I get a few calls a week from our clients wondering why their car insurance rates are increasing even though they have not had an accident. It’s a good question, but the answer can’t be summed up in a statement or two. I have written before how car insurance rates are impacted not only by your specific driving habits, but by others as well. I have written about how your insurance company and the claims they pay out in your city, county, state and nationally impact your insurance rates. I remind folks that insurance is risk sharing and not a savings account where you put money every year to be withdrawn when you have an accident. So what’s going on that is causing insurance rates to increase, even if you aren’t having accidents.
More miles driven. Vehicle miles traveled increased by 3.5% in 2015, the largest annual increase in nearly 25 years, and an additional growth of 3.1% occurred in 2016. The lower cost of gas is helping drive this trend.
More drivers driving. The number of people employed has increased significantly. Simply put, more cars and drivers on the road leads to a higher probability of accidents. And when those accidents occur, the severity of the claims are greater than ever before. The average cost per paid bodily injury claim increased 32.1% from 2005 to 2013, and medical costs are on the rise as we all know. So when people are injured in an accident, we all feel the pain in increased insurance premiums.
Increase in auto repair costs. The U.S. set a new car sales record in 2015, and new cars have more advanced technology and are more expensive to repair. I recently got a newer car after driving my last one for 8 years. I had to schedule a “technology class” so I could learn all of the features of my car. The technology they have in cars today is great, but it’s also expensive to repair. My dealer offered me a “computer warranty”, in case the brains of my car went bonkers. And that minor fender bender of years past now involves replacing backup cameras and sensors.
Increase in traffic fatalities: deaths on the roadways increased 8% in 2015 to the highest level since 2005. I believe distracted driving has a lot to do with not only traffic fatalities but with the increase in traffic accidents overall.
So what should you do when you get an increase on your auto insurance? Some people will recommend you shop for cheaper insurance, because as we know, all insurance and insurance companies are the same, right? In my opinion, as the likelihood of being in an auto accident increases, the quality of your insurance coverage, the quality of the service provided, and the prompt and fair claims handling of your insurance company has never been more important. I recommend you contact your insurance professional to see what options are available to you. Make sure you know the coverage you have selected on each vehicle you own meets your specific needs. Make sure you have all available discounts applied to your policy. It seems like every day insurance companies are coming up with new discounts and coverage options to meet the needs of an every changing insurance market.
I hope you never get into an accident, but in case you do, take steps now to make sure you are well-protected by a reputable insurance company that will fulfill their promise to be there for you when you need them most.