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You're a good driver but no one knows why

The topic of car insurance comes up in a conversation with friends. You learn that you all have the same insurance company and coverage, but they pay hundreds of dollars more each year. You suspect that your friends are serial car-crashers - but you'd probably be wrong.

Forces unknown to you -- and even to insurance regulators - are likely picking the lucky ones in the car insurance lottery. Your premiums might have as much to do with a utility bill as safe driving.

How does it work? Auto insurers predict the likelihood of how much you'll cost them before they determine your annual premium. To do this, they need to know as much as possible about you: specifically, whether you're likely to experience an accident, theft or fire. And they use numerous predictive indicators to figure it out.

You might think much of this data has little to do with your driving skills, but insurers say they have found correlations between data and the likelihood you'll file a claim.

FICO is old news

Many old-school rate-setting techniques are still used. Reaching age 65 may cost you more. Belonging to an affinity grouplike AARP could get you a betterpremium. Women are often quoted lower rates than men; married people usually get a better price than singles.

Another traditional data source for insurers is FICO, an acronym for publicly held Fair Isaac Corp., which provides models used in credit scoring, including insurance scores used by insurers.

"All our models know is: If you assumed credit responsibilities, how are you managing those responsibilities," says Lamont Boyd, the insurance market director of analytics for FICO. "Each insurance company decides if and how they want to use these scores as part of their overall pricing."

The director of insurance for the Consumer Federation of America (CFA), Robert Hunter, says otherwise, charging that FICO's models inherently discriminate against the poor and minorities. But 46 out of 50 state insurance regulators allow insurers to use FICO models, and only California and Hawaii totally ban their use. One reason: FICO is an accepted yardstick.

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