At Ideal Auto Glass, many customers ask us if filing an auto glass claim will make their insurance premiums go up. For a lot of people, the process of insurance, from quote to claim, is confusing and mysterious. This is the first part of a blog series that will delve into the insurance process and answer some of the most common questions people have about insurance.

How do insurance providers calculate rates?

Consumer Reports Magazine recently did a special investigation into the insurance industry to determine how insurance providers determine rates. They investigated more than 2 billion car insurance price quotes from all over the United States over the course of 2 years. The first thing they stress is that pithy advertising doesn’t necessarily equate to a low rate. Marketing is so strong with insurance companies (from the gecko to the witty lady in a lab coat and red lipstick) because the process insurance companies use to determine rates is so opaque.

In lieu of concrete facts, consumers have to rely on marketing. So, if you’re confused about how your insurance rates were calculated and what could raise or lower them, you’re not alone.

One reason that insurance rates are so complicated is that they’re not federally regulated. Auto insurance rates vary by state to state, meaning that pricing between states can vary dramatically. Some states require that insurance companies reveal their pricing formulas with regulators, but not all do. Furthermore, even if the pricing models are available to regulators, they’re not open to the public. The complexity of the formulas also makes it difficult to regulate, even for experts.

Consumer Reports found that oftentimes a person’s insurance rates are based more on his or her socioeconomic scores, such as credit history, type and number of credit cards, than your driving history. Big data is making this information easier for insurance companies to collect and analyze. What does it mean for consumers? Stay tuned next week for the second part of our series on car insurance.