Why Are Auto Premiums Going Up – Up – Up?

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Honestly, being in the insurance industry for over 30 years, I have never seen auto and property rates increase like they have the past couple of years. I see it in my own agency. My loss ratio for auto claims was around 40% each year, now I see it ticking upwards in the 50% range. This has never happened.

At our agency, we get asked this question all the time: Why have my rates increased? I have not had any losses? My car is older… you know what I mean…you have probably asked this as well.

Keep in mind, we are all sharing in each other’s losses. We tell our clients that their premiums will be less and they will always get the best rate with their company if they have continuous insurance, your credit score (fair or not fair) is good, your driving record is clean and you have driving experience, but unfortunately, just like everything else, premiums are going to increase. Why? Because it is not just our driving experience and losses, but others driving experience and losses as well.

There are several reasons for this:

Insurance is state regulated, so the number of claims in your state does impact your price for auto insurance. The more claims made in your state, the higher car insurance costs that you will see.

Severe weather events can damage cars, cause accidents and typically the rates will be higher. For example, high winds, hail, tornados, flooding, and ice and snow.
Urban vs. rural – congested cities are prone to more accidents. Iowa, a mostly rural state has some of the cheapest auto rates, vs. a state like Connecticut, Los Angeles, or Atlanta can cause insurance rates to be much higher.
High crime areas that are higher than average rate of vandalism or car theft.

Cost of Insurance claims in your state.

The cost of parts and labor varies state to state, and cost of parts has gone up.
The cost to rebuild your home is up dramatically due to the rising cost of materials and labor. Supply chain for materials continues to be an issue.

Frequency of lawsuits

Lawsuits over auto insurance accidents tend to lead to higher claim settlements, which results in car insurance companies charging higher car insurance costs for all drivers.
Bodily injury on auto accidents. Medical expenses have increased.
Both the frequency and severity of auto accidents are WAY up post COVID along with the rising frequency of auto fatalities.

What are some things that we can do to help us get through this current insurance market:

Consider higher deductibles – I know this is not what you want to hear, but most companies will non renew you if you have 2 or 3 claims in a 3-year period, plus your premiums will increase. Insurance is not a maintenance policy, it is there for catastrophic situations, so we need to look at insurance differently and go ahead and increase those deductibles to save money and to use our policy for more catastrophic situations.
Have an insurance review with your agency. There are discounts that you may not have.
Bundle your auto and home insurance for more discounts. I do not understand clients who have these coverages with separate companies. You can save up to 20% bundling

Follow the laws so that you will not get tickets or worse a DUI. These tickets/accidents can not only cost you $1000’s in the long run, but stay on your insurance record for 3 to 5 years.
Absorb those small claims, Frequency matters. See #1 for increasing deductibles. Talk to an experience agency with experience licensed producers. There are options out there to lower your cost without sacrificing coverage.
Safe Driving Telematic programs – Most companies have these programs that give discounts for good driving

Keep in mind, insurance agents are agents for the carriers, we do not make the rules, we do not have control over rates and we do not make the decision to cancel your policy by the carriers.

We are here to educate, make sure that you have the best insurance for your situation with the best rate, and to manage your account with the carrier.

Tammie Grisso D’Allura, CPCU, CIC