Catastrophic events in 2017 caused record insurance market losses topping $300 billion. Last year, over 500,000 vehicles were lost due to flooding and wind storms from Hurricane Harvey alone. Now, insurance companies are raising rates to try to recoup their losses and back into the black. Because insurance is a group pool, we all pay the price when there is a loss even when it’s not in our immediate area.
What factors contribute to rising auto premiums?
- Year, make, and model of your vehicle
- Driver’s age and gender
- Where the vehicle is driven/garaged/located
- How the vehicle is used: Is it used for business, back and forth to work, or pleasure?
The insurance score takes into consideration credit score, payment history, and claims history. All of these factors can affect your insurance rates.
Advancing technology in cars raises repair and replacement costs, ultimately pushing up insurance premiums as well. For example, bumper replacements are no longer swapping out a single part. Now, many cars also require sensor and backup camera replacement, plus labor.
The cost of medical care has also skyrocketed in recent years. If someone was injured as part of an auto accident and they file a liability claim, that brings up the total cost to the insurance company for that accident Insurance companies have to recoup that cost by raising premiums over time.
As you’ve probably heard, distracted driving (texting and driving) incidents are also on the rise. These incidents can cause fatalities and serious injury, so that means even more medical bills that drive up premiums for the general population.
Who will feel the effects the most?
Age definitely plays a part (over 70 or under 25) in the cost of insurance. People under 25 years old or over 70 years old will experience higher insurance rates because those classes of people statistically experience more losses than the general population. These rates are higher to begin with, so combining that higher rate with the upcoming rate increases will exacerbate the situation for these age groups.
How much will auto insurance cost in the future?
Insurance rates are tough to predict. If recent catastrophes continue, rates are sure to rise; if we get a break from devastating hurricanes or wildfires, we could see premiums level out for a while.
Overall, rates are likely to continue to increase. Over the past five years, we’ve seen a 7-15% increase in auto rates. If history holds true, as technology changes and there are more cars on the road, premiums will continue to gradually rise. Although, the emergence and popularity of ridesharing programs and driverless cars reduce the amount of drivers on the road, so they could help combat rising premiums.
What can you (as the insured) do to combat the rising auto premiums?
There are several methods you can pursue to keep your auto insurance premiums as low as possible.
- Pursue package discounts. Consider packaging home, autos, and personal property policies. Many insurance companies will offer a discount for your brand loyalty.
- Look for reward programs. Take advantage of good student driving, safety courses, and loyalty credits.
- Equip teens with safe driving techniques. Invest the time to make sure your teen feels comfortable and knowledgeable behind the wheel. Consider trying technology that disables texting while driving, or make a pact to wait to answer calls off the road.
- Monitor your insurance score. Maintain a responsible credit score, payment history, and claim history.
- Secure your vehicle. Always lock the doors, and ensure you are parking in an area that feels safe and is well-lit. If something feels unsafe, it probably is.
- Consult your insurance agent. If you are ever unsure about an insurance best practice, your agent is an invaluable resource to champion in your best interest. Need help contacting your agent? Head over to the Catto & Catto agent directory here to locate contact information. Don’t have an agent? Give us a call at 800-399-6059, and we’ll be happy to help answer any questions you may have.
About the Author
Personal Lines Experience Director