Frequently Asked Questions

Personal Insurance: Auto Insurance

Rates

Auto Insurance – Why did my rate increase?

Sometimes auto insurance rates change with no apparent explanation. The answer may have more to do with general auto expense trends than your individual claim or driving experience.  It is frustrating to realize that auto insurance rates are affected by two things – circumstances under your control and circumstances out of your control. 

One thing you should know is that competition for your Auto Insurance policy is intense! Insurance companies all compete and try to attract you with the best coverages, high quality service and lowest premiums.  Insurance companies in most states are highly regulated by their Department of Insurance and must provide statistics and studies to prove that any rate changes they request are justified and in the public interest.  So, when premium rates do change – up or down - that decision has been thoroughly reviewed.  But, any change in rating formulas can have a dramatic and unpredictable effect on individual policyholders.

Verify Premium Discounts.

Call us first, if your auto insurance rate takes a noticeable change.  The first thing our agents will do is verify that you are getting all the premium discounts available to you.  You may qualify for some new discounts now available that will bring your rates back in line.     

Factors under your control.

If you don’t have tickets or accidents and have excellent credit and payment history, then you have done everything possible under your control to deserve the lowest insurance rates.  How much you are rewarded for being an excellent insurance risk varies from company to company.  If your auto insurance rate still seems too high then the next thing under your control is shopping for new auto insurance.

American Insurance makes shopping easy. We offer a freeMarketplace Double Check.” With one call, we shop dozens of America’s largest Independent insurance companies to find you the best price and coverage available in the marketplace right now. Update your policy with the latest coverage extras like – New Car Replacement and Accident Forgiveness. You may save up to an additional 15% with a multi-policy discount by combining your auto and home insurance. New customer discounts can save you up to $600 a year on your car insurance premium. 

Factors beyond your control.

The fundamental nature and purpose of insurance is to spread the financial risks of individuals to a larger group by transferring your risk to an insurance company. Your premiums are calculated to pay for all the claims – your neighbor’s claim today and perhaps your claim tomorrow – plus the expenses of operating an insurance company.  In recent years, the upward pressure on claim costs has translated into generally rising premiums for all of us.  The main factors driving claim costs today are:

Liability and medical expense costs - The rapidly increasing costs of medical care that affect medical insurance rates also impact auto insurance claims for bodily injury liability and medical expense paid under auto insurance policies. From 2005 to 2013, the average cost for a bodily injury liability claim rose 32.1 percent, according to the Insurance Research Council.  Additional costs include pain & suffering, loss wages and legal expense. 

Vehicle repair costs - Previously minor repairs have become major due to the addition of sensors and other tech which need to be calibrated after repair. Advanced driver assistance systems may employ radar, cameras and other technologies.  Repairs take longer and are more complicated which drives up labor costs on top of parts and materials.  The technology is making us safer but there is a corresponding new cost.

More of everything – There are more new cars on the road, more miles driven, more accidents. The U.S. registered a 7.2 percent increase in annual traffic-related deaths from 2014 to 2015 and it has stayed steady since.  Distracted driving continues to significantly add to increased accidents.  

Based on these and many other economic factors, auto insurance premium rates are rising faster than the general growth of the economy.  Consumers may never know the specific reason from their own premium increase so need to be proactive to shop the marketplace when warranted. 

Related articles 

Source: III.org presentation on Rising Auto Costs

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FAQ Disclaimer

The content of FAQ articles are general in nature and are not intended as a substitute for professional legal, financial, or insurance counsel for individuals. Insurance coverage forms vary by issuing company and by state. For specific advice contact us.

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