You just received another letter from your insurance company notifying you that your car insurance rates will be increasing this year.
“Why did my car insurance go up?!” you scream in frustration. “I didn’t even have any claims!”
Unfortunately for car owners, this is an common occurrence…and it doesn’t look like it will stop anytime soon.
Florida is already the fifth most expensive state for auto insurance, which makes any car insurance rate increases even harder to swallow. But—whether you like it or not—there is a good reason for your premium hike.
In fact, there are several.
1. More Claims
The way insurance works is pretty simple: you pay premiums to the insurance company commensurate with your individually determined level of risk. The insurance company then uses this money to reimburse covered claims. The more claims an insurance carrier pays out, the more it must take in to replenish its “risk pool.”
Yet, despite increasing rates, insurance underwriters are consistently reporting profit losses.
Hurricanes like Michael and Florence and the California wildfires caused devastating losses for car owners, while an increase in distracted driving accidents increased claims nationwide.
The National Association of Insurance Commissioners (NAIC) has reported steadily increasing auto insurance claims over the last several years. But even as claims increase, insurers aren’t always able to increase rates proportionately.
In most states, insurance premium hikes need to be reviewed by the local Dept. of Insurance before they can go into effect. By the time the rate increase goes into effect, claims have often increased as well.
2. Fraud
An increase in claims leads to an increase in premiums, but not every car insurance claim is legit.
Car owners have been known to exaggerate, withhold information, and outright lie in efforts to reduce their premiums and/or increase their claim payouts.
Unfortunately, it all falls back on the policy holders.
This is one of the many reasons to keep your insurance claims completely honest.
3. More Tech
That Lane Assist technology you had to have might be helpful at alerting you to dangers on the road, but it comes at a high price.
Cars are made with increasingly advanced technology, making them more expensive to repair when you do have an accident.
A decade ago, it was fairly simple to replace your rear bumper after a fender bender. But after May of last year, all new vehicles are now required to have backup cameras, which makes those repairs a lot more expensive.
While better technology can do a lot toward preventing accidents, it will be a long time before we see collisions and claims eliminated completely. In the meantime, those claims are going to cost you a pretty penny.
4. Traffic Violations
It’s common knowledge in the insurance industry that physical damage to your vehicle is only one factor in determining your level of risk as a driver.
Even minor traffic violations—such as speeding or tailgating—can affect your insurance premiums if they end up on your permanent record.
Luckily, fixing this issue is typically within your control: follow the traffic laws.
If you do receive a ticket for a traffic violation, try to fight it in court to take the incident off of your driving record.
5. Policy Changes
An accident isn’t the only thing that can make your car insurance go up.
Policy changes, added drivers, vehicle changes, an address change, or even a drop in your credit score can all cause your premiums to skyrocket.
You probably already know that insurance companies look at your personal info to determine your car insurance rates, but there are some factors you can’t control. You could buy the “safest” car on the market and take every defensive driving course on offer, but something as simple as moving from a rural to an urban area can cause your car insurance to go up, even if nothing changed in the way you drive.
Here’s the Good News
The good news? You can shop around for a better car insurance premium.
Insurance carriers look at different factors when determining your rates; Traveler’s and Nationwide will come back with two completely different quotes for the same level of coverage.
If it’s been a while since you’ve shopped for car insurance, call Harry Levine Insurance for an updated quote.
