In the auto insurance world, the news of late is not good for anyone—auto insurers are making less money than they used to, and in an attempt to recoup some of their lost profits, insurers are charging higher rates for coverage. Here's the lowdown on why auto insurance rates are rising and what you as a policyholder can do to minimize the increases.
Decreased insurer profit
Auto insurers make money in two ways:
1. Investment income
2. Profit generated when they collect more in premiums than they pay out in claims
Over the last several years, auto insurers have had a much harder time making money in either way. First, the United States'
Though automobile manufacturers have added a number of features that increase safety and decrease the likelihood of an accident, such as lane departure warnings and rear backup cameras, drivers are still filing more and more accident claims every year. The experts at the Insurance Information Institute point to a healthy economy as one of the main reasons for the increase in collisions. With unemployment low, more workers are on the roads driving to work. Those same workers are using their income to shop and attend entertainment events, which means more driving, and with more drivers on the roads, we simply have more opportunities for accidents.
Another part of why we're involved in more accidents and insurance claims is because we're distracted by our smartphones or by attempting to eat, apply makeup, or otherwise multitask while we drive. According to Teen Safe, distracted driving is to blame for about 25% of all fatal car crashes and almost 60% of car crashes involving teenagers.
Certainly, some crashes and claims are beyond
How to minimize your premium increases
Fortunately, you do have some control over your auto insurance rates. Here are some ways you can minimize the effect of auto insurance rate increases:
Find out if you can get reduced rates through your employer, a trade group, or your alumni association.
Evaluate how increasing your deductible and/or lowering certain coverage limits impacts your premium.
Check if your profession, credit record, educational background, good driving record, or another trait qualifies you for additional discounts.
Ask your insurer if you're eligible for savings based on your projected yearly mileage.
Consider insurance rates when you shop for a car and select a car that's less costly to insure.
Check prices of other insurers periodically, and make a switch if you'll save.
Insureonly what makes sense for your car's value. For example, if your car is an older model, collision and comprehensive insurance may no longer make sense financially.
While none of us wants to pay higher auto insurance premiums, it looks like that trend will be around for a while.