What affects your insurance premium and how to reduce it
Insurers use rating factors — characteristics that predict the likelihood and cost of a claim — to set your premium. Understanding which factors they use, and which you can influence, is the first step to buying cover more strategically.
What a rating factor is
Every insurance premium is calculated using rating factors — measurable characteristics about you, your property, or your vehicle that the insurer uses to predict the probability and likely cost of a claim. Insurers do not set a different price for each individual based on their unique history; they group policyholders into risk segments and price each segment accordingly.
The NAIC consumer portal in the US and the FCA in the UK both publish guidance on which rating factors are permitted in their respective markets.
Common rating factors by insurance type
- Age and years licensed
- Claims history and convictions
- Vehicle make, model, and age
- Annual mileage
- Where the vehicle is kept overnight
- No-claims bonus years
- Property type, age, and construction
- Location and flood/subsidence risk
- Rebuild cost (sum insured)
- Security features
- Claims history
- Whether the property is occupied
- Age
- Pre-existing conditions
- Smoker status
- Location / state
- Plan type selected
- Deductible chosen
- Age at policy start
- Health and medical history
- Smoker status
- Occupation
- Sum assured and term
- Family medical history
Which factors you can influence
Some rating factors are fixed (age, property location, health history). Others you can actively influence to reduce your premium:
- Increase your voluntary excess/deductible. Taking on a higher deductible signals willingness to absorb small losses yourself, reducing the insurer's expected cost. The saving varies by product — typically most effective in motor and health.
- Build and protect your no-claims discount. In motor insurance, a no-claims bonus of four or more years can reduce premiums by 50–70% in some markets. Consider whether protecting your no-claims bonus at renewal is worth the small extra cost.
- Improve security. Fitting approved security devices (alarms, deadlocks, dashcams) can reduce home and motor premiums. Ask your insurer which specific devices qualify before purchasing.
- Review your sum insured annually. Over-insuring increases your premium without benefit; under-insuring creates an average clause risk. Use a rebuild cost calculator annually for buildings cover.
- Shop at every renewal. Customer loyalty is not rewarded in most insurance markets. Comparing quotes at renewal consistently finds better-priced alternatives for equivalent cover.
What you should never do to lower a premium
Providing false information to get a lower premium — known as insurance fraud — voids the policy and can result in prosecution. Common examples that cross this line:
- Registering a vehicle at a lower-risk address (fronting)
- Listing a lower annual mileage than you drive
- Omitting claims, convictions, or points from an application
- Misrepresenting the primary driver on a vehicle
Insurers cross-reference applications against the Claims and Underwriting Exchange (CUE) database in the UK and similar databases elsewhere. Misrepresentations discovered at claim time result in the claim being refused and the policy cancelled — the worst possible outcome.
For a full explanation of how the five components of a policy interact with your premium, see our guide to the five parts of every policy.
Premium factors FAQ
Frequently asked questions
- No. Following the 2012 European Court of Justice ruling (Test-Achats), insurers in the UK and EU cannot use gender as a rating factor for new policies. Age, claims history, occupation, and vehicle or property characteristics remain permissible factors. The FCA publishes guidance on what information insurers are permitted to use.
- Yes — increasing your deductible (called an excess in the UK and Australia) is one of the most direct ways to reduce your premium. The relationship is not always linear, and the saving diminishes above a certain threshold. Our guide to deductibles and out-of-pocket maximums includes a calculator to help you model whether a higher deductible is worth the premium saving.
- Premiums reflect the cost of claims across the entire pool of policyholders, not your individual record. If claims frequency or severity rises in your area, your vehicle class, or your age group, premiums rise for everyone in that segment. Other factors include general cost inflation (repair costs, medical costs), changes in reinsurance pricing, and changes to the legal environment. See our explainer on how insurance works for the pooling mechanism that drives pricing.
- Yes, and the evidence is consistent. The FCA General Insurance Pricing Practices market study found that loyal customers were, on average, paying materially more than new customers for equivalent cover. Since 2022, UK insurers are required to offer renewal prices that are no higher than an equivalent new-customer price. Comparative shopping still finds better deals from competing insurers for the same cover.