced, some sort of surcharge maybe, that makes this come out?

So fight my ignorance, please

2

Interest and/or fees for paying monthly instead of paying for the policy in full.

3

Right. I believe the quote given is “either $5,531 up front, or $1,561 down and five payments of $942.” The last time I paid my insurance I had a similar choice of options (albeit with amounts that were ten times smaller.)

4

Well that’s a disapointment. I was really hoping for fuckery of some sort or another.

Not that it matters much, it isn’t likely that “Bob,” given his past history, has much driving in his future.

5

Perhaps you should insert “legally insured” before “driving” (too many of these guys drive uninsured).

6

Lots of insurance works like this. The one-time, up front premium will be less than if you spread payments out over time. This is the “time value of money”.

If one year’s premium was, for example, $1200, and you paid the insurance company $1200 on January 1 then they’d have $1200 in capital to work with for the next 12 months. But if you only paid them $100 on January 1, then $100 on February 1, then $100 on March 1, etc. etc. etc. they wouldn’t have $1200 in capital until December 1.

Insurance companies would rather have your premiums up front to give them capital to work with – to pay claims or to invest.

7

Isn’t providing false information to an insurance company a crime of some sort?

8

No legal cite, but I’m guessing there’s a huge difference between doing so when purchasing a policy, and when doing so to get a rate quote (usually processed by some kind of computer automation these days). One is an attempt to defraud the company; the other a mostly harmless use of a few microseconds of computational time. IANALetcetc

9

I’m certainly going with atomicbadgerrace’s brilliant analysis of the legal situation.

10

Yes, when I worked for an insurer the standard frequency loadings were:

  • 2.5% half-yearly;
  • 3.0% quarterly;
  • 5.0% monthly and fortnightly.
11

So, what could, “Bop” do to earn a higher rate? I had him as a student. what if he was a 16 year old dropout? A more expensive car than a BMW?

What’s the highest you’ve ever heard of?