Why Did the Price Change? Understanding Rate Variance in Insurance Prices

Author profile picture

Susan Meyer

Senior Editorial Manager

Susan is a licensed insurance agent and has worked as a writer and editor for over 10 years across a number of industries. She has worked at The Zebr…

Credentials
  • Licensed Insurance Agent — Property and Casualty
Author profile picture

Beth Swanson

SEO Content Strategist

Beth joined The Zebra in 2022 as an Associate Content Strategist. She is a licensed insurance agent whose goal is to make insurance content easy to r…

Credentials
  • Licensed Insurance Agent — Property and Casualty

No one likes a bait and switch. And that’s what shopping for insurance can sometimes feel like. 

You take the time to enter your information and get a number. Great! That’s what you’ll pay for insurance then, right? Unfortunately, no. 

When you enter more information to officially secure your rate, you might see that number suddenly jump up. What’s going on? 

In this article, we’re seeking to explain this sudden jump. What causes the rate variance?

What is rate variance?

When shopping for insurance, you may notice that the prices you’re quoted can vary widely, even for the same type of coverage. More importantly you might see the number you’re initially quoted suddenly change after you enter your full information.

This phenomenon, known as rate variance, occurs because insurance companies consider a multitude of factors when determining premiums. Let’s dive deeper into why these rates vary and explore the concept of an RC1 rate—a term often encountered during the initial quoting process.

What is an RC1 Rate?

An RC1 rate, or "Rate Class 1," is typically the baseline premium estimate that an insurance company provides based on limited information. It serves as a preliminary quote and assumes standard or average risk levels. This rate is calculated using broad demographic data such as age, location and the type of coverage you’re seeking. At this stage, the insurance company has not yet conducted a deep dive into your specific details, such as your driving history, credit score or claims history. These can have a big impact on the final rate you’ll be offered.

Think of the RC1 rate as the starting point. While it’s a useful ballpark figure, it’s not set in stone. As more personalized information becomes available, the insurer recalculates the premium to reflect your unique risk profile.

Why does the rate change after providing more information?

Insurance pricing is inherently tied to risk assessment. Once you supply more detailed information—whether through an application form, driving record check or other underwriting processes—the insurer gains a clearer picture of the potential risks associated with insuring you. Here are some common factors that can influence the change:

  1. Driving History
    • If you have a clean driving record, your rate may decrease. However, traffic violations, accidents or DUIs can significantly increase the premium.
  2. Credit Score (Varies by State):
    • Many insurers use credit-based insurance scores as a risk indicator. A higher score often correlates with a lower premium, while a lower score can result in higher rates.
  3. Claims History:
    • A history of frequent claims suggests a higher likelihood of future claims, which can lead to increased rates.
  4. Vehicle or Property Details:
    • For auto insurance, the make, model and year of your vehicle play a significant role. For homeowners insurance, the age, size and condition of the property are key considerations.
  5. Lifestyle and Occupation:
    • Certain occupations or lifestyle situations might be seen as riskier by insurers. For example, if you commute long distances daily, you’re statistically at a higher risk of accidents.
  6. Discovered Drivers:
    • If the insurance company detects additional drivers in your household that weren't initially disclosed, it might affect your rates. Remember to disclose and exclude any drivers who live with you but will never drive the insured vehicle. 
  7. Updates to Underwriting Guidelines:
    • Insurers periodically revise their pricing models based on emerging trends or data, which can impact rates even mid-process.

Wrapping up

Rate variance in insurance prices is a common and expected aspect of the industry. The RC1 rate serves as a starting point, but as insurers gather more specific data, they can better assess the risk and provide a more accurate premium. By understanding the factors that influence these changes, consumers can make informed decisions and secure the best possible coverage for their needs. 

At The Zebra our goal is to make the process as painless and straightforward as possible. We want to provide consumers the closest and most accurate information at every stage of the process.