You may have noticed your car insurance rates go up at your last renewal, even if you’ve had no new accidents or tickets.
If your rates haven’t gone up yet, brace yourself: Car insurance companies have been losing money recently, and many will have to raise premiums to remain profitable.
Car insurance rates typically go up about three percent or four percent every year, according to the Consumer Price Index. But in December 2016, they were up seven percent from the previous December. Because the industry is expected to lose even more money this year due to more claims — and more expensive claims — we can expect insurers to kick up their rates even more. Here are some causes behind the bigger bills.
Why Car Insurance Rates Are Going Up
Problem No. 1: More People have Jobs
A better job market isn’t helping insurance rates. Unemployment has dropped from 10% in October 2009 to 4.3% in July 2017.
With more people employed, “We see more people on the roads, more people commuting,” says Janet Ruiz, the Insurance Information Institute’s California representative. That means more accidents, she says.
Problem No. 2: Fewer People Looking at the Road
Most of us have been distracted by a cell phone behind the wheel. A recent NerdWallet study found that 67 percent of Americans surveyed who had driven in the past 12 months had used a cell phone while driving during that time.
Cell phones aren’t the only distraction on the road. The problem “is a combination of so many things,” Ruiz says. People are still distracted by the same things they always were behind the wheel — grooming, eating, children in the back seat and so on.
Distraction played a role in 14 percent of all police-reported motor vehicle traffic crashes in 2015, according to the Transportation Department.
Problem No. 3: Claims are Getting More Expensive
State Farm, the largest auto insurer in the U.S., has seen a continual rise in claims costs due to more expensive vehicle repairs and rising medical costs in recent years, says Sevag Sarkissian, a State Farm spokesman. Many insurers are seeing the same trend.
- Medical bills: You might not think of medical bills as a big contributor to car insurance premiums, but auto insurers, not health insurers, often end up paying for medical costs due to car accidents. The cost of hospital care rose 32.5% between November 2010 and November 2016, according to the Labor Department.
- Car technology: The safety features, cameras, sensors and computer systems now commonplace in new cars may help make drivers safer. But these sophisticated car parts are expensive to replace after accidents, Ruiz says.
The consequences: The number of crashes rose 3.8% from 2014 to 2015, the most recent year for which data are available, according to the Transportation Department. During that same time, insurers paid out $7.5 billion more in claims and expenses than they made from premiums, according to the insurance institute. And auto insurance rates were up 7.7% between June 2016 and June 2017, according to a Consumer Price Index that measured all urban consumers.
In 2017, the private passenger auto insurance industry is projected to lose $154 billion, a new record, reflecting an increase in the number and cost of claims, according to a recent report by S&P Global Market Intelligence, an industry research company.
How to Keep Your Rates Down
- Compare insurance quotes every year and after major life changes such as moving or getting married.
- If you drive less than 10,000 miles per year, consider a usage-based or per-mile insurance policy.
- Take steps to improve your credit, which affects car insurance rates in all states except California, Hawaii and Massachusetts.
- Ask your agent to do a periodic review for possible discounts.
- Consider buying your auto and home insurance from the same company for a bundling discount.
Republished by permission. Original here.
Rush Hour Photo via Shutterstock
This article, "Will Rising Auto Insurance Rates Affect Your Business?" was first published on Small Business Trends
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