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Nice catch.

That simplifies things. However, the same biases are in place, and, to a very close degree, insurance premiums reflect costs to the insurer. The only additional variable I can think of is their confidence in their amalgamated payouts, with the less data having a larger markup as represented in premiums.

I.E. If the average payout for a vehicle is $1100, they will charge some likely fixed percentage above that (10%, 50%, I don't have a lot of knowledge of insurance markup)....
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Depending on the insurer, they will have many other risks to factor into a premium calculation beyond just the repair costs..
Not least of which would be ...the driver age, occupation, claim history, driving offence history, address, annual mileage driven, garaging or street parking, etc etc
Even if you have other insurance policies with the same company can make Significant difference (-20% ).
In other words, to some insurers, the driver can be more relavent than the actual vehicle when calculating a premium figure. !
 

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Erm, no. I don't think so.

This number is the average cost to the insurer for the vehicle. It amalgamates all of those factors by observation. I.E. When all is said and done, all payouts divided by all policies, what was the average cost.
I realise what that number is, it is average COSTS incurred....not related to the premium charged.
It represents the likely cost outcome, not the probability or risk, of that outcome happening, which the insurance company have to asses to calculate a premium .
You are implying that a 19yr old , with convictions and a history of car accidents , living in Compton, with only street parking,...
.....would pay the same premium for the Tesla as a retired university professor, with a clean driving record, living on private estate the Hamptons with a 5 car classic collection all insured with the same company ?

Erm, no i dont think so !
 
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