Why did my car insurance go up again?

You just got your renewal for your car insurance policy and the rates have gone up again! Feeling steamed? You’re not alone. And as independent insurance agents, we feel your pain. We drive, too, and our personal rates have also gone up. In fact, in the past few years auto insurance rates have climbed at more than twice the rate of inflation.

Why have premiums gotten so high?

There are a few things contributing to the rise.

1. 1. More claims are being made. This is due to a few factors, including an increase in the number of miles people are driving. Low unemployment rates may be partially to blame. More workers are commuting to and from jobs on a daily basis. Lower gasoline prices may also be encouraging people to drive more.
   2. The average claim cost is higher. The severity of car accidents has increased every year since 2011, according to an article published by Forbes.com. For 2016, USDOT reported a 5.6% increase in fatal traffic crashes over 2015. Distracted driving and other reckless behaviors, such as speeding and driving while impaired, contribute to this rise. It also costs more to repair newer, highly computerized vehicles when they are damaged.
   3. Weather-related claims have increased. Hail, tornados, hurricanes and floods damage cars as well as houses. In 2017, Hurricanes Harvey and Irma together destroyed more than 500,000 vehicles, according to an analysis by Cox Automotive. Total costs to auto insurers will be in the $3-$5 billion range.
   4. Investment revenue has declined. Insurance is essentially a financial business, and insurers have to keep enough liquidity to cover claims. Insurance companies hold large portfolios to earn income and spread risk. Since the economic downtown of 2008, interest rates have been low, meaning insurance companies (like all businesses) are earning less on their investments. Consumers are bearing the cost through higher rates.

When will rates begin to moderate? Unfortunately, it probably won’t be anytime soon.  In general, most insurance companies have struggled in recent years to break even. Until the volume of claims drops and the economic picture changes, rates will likely continue to rise.

Independent insurance agencies, like General Southwest, have the advantage of being able to compare policies from different carriers. “We do all we can,” says Judi LaRocco-Franko of GSW, “to find the best rates without compromising on coverage.”

Insurance rates are tightly regulated, and the business is highly competitive. “Sadly, there’s no magic way to drop your premiums,” adds Michelle Fischer, Assistant Vice President of GSW.

There are, however, some things you can do to keep rate increases to a minimum. Click HERE for our companion article with tips to help you get the best rate possible.