With each new year, you may see a rise or fluctuation in your auto insurance premiums. This occurs for a variety of reasons, many of which are unfortunately out of your control. Inflation is one of these factors, but this is a slow increase rather than an unexpected jump. Other factors could be influencing your car insurance rates and driving your premiums higher.
Such factors could include:
More Drivers and More Auto Accidents
More drivers on the road can cause a higher likelihood of accidents. This is in part due to the population in your area. If the population in your area rises, especially concerning drivers, you may pay more for auto insurance.
The number of accidents has also risen because of an increase in unsafe driving practices. According to the AAA Foundation for Traffic Safety, about 87% of drivers admitted to engaging in at least one risky behavior while behind the wheel, including using their phones and not wearing seat belts.
This means that even if you drive defensively and have a clean record, drivers around you can cause your rates to go up.
The number of accidents isn’t the only factor affecting auto insurance claims. The size of the average insurance claim—also known as claim severity—has increased as well. The three largest drivers of claim severity include the increase in the costs of medical care, auto repairs and auto parts. According to a recent study by CarMD, the largest repair cost comes from replacing the expensive technology that’s common in newer vehicles, as body shops struggle to afford the special equipment and training required to perform the repairs.
Insurers calculate your premiums based on how much they may have to pay after a claim. With more expensive accidents, insurance providers are paying out heftier compensation—which means a raise in prices to offset the risk.
Auto insurance is required in most states as a way to cover your own liability and provide compensation to others in the event that you’re responsible for an accident. Despite this, approximately 13% of drivers drive uninsured.
Unfortunately, it’s the drivers who follow required insurance laws who end up paying the price in the form of uninsured motorist coverage. According to the Insurance Research Council, uninsured claim payments have risen by 75% over the past 10 years, resulting in a $14 premium increase for every insured individual.
If you live in a state or area that is particularly high in its number of uninsured drivers, you could pay more for auto insurance.
Although autonomous vehicles that can drive themselves have the potential to save lives and reduce injuries, they could also decrease the personal automobile insurance sector to less than 40% of its current size. While this change should be gradual, many insurance carriers have been slowly increasing their rates in anticipation of the shrinking market.
Insurance is meant to protect you in the event of an accident, but many criminals try to illegally use insurance policies for their personal gain. Most fraud schemes involve a policyholder faking an injury and blaming a third party, or conspiring to cause an accident that can be blamed on someone else.
Although insurance carriers attempt to uncover the truth during all insurance claims, the Insurance Information Institute estimates that insurance fraud costs the United States $32 billion per year. Unfortunately, much of this cost is transferred to law-abiding policyholders.
Insurers commonly use applicants’ credit history as a factor in determining car insurance rates. However, they also use a practice called price optimization to see how much they can raise their customers’ rates before they decide to choose another company. For example, customers who tolerate small, regular increases to their internet or cable bills are more likely to stay loyal to their insurance carriers when premiums increase.
How to Save on Auto Insurance
There are many factors out of your control but also several that you can affect in order to save money on auto insurance. You can save money on your auto insurance policy by:
- Driving defensively
- Maintaining a high credit score
- Choosing a safe and low-cost vehicle
- Asking about discounts
- Bundling your home and auto
Speak with an insurance agent about different ways to save on your auto insurance even as the world changes around you. Make sure to compare quotes in your area if you believe that you are paying too much for your auto insurance policy. Keeping a finger on the pulse of auto insurance premiums can help you keep your important coverages without paying too much for insurance.
Also Read: How Driving Offenses Impact Your Driving Record
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