Why Do Auto Insurance Rates Continue to Rise?

Why Do Auto Insurance Rates Continue to Go Up?

Even if you have an immaculate driving record with a minimal number of claims submitted to your provider, you have probably noticed that auto insurance rates continue to increase. Several factors have led to the increase, but bottom line is that auto insurance companies have run at a deficit for several years now.

Financial data analyzer ValuePenguin.com notes that the consumer price index (CPI) for auto insurance rose 21.5% from 2012 to 2017. To put things into perspective, the overall CPI increased by 6.6% during the same period. The industry hasn’t seen that kind of increase over a five-year period since the 1990s.

Factors Influencing Auto Insurance Rates

Negative underwriting profit margins are linked to rising auto insurance rates. This loss can’t be countered with immediate rate changes because insurers must first submit a request to the state department of insurance for review first. This process means that incurred losses can’t be adjusted for immediately.

Insurance companies are seeing losses due to natural disasters, distracted driving and car tech that makes repairs more expensive. Other influences include more drivers on the road because of an improving economy and rising collision claims in states that have legalized marijuana use.

Natural Disasters

Unrelenting natural disasters in 2018 brought billions of dollars in claims to insurance companies. California’s record wildfires in 2018 resulted in $123 million in auto and insurance claims for nonresidential damages. Major hurricanes in the Southeast that year were also followed by a huge surge in comprehensive car insurance claims. Comprehensive coverage pays out funds to repair or replace a car damaged in non-collision events.

Distracted Driving

Auto accidents resulting from distracted driving also resulted in more claims. A large portion of these crashes involved drivers using cell phones behind the wheel. As reported by the National Highway Traffic Safety Administration (NHTSA), 2.443 million individuals were injured in distracted driving collisions in 2015, an increase from 2011, when 2.217 people were injured.

Expensive Vehicle Repairs

New cars are now more expensive, an increase in part due to costly technology. Regulations such as the requirement to include rearview video systems for backing up have reduced the number of human-error accidents. At the same time, they have made replacement costs to go up. Other examples of tech causing more expensive repairs include bumpers; when it features a distance sensor it is more expensive to replace than with a standard bumper. If a camera mounted behind a broken windshield needs to be replaced or repaired, that’s another tech expense.

How to Save on Auto Insurance Rates

Even through rate increases make sense when insurers are losing money, there are some things you can do to keep your auto insurance rates as low as possible.

1. Bundle insurance. It can pay to have your insurance premium with a single provider. You can save with bundle discounts as much as 35%.
2. Maintain a good credit score. com reports that 90% of insurance companies look at credit scores when setting premium costs. The thinking goes that the better your score, the less likely you are to be in a car accident.
3. Get a low mileage discount. You may be eligible for a low mileage discount, based on your car’s mileage and the state in which you live.
4. Avoid filing claims. When you file a claim, you can expect to get a rate increase. This is why many only file claims if it’s an expensive fix. When your repair cost is low, it might be a good idea to pay out of pocket instead of filing a claim.
5. Apply a group membership discount. A number of professional, alumni and business memberships allow special discounts, including for auto coverage because insurance companies often offer groups big discounts.
6. Ask your insurance company about discounts. Find out what discounts are offered by your current company or prospective insurance providers. Types of discounts and level of savings can differ from one company to the next. See how much discounts would save you.
7. Go shopping. If you have an auto insurance policy, find out which discounts are offered and how much you could save. Then, shop around to see what other providers can do for you. For fast and easy access to quotes to compare, our online search tool can help. Experts recommend shopping around once a year to get the best price and coverage possible.

You may not be able to control natural disasters and drivers who aren’t paying attention, and tech improvements on your cars may be unavoidable. Since it’s these sorts of events that raise rates every year, on top of paying careful attention to your own driving you can apply for industry discounts to get the best price available.