When you look at the variation you can find in different car insurance quotes  you may well wonder how car insurance companies come up with those often disparate figures. Here we will take a look at how they calculate premiums in general, and why some companies seems much cheaper than others. 

Filling in insurance application forms even online can be tedious as there are so many questions that have to be answered; often upward of 20. It is your answers to these questions that are used to calculate your premium, but never be tempted to tell a lie, or even be economical with the truth. Your answers form an important part of the insurance contract, so if it is found that you were aware that any were incorrect, then you insurance policy could be invalidated.   

The major parameters in the calculation of insurance premiums are the perceived likelihood that the driver will make an insurance claim and the expected cost of that claim. Here we will look at some of the more important factors that are used in this assessment. 

Age is one of the most important factors, and the highest premiums are charged to drivers who are 25 years old or younger. This is because statistically younger drivers have far more accidents than older ones. 

Gender is another major consideration. Despite all the jokes about female drivers, it is a fact that they have far fewer accidents than men, and when they do the costs of the claims are lower. Historically insurance companies have used this to decrease the premiums charged to females, but that is now against European law; however all indications suggest that women are still being charged lower premiums than men. 

Occupation is also important. Statistically people in certain occupations tend to have a higher proportion of accidents.  One reason is that insurance companies consider certain occupations to be associated with more reckless drivers. One of the worst occupations is journalist and one of the best is school teacher. 

An important parameter is the car you drive. Essentially faster expensive cars cost more to insure than slower inexpensive ones. All cars are grouped into one of fifty insurance groups according to the potential cost of repair and replacement. Also insurance companies have statistics which show that faster more powerful cars tend to be involved in more accidents. Certain cars are also considered to be more vulnerable to theft due to their desirability.

Location is another important factor. If you live in an inner city postcode that is associated with large amounts of car crime then you will pay far more than if you lived in the leafy suburbs where car crime is rare. 

Other important factors include how you use your car, for instance you will pay more if you use it for business; your annual mileage; your motoring history including previous claims and road traffic offences; the amount of voluntary excess you agree to; the kind of cover, for instance third party or comprehensive; and whether or not you are the only driver. 

The reason for the discrepancies in pricing between different insurance companies is twofold: different companies assess different levels of risk differently; and some insurance companies specialise in insuring certain groups of drivers, for instance young drivers or drivers over 50 or drivers in certain professions, so it always pays to shop around.