Insurance companies operate under a theory known as a “pool of risk.” To make the math easy, lets assume 100 people in a town want to purchase auto insurance. The company will use its vast amount of data to determine how likely it will be for the average driver to get into a serious crash in any given policy year and how much it will cost the company when an accident occurs.
While there are obviously some variables, such as age of a driver, past driving record and type of vehicle, these companies are pretty skilled at determining their risk levels when setting premiums. If one particular town were known for having dangerous drivers, the insurance companies might charge higher premiums for applicants in that town. According to a recent news article from Mass Live, Springfield, Mass. is one of those places. Continue reading