How is the Risk Profile Assessed on the Basis of Individual Risk Factors?

August 9, 2018 | Author: | Posted in Insurance

Risk assessment is one of the primary tasks to be performed by insurers. Also, known as underwriting, it is a detailed methodology which helps the insurer in evaluating and assessing the risk associated with the insurance policy. The main purpose of the assessment is the calculation of the correct premium amount for the insured.

The insurance risk assessment is performed on the basis of certain factors. Before the advancement of technology, determining the premium rate was quite simple as it involved looking at the prospect’s age, driving record, type of vehicle, and location. These days, it has become easier for the insurance companies to exactly pinpoint how much to charge on the basis of individual risk profile.

Here’s a look at the individual risk factors that will determine the premium amount:

1. Credit rating

Several credit rating companies have indicated that an individual’s credit rating can determine their possibility to have an accident. The best automobile insurance companies insure only individuals with the best credit scores.

2. Payment history

Just like the credit history, if you pay the automobile premiums on time, you might be able to reduce your premiums.

3. Age

Age is yet another factor taken into consideration. It has been estimated that a significant percentage of vehicle injuries are caused by the drivers in the age bracket of 15 to 24 years. People in the 16 – 19 age group are three times more likely to be a part of the fatal car crash than those above 20. In fact, motor vehicle accident is one of the significant reasons for death of teenagers. Thus, individuals in age group of 16 to 19 pay 40% more insurance premium than the individual in age group of 20 to 24. With growing age, the premium amounts are reduced by the company and by the age of 55 one can also enjoy senior discounts.

4. Driving record

Driving history is considered to be an accurate indicator of the future claims. Individuals with a clean driving history enjoy more discounts than those with accidents.

5. Gender

Young men are more likely to be involved in automobile accidents than women, irrespective of their age. Thus, men pay more for their automobile insurance over the years.

6. Nature of business

Individuals who use their cars for businesses pay more premium than people who work from home.

7. Vehicle type

Cars which are more expensive to get repaired or the ones that are likely to get stolen have high premium rates. If your car comes under luxurious / premium category, then you may need to pay extra premium as compared to what is being charged to a budget car owner.

8. Location of house

Individuals who live in high-crime neighborhood or high risk urban areas are likely to pay more premiums that the ones residing in areas that are low risk areas. Insurance companies have detailed database containing details of crime reported from/in a particular area to define their insurance premium plans.

Explore the web for more information on how the insurance company decides the premium after performing the insurance risk assessment.

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About Author
Robinson James is an automobile engineer at a leading service center in Malaysia. He is known for offering free advice on motor insurance, auto insurance, and insurance risk assessment through his blogs. He loves to share latest insurance news to his readers for ensuring that they stay updated with latest happenings of the auto world. Connect with him to get most astonishing motor vehicle insurance plans at affordable rates.


PIAM Insurance makes the renewal of your motor & car insurance more reliable and offer the best insurance policy online in Malaysia.

This author has published 14 articles so far.

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