The combination of record-setting natural disasters, an increase in distracted-driving accidents, and higher new vehicle costs as well as the increasing prevalence of tech-loaded vehicles means personal auto insurance cariers will be increasing personal auto insurance premiums in 2020. These factors, coupled with the fact that despite recent year-over-year rate increases, Personal Auto Insurance Carriers have failed to turn an underwriting profit in recent years indicate that drivers will be paying more for car insurance in the coming years.
A slew of devastating natural disasters struck the U.S. in 2018 and 2019, resulting in an increase in insurance claims that cost carriers billions of dollars. While home insurers are usually hit the hardest by these types of disasters, auto insurers are affected as well. One only needs to turn on the television during or after a nautural disaster has occurred to see images of flood-submerged or burnt out vehicles due to flood and wildfire disasters. Reports from the California Department of Insurance estimate that November 2018 wildfires caused more that $123 million in auto insurance claims. Additionally, hurricanes Michael and Florence, which pummeled the Southeast in the Fall of 2018, caused up to $14.6 billion in insurance losses.
While you may not live in one of these disaster-prone areas, insurance carriers typically write policies in all 50 states – so when a natural disaster occurs in California and causes millions or billions of dollars in auto losses, premiums must go up for that carrier’s policyholders who live in the other 49 states for the same types of policies. Remember, the entire premise of insurance is that claim payouts to people who suffer claim losses are subsidized by those who do not suffer losses. While this may not seem “fair” to some, without this underyling premise there would be no insurance industry at all.
Distracted driving claims continue to increase as many drivers continue to ignore laws designed to curb the use of mobile devices while driving. The National Highway Traffic Safety Administration (NHTSA) reports that 2.443 million people were injured in distracted driving crashes in 2015, which is an increase from 2.217 million people in 2011. This trend has only continued to increase over the last several years.
Higher sticker prices as well as higher repair costs for new vehicles – which are increasingly packed with sensitive and expensive technology – means that when an accident occurs, it typically results in a higher monetary payout. With the advent of newer technologies such as rear view cameras (in rear and front bumpers) and lane change monitoring devises in side view mirrors, the cost to repair or replace bumpers and side view mirrors has skyrocketed. Further, as of May 2018, all new vehicles are required to have rearview video systems (backup cameras) in accordance with NHTSA regulations.
It is difficult to project whether auto insurance rates will continue to rise, however if these loss trends continue, consumers can expect to see premium increases going forward.
If you feel that your auto insurance premiums are increasing too quickly, contact an your current independent agent and ask that they look at alternate insurance carriers for competitive pricing comparisons. Keep in mind that there are often many moving pieces that dictate your overall out of pocket cost for insurance. For example: while changing carriers may save you premium on your auto policy, doing so may cause you to lose the muti-policy discount which you receive by having your homeowner and auto policies written by the same carrier. It is important that you build a relationship with an independent agent who knows your overall insurance picture and who can advise you on how to maintain the coverage you need at a premium you can afford. While no one likes to pay too much for insurance, having the correct coverage due to your unique risk profile is actually more important than saving a little money on one of your policies. What good is saving money on your premium if, when you need your policy to respond, it does not because you chose a cut rate policy? All you need is one uncovered claim to realize that the savings you received on your cut rate policy is more than offset by a multi thousand-dollar loss which you should have had coverage for.
The big direct writer carriers spend millions of dollars on advertising trying to convince you to contact them for a quote in order to “save you money” – they understand that if they can get 100 people to contact them for a quote that they will be able to save a few of these people some money on their premium. A good independent insurance agent should have enough auto insurance markets to compete with the big direct writers on premium. Further, a good independent agent will advise you properly on the coverages you should consider based on your own unique risk profile – while the big direct writers will have no problem advising you to cut your coverage or increase your deductibles just to save you a few dollars on your premium.
Do not underestimate the importance of having a good indepent insurance agent in your corner who can properly advise you as to what types of coverages, limits, and deductibles you should be carrying – after all, what good is saving a few dollars on your auto insurance premium only to have that savings evaporate (and then some) when you suffer an auto claim incident that is either not covered by your policy or in which your policy provides inadequate coverage? All you need is one uninsured or underinsured claim and it will wipe out years of premium savings. A good independent agent will also advocate on your behalf to make sure that the insurance carrier pays you all the money you deserve when a claim does occur – when you purchase an auto policy from one on the big direct writers who “save you money,” there is no one to advocate for you when a claim occurs.