The factors influencing your auto rates

You might have noticed that auto insurance rates are on the rise. Despite safer cars and an aging population (safer driving habits), the trends in auto insurance started to deteriorate a few years ago. Fatalities in the U.S. from auto accidents had been steadily declining from a high in 1979. That year, 51,093 people lost their lives. Fatalities bottomed in 2011 at 32,479. But starting in 2015, there has been a sharp increase. In 2016, 37,806 lost their lives, and 37,133 lost their lives in 2017. The numbers for 2018 are not available, yet.[1] 
In no particular order, here are the trends driving auto insurance costs higher:

  • Distracted Driving. This one doesn’t need any explanation – we all see this nearly every day.
  • Rising Medical Costs. Combine an aging population with rising medical costs and more accidents, and you have a bad combination.
  • Uninsured and underinsured motorists. As bad as this problem has been for years, it’s actually getting worse.   
  • Attorneys. We’ve never seen so many commercials on TV and on billboards for personal injury attorneys. They have applied a lot of pressure. Wasn’t there a day not long ago when attorneys couldn’t advertise for ethical reasons?
  • Repair Costs. Cars are complicated to repair these days. For example, sensors and cameras are now routinely installed in bumpers. What might have been a small $400 claim for backing into a pole can easily exceed $2,000 today.      
  • Labor shortage for auto repair body shops. Talk to any owner of an auto repair shop, and they will tell you how they cannot find young people who want to work in this industry.
  • Low interest rates. Insurance companies earn money on funds they collect until the time they pay claims. Interest rates remain historically low. 

Clients oftentimes ask why their rates are not going down as their vehicle ages. Good question. Let’s break down the five main coverages in an auto policy:

  • Bodily-injury liability. This coverage pays for someone else’s legal damages if you are at fault. The cost for this coverage is minimally impacted by the age of your vehicle. If anything, companies charge more for older cars due to fewer safety features.
  • Uninsured and Underinsured Motorist (“UM”). This coverage pays your bodily-injury legal damages if another driver is at fault and does not have adequate bodily-injury liability coverage. Similar to liability coverage, the cost for UM coverage does not decrease as a vehicle gets older.
  • Medical. This coverage pays for your medical bills, regardless of fault. Similar to the two prior coverages, the cost for this coverage does not decrease as a car gets older.
  • “Comprehensive” – a/k/a Physical damage coverage for “other than collision”. This covers damage to your vehicle that is not the result of a “collision”. Age matters here. However, it only matters if your car is deemed a total loss – then the insurance company would pay less for an older car. Most claims do NOT result in a total loss. Rather, most claims are repair situations, and the cost of repairs (parts and labor), generally increases each year.
  • Collision. This covers damage to your vehicle that is the result of a collision. The same answer for comprehensive applies here. Most accidents do not result in a total loss.

We hope this helps. As always, we work for you, and we’re here to answer your questions. Thank you for your business!


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