Since the beginning of time, people find safety in numbers. They group together and form tribes to protect themselves from the harsh wrath of nature, gather food for survival, and protect themselves from other tribes. Simply put, being in a group is essential for survival and the group itself aids the survival of each of its members. On the other hand, each individual of the group contributes for the survival of the entire group. Apart from that, heavy tasks if approached by a group become easier to accomplish than doing it alone. A group also shares the same culture that contributes to their identity.
Auto Insurance Groups' Identity: Low Risk and High Risk
Car insurance works under the same dynamics of the early tribesman. When people apply for vehicle insurance, they are grouped or clustered by insurance companies according to risk levels. Their identity then or labels can range from "high risk" to "low risk." As what I've mentioned above, groups share the same identity. Therefore, people in the high risk group are those that have committed countless traffic violations and road accidents. On the other hand, members of the low risk group are just the opposite.
Since people in the high risk group are more likely to make claims, their insurance rates are higher than the low risk group. Although they might transfer you to other groups, but it takes time to prove to them that you are a safe driver. For most, it takes years without making claims before one is transferred to a less risky group with lower premium rates.
As a heads up, you should be safe in driving. Even if you have insurance, remember that your periodic payments or insurance premium is affected by the group you belong. So, if the insurance company decided to transfer you to high risk group because you have made a lot of claims, you will be paying higher premiums than before.
The Group as a Tribe: Offsets the Cost
Moreover, the premium that each individual (in a group) paid to car insurance companies is what protects the entire group financially. Explained simply, if a member of the group is at fault in an accident, the money spent comes from the group. To explain further, the entire group through their periodic insurance payments to the insurance company, shoulders the expense of the damage done by a single member of the group. That way, the insured individual (a group member) does not have to carry the entire financial burden of the accident - being insured offset his or her costs.
But what if only one member of the group commits an accident all the time? Isn't it unfair to the other members of the group? This is one of the reasons why groups were created by insurance firms companies. People in the high risk group are more likely to commit an accident based on their driving records or history. Also, they pay the same amount in their periodic payments and will get the same coverage from insurance companies which keep the money of the group.
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