What Drives Auto Insurance Rates Up?

 

Many of our clients are noticing that their Greensboro auto insurance rates continue to increase year over year and they're wondering why.  There are a number of answers to this question and they can be divided into two sections:

1.  Rate increases affecting everyone
2.  Rate increases specifically affecting you

Everyone's Coverage Rates Going Up

The auto insurance business is highly competitive and many auto insurance companies are struggling to stay profitable in these days of unusually high claims payments.  This has caused insurance rates to spiral upwards during the past several years.  This affects your Greensboro auto insurance rates as well as rates with companies all across the country.

Like any other business, an auto insurance company must stay profitable in order to remain in business.  They make money in two ways:  by collecting premium dollars from their policyholders and by putting these collected funds into profitable investments.  These funds are then used to pay out claims and to cover employee salaries and other administrative costs.  When claims payments going out surpass premiums coming in, a phenomena that's known as underwriting loss, premium costs must be increased in order to make ends meet.   There are some definite reasons why claims have risen so much recently.  Consider this:  

In the past several years, eight out of the ten largest auto insurance companies in the U.S. have reported losing money in their policy underwriting efforts.  In other words, they've paid out more in claims than they've collected in premiums.  Reasons for this include:

• A record number of disasters occurred in 2018-2019, including wildfires, hurricanes, floods and more.  These disasters not only negatively affected home insurance companies but also those companies insuring automobiles.  An inordinate number of claims were made on vehicles that burned, suffered flood damage or were damaged in tornadoes.
• An increase in distracted-driving accidents, mostly attributed to cell phone use, have been occurring lately.  Millions of crashes are blamed on distracted driving, causing insurers to raise rates.
• Expensive technology added to newer vehicles have made repairs more costly.  What used to be a simple rear bumper repair, for example, now includes repair of rearview video cameras, now required on all new cars sold in the U.S.

Rate increases affecting you individually may result from:

• Too many claims filed
• Adding a teen driver to your policy
• Moving to a higher crime/higher accident-prone area
• Too many moving violations
• You've turned 70 years old