nsurers have a 25-cent phrase for it: loss management. It's the art and science of predicting insurance premiums for a vehicle so the money insurers pay in claims doesn't exceed what insurers collect from customers.

Loss management is science because the insurance industry loves data gathering, graph drawing, and statistical predicting. It's art because each company mixes a heavy dose of judgment and experience into its agreement to cover your loss for a given annual fee. That judgment/experience factor varies for each insurer's principal target market.

High premiums are a way particular companies discourage owners of certain vehicles from seeking coverage with them. Low premiums, obviously, say, "We want your business. We think you and your car make a good combination."

Each company
mixes a heavy dose
of judgment and
into its agreement
to cover your loss
for an annual fee.
Past performance
Car insurance also is about history: A car model tends to be designed and driven in the future the way it has been in the past. While financial investment companies caution that past performance is not indicative of future earnings, the insurance industry strongly believes otherwise.

Even your car's name is important in the insurance cost equation. Many years ago Nissan changed the name of its midrange sedan from Stanza to Altima when redesigning the vehicle. To comfort insurers that Altima really was an improved Stanza, Nissan put a small sticker on the trunk lid with low-contrast lettering reading "Stanza." Far above it in larger, bolder lettering was the new name "Altima." The Stanza sticker was easy for the owner to remove, and some surely did.

A completely new model entry in a company's lineup is an unknown for insurers. Until they have a history of its insurance record in the hands of real owners, the initial premium is all judgment and experience.

The Highway Loss Data Institute (HLDI, and pronounced in shortspeak "hilldy") in Arlington, Va., is a sibling insurance organization to the Insurance Institute for Highway Safety (IIHS), also in Arlington. HLDI collects and reports loss ratings—injury, collision, and theft—and fatalities for makes and models, while IIHS investigates vehicle safety performance.

Before you shop
Kim Hazelbaker is senior vice president of HLDI. He encourages car shoppers to check the insurance implications of their choices before committing to a purchase. Consumers can get a picture of a vehicle's insurance history by visiting the HLDI Web site.

When a car is available in both two-door and four-door body styles, the four-door almost always has a lower premium. Where available, station wagons are even better than four-door sedans. Four doors say mature and conservative to insurers; two doors signal youthful and exuberant; station wagons equal families and car pooling. And the companies have the loss numbers to back it up.

Trim level matters too. Is yours an LX, LS, or SE? Higher trim levels mean higher purchase price—and higher insurance premium—because of more features. That means all Mercury Sables and Honda Accords are not created equal in the eyes of the insurance companies.

A pickup truck that costs the same as a given four-door sedan will have a "significantly lower" premium cost, according to Hazelbaker. Consumers cite this fact as one factor in the increasing popularity of truck-based vehicles for personal use.

Add four-wheel drive to that rear-drive pickup, however, and the premium jumps. "Frontal impacts are the most common crashes," reminds Hazelbaker. The four-wheel drive components are in that vulnerable area of the vehicle.
    A completely
    new model
    is an unknown
    for insurers.

Size makes a difference
For a given vehicle price, the laws of physics affect insurance premiums: Bigger vehicles are cheaper to insure. They perform better in collisions.

"Horsepower costs more," says Hazelbaker, and he's not referring to gasoline operating cost, which is higher, too. "It's just the increased power, not whether it's because of a turbocharger or supercharger."

Insurers don't distinguish premiums for gasoline- or diesel-fueled engines on that basis for the few makes (Mercedes-Benz and Volkswagen) offering them.

Hazelbaker says many companies prefer to limit their exposure with exotic cars like Dodge Vipers and Lamborghini Diablos. "Nobody [company] I know, though, is turning down Mustangs with the GT package [and V-8 engine]."

Safety pays—but not necessarily in premium relief
Some safety feature discounts are disappearing. Now that dual-front air bags are standard on cars, many companies no longer give a discount for them on the newest models. Side-impact air bags are optional or standard on some vehicles, but Hazelbaker is not aware of any discounts for them.

Similarly, discounts for antilock braking systems (ABS) are seldom available because many insurance companies aren't seeing reduced claims. Other features auto makers promote for crash-avoidance safety, like traction control and stability control, don't yet qualify for discounts.

Individual states regulate insurance companies. That means it isn't always easy to make general comparisons in an overview like this. New York, for example, requires a discount for vehicles with daytime running lights (DRLs). Some states require discounts for various forms of anti-theft devices, with immobilizing features receiving the most reduction.

Remember, several separate coverages make up an auto insurance policy. Discounts apply only to a specific coverage, not to the premium as a whole. So a 15% discount for a theft-deterrent often amounts to only 1% of the total premium cost!

"Bumpers are getting better," Hazelbaker happily reports. That's at all price levels of vehicles. The insurance industry is especially pleased with the performance of the Volkswagen New Beetle. It has the "lowest loss cost of any small car."
    safety feature
    are disappearing.

Modify the vehicle, modify coverage
Insurers usually ask if you've modified a vehicle when you apply for coverage. Some companies may ask you later, when the policy is due for renewal, because owners usually add custom equipment only after they've owned the vehicle for a while. Concealing modifications can mean no insurance protection for them in a claim.

You must explain modifications when they are present. Then the insurance company can take one of three actions, according to HLDI's Hazelbaker: Ignore it, not insure at all, or require purchase of an additional "for cost" rider to cover the custom changes.

The message to car shoppers? Include insurance in your vehicle choice selection process. Once you've narrowed your choice to two or three contenders, a call to an insurance agent could uncover differences that you didn't experience during the road tests.

 Morsels from the HLDI database

• Browsing the HLDI Web site brings up interesting numbers.
   For example, station wagons have low loss figures compared
   with other same-name body styles. Using 100 as the average
   loss in a category of injury, collision, or theft, the 1995-97
   Saturn wagon is 71-67-22, the sedan 97-80-26, and the coupe
   108-92-13. Looking at the Honda Accord, which also has
   three types, the wagon is 88-87-127, the sedan is 106-97-202,
   and the coupe is 103-109-227.

• The better loss performance of four-door models over
   two-door models doesn't hold in the mini class. The Geo Metro
   four-door is 170-134-39 and the two-door is 136-113-30.
   The pattern repeats with less difference for Ford Aspire and
   Toyota Tercel.

• The insurance industry sometimes classifies cars in unusual ways.
   The Saab 900 convertible is listed as a sports car.
   Ford Probe, Nissan 240SX, and Toyota Celica are not.

• Individual insurance company classifications and ratings may
   differ from those in the HLDI database. This means
   you can't ask too many questions of your insurance agent.

Columnist John Fobian is an automotive writer and engineer.

©1999 Credit Union National Association Inc.