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I leave that to the actuaries. That's why every insurance company has their own rating algorithms and rates vary. It's an evolving target.
It’s all a numbers game. Insurance companies don’t usually cancel your insurance when you have a claim because that’s already paid for by others insurers. They don’t cancel because they want your future premium payments. Premiums collected in theory are meant to cover losses and administrative costs plus a bit left for profit to shareholders.
Yet, it’s not an exact science to predict future loses. Raise premiums too much you lose renewal to competition. Keep premiums too low then they don’t cover losses & costs.
Insurance is a necessity but it’s extremely flawed. I worked with an insurance company for years that severely underestimated the claims they’d receive over the life of policy. As time went on they needed to increase premiums by 100%+ annually to pay the claims. Of course, insureds were angry as the plan for increases weren’t affordable and they sued. The insurance company settled but ultimately walked away with no future responsibility for claims that exceeded paid in premiums. I understand what happened, how it happened but still find it wrong. Lesson learnt, you pay premiums on time for years and you still may find yourself uninsured/underinsured. They have deeper pockets and the states need them. The insureds are the ones left scrambling as always. I have no pity for insurance companies as they’ve gotten fat for decades!
I agree with both answers but I do feel it’s more of a game to assume your more of risk due to a higher population. Some highly populated places do not even have people driving as much, they use public transportation due to the population
I don't think rates are based more or less on either. Rates are based on driving record, losses, age, demographics, credit behavior and probably a few more things.
Many companies offer a discount based on good driving performance (tracking required)