Auto Insurance: Driving Experience Not Considered, Why?

Driving experience is a major factor in determining auto insurance rates. New drivers often pay significantly more for car insurance than experienced drivers due to their lack of a driving record, with rates increasing by up to 63% for those with less than three years of experience. However, this varies depending on location, as some countries' driving experience may not be honoured by insurance companies in other countries. For example, in Canada, driving experience from outside of North America is often not considered when determining insurance rates, resulting in higher premiums for newcomers. Additionally, factors such as age, gender, credit score, and driving history also influence insurance rates, with younger and less experienced drivers typically paying higher premiums.

Foreign driving history not considered

Foreign driving history is usually not considered when applying for auto insurance in the US. This is because a driver's history from another country does not transfer to the US. Consequently, when obtaining a quote, drivers are regarded as new drivers without any prior driving experience.

Insurance companies in the US consider several factors when determining insurance rates, including age, credit history, and driving history. However, when it comes to foreign drivers, the lack of a US driving history can result in higher insurance premiums. This is because insurance companies categorise these drivers as "inexperienced", posing a higher risk due to the absence of a documented driving history in the country.

To drive legally in the US as a foreign national, you need a valid driver's license from your country of origin and may also require an International Driving Permit (IDP). An IDP serves as proof that you are licensed to drive in your home country and is a translation of your foreign driver's license. It is important to note that an IDP is not a valid driver's license and must be accompanied by your native country's license.

Obtaining auto insurance as a foreign driver in the US can be challenging. Some insurance companies may not issue policies to drivers without a valid US driver's license or social security number. Additionally, insurance rates for foreign drivers may be higher, and finding insurance companies that cater to foreign drivers can be difficult.

If you are a short-term visitor to the US, it is recommended to purchase car insurance through a car rental company. However, if you plan to stay in the country long-term, you may need to buy insurance from a US-based insurance company. Some companies that cater to foreign drivers include Farmers and Progressive, which allow applicants to state their foreign license on their quotes pages.

Higher insurance premiums for newcomers

Newcomers to the US or Canada often face higher auto insurance premiums due to a lack of recognised driving experience on North American roads. This is because insurance companies primarily consider driving records and claims history when determining premiums. As a result, newcomers are often treated similarly to new drivers, who are considered high-risk due to their unfamiliarity with local roads, traffic rules, and driving conditions.

However, there are some ways to mitigate these higher insurance costs. Here are some strategies for newcomers to potentially reduce their auto insurance premiums:

• Getting a full licence as soon as possible: By completing the necessary requirements and obtaining a full licence, newcomers can demonstrate their driving abilities and potentially lower their insurance rates.
• Being added as a secondary driver: Adding oneself as a secondary driver on an existing policy can help build driving experience and may result in lower premiums.
• Choosing a vehicle that is cheaper to insure: Opting for an older or more reliable vehicle can reduce insurance costs, as newer cars often have higher repair or replacement costs, leading to higher insurance premiums.
• Increasing the deductible: A higher deductible can lead to a lower premium, but it's important to have enough savings to cover potential claims.
• Taking advantage of winter tires: In regions with harsh winters, using winter tires can provide a discount on car insurance, as they improve safety and reduce the risk of accidents.
• Bundling home and auto insurance: Combining home, condo, or tenant insurance with auto insurance from the same provider can often result in significant savings.
• Comparing insurance rates: Shopping around and comparing quotes from multiple providers can help identify the most competitive rates, as pricing can vary across companies.

It's important to note that insurance rates are influenced by various factors, including age, gender, address, car model, and driving frequency. Additionally, insurance regulations and coverage options can vary by state or province. Therefore, it's advisable for newcomers to familiarise themselves with the specific requirements and options available in their region.

Difficulty obtaining insurance without a US license

While it is possible to obtain car insurance without a US license, it can be challenging. Some insurance companies will decline coverage to those without a US driver's license, while others will extend coverage, but at a higher cost.

Reasons for Difficulty

There are several reasons why it may be difficult to obtain car insurance without a US license:

• Accessing Driving Records: Having a valid US driver's license is the easiest way for an insurer to access your driving record. Without a US driver's license number, providers have a harder time accessing your records, and thus may view you as a high-risk driver.
• Determining Insurance Rates: Insurance companies often look at your driving history and records to determine your insurance rate. Without a US driver's license, they are unable to do so, which can result in higher rates.
• Insurance "Coverage Gap": Insurers view a period without insurance coverage as a higher risk. If you have had your license suspended or have not had a license for several years, you may be seen as a higher-risk driver, leading to higher insurance rates.

Options for Obtaining Insurance

Despite these challenges, there are some options for obtaining car insurance without a US license:

• Independent Insurance Agents: Working with independent insurance agents can be beneficial as they can write policies for multiple companies and may work with local insurers that offer coverage to unlicensed drivers.
• Listing a Primary Driver: Some insurance companies allow you to designate someone else as the primary driver of your vehicle. This person will need to be a licensed driver and may be a spouse, child, or caregiver, depending on your situation.
• Adding a Co-Owner: If you cannot find an insurance company that will cover you as an unlicensed driver, adding a co-owner to your car's registration may be an option. This can be a workaround, as vehicle ownership is typically required for insurance.
• Parked-Car or Car Storage Insurance: If you do not plan to drive your vehicle and will be storing it for an extended period, you may be able to purchase parked-car or car storage insurance.
• Excluded Driver: You can list yourself as an excluded driver on the policy. However, this option should be approached with caution, as you will not be adequately covered if you get into an accident or drive illegally.

Examples of Insurance Companies

Some specific insurance companies that may provide coverage for unlicensed drivers include:

• Geico: Geico offers minimum-liability coverage for drivers without a valid license and is known for its affordable rates.
• Farmers and Progressive: These companies allow applicants to state their possession of a foreign license, indicating a willingness to offer policies to foreign or unlicensed drivers.

Additional Considerations

It is important to note that insurance requirements and regulations can vary by state within the US. Additionally, if you are a foreign driver, you may need an International Driving Permit (IDP) in addition to your license from your country of origin to drive legally in the US.

While obtaining car insurance without a US license can be challenging, understanding the options and working with local agents can help you navigate the process and find suitable coverage.

Driving data shared with insurance companies

In the US, insurance companies determine premiums based on several factors, including age, gender, address, car model, driving frequency, driving record, and claims history. However, driving experience outside of North America is often not considered, leading to higher insurance premiums for newcomers.

The driving data shared with insurance companies can include odometer readings, braking and acceleration statistics, and the time of day a person drives. This data is often collected through "connected" cars with internet services and in-car apps. While some drivers actively agree to have their driving habits monitored through usage-based insurance programs, others may unknowingly consent to data sharing when purchasing a new car.

Automakers such as General Motors have been known to share customers' driving behavior data with data-collection companies like LexisNexis, which then sell this information to insurance companies. This data is used to generate consumer risk profiles, which can lead to increased insurance rates. For example, a driver of a leased Chevy Bolt EV experienced a 21% increase in insurance rates, which he later attributed to his driving data being shared with the insurer.

To address privacy concerns, individuals can review the privacy terms of connected car services and request consumer disclosure reports from data brokers like LexisNexis. Additionally, certain states, like California, have stronger privacy regulations and are investigating data-sharing practices.

Insurance companies' differing acceptance criteria

Insurance companies in the US and Canada have differing criteria for accepting foreign driving experience. In general, a driver's history from another country does not transfer to the US, and most US insurance companies will not issue policies to drivers without a valid US license or social security number. However, some US insurance companies do issue policies for foreign drivers, although rates may be higher.

In Canada, insurance companies do not honour driving experience outside of North America, but this also differs from company to company. For example, some global insurance companies might honour the driving experience of customers who held a policy in their country of origin, provided the driver obtains a Canadian-equivalent license.

When determining insurance premiums, companies in the US and Canada take into account various factors, including age, gender, address, car model, driving frequency, driving record, and claims history. As a result, newcomers without a local driving record will likely face higher auto insurance premiums.

Lowering Auto Insurance Premiums

While insurance companies may not recognize foreign driving experience, there are several strategies that newcomers can employ to lower their auto insurance premiums:

• Obtain a local driver's license as soon as possible.
• Get added as a secondary driver on an existing policy.
• Choose a vehicle that is cheaper to insure.
• Increase the deductible on the policy.
• Install winter tires, which can provide a discount in certain regions.
• Bundle home and auto insurance policies.
• Compare insurance rates from multiple providers to find the best value.

Frequently asked questions