By: William Forbes
Being an insurance agent, I get asked every day, "Why is the cost of my car insurance going up?" And, the majority of the time this question isn't even coming from one of my clients. I get asked by friends, family, my supermarket cashier...it seems to be a question on everyone's mind.
Believe it or not, there are some very specific reasons for the increased cost of auto insurance; and none of them have to do with insurance companies being out to get us (I hear this suggestion quite a bit as an agent, too).
Forbes recently published an article (link here) that does a nice job of explaining some of the reasons. As stated in the article, "the driving force in the upward march in premiums is an auto insurance industry that’s been finding it increasingly difficult to sustain healthy profit margins."
This means auto insurers are finding it difficult to make a profit off insurance premiums, when the expense of running an insurance company is considered.
The article points to a few main reasons why profits have been down for insurers:
- More costly accidents. Both the severity of accidents and the number of fatal car accidents have been trending upward. So, fulfilling these types of claims, particularly those that include high medical costs, is very costly.
- A decline in investment revenue. The article explains that insurance companies hold large investment portfolios, and when interest rates and investment income is lower, they can't offset losses.
- Bad weather. As comprehensive claims from bad weather (tornadoes, hail, flooding) continue to rise, so does the amount insurance companies pay out to their insureds. I would also add to this that cars are getting more expensive to repair - the cost of parts is increasing, and added technology features make what used to be simple repairs, more costly. For example, windshields now have cameras in them, and this increases the cost of replacing them.
For a deeper dive into these three points, check out the full article on Forbes.com. And, if you have questions about your policy, always feel free to contact your agent.
(Here is the full link to the article: https://www.forbes.com/sites/ccasazza/2017/05/23/why-are-car-insurance-rates-still-going-up/#3315a8cb7753)