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Recent Trends in Auto Insurance

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!

  [1]https://www.iihs.org/iihs/topics/t/general-statistics/fatalityfacts/overview-of-fatality-facts

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TIPS FOR SHOPPING YOUR HOME AND AUTO INSURANCE

If you’re thinking about shopping for a new insurance carrier, there are important differences you should consider.  It seems that every insurance carrier is offering the best price – but that’s impossible.  The claim to a low price can grab a prospective customer’s attention.  In reality, all companies in all industries compete for your business in three ways: Price. Service. Quality. 

PRICE:

We would all love it if we could pay low insurance premiums that never increased at renewal, wouldn’t we?  Unfortunately, that isn’t the reality we face.  Distracted driving and increasingly severe weather1 have driven claims payouts higher.  The insurance company has a higher cost of doing business each year, and a prolonged low interest rate environment have negatively impacted insurance companies.

Every carrier has a niche market and can offer competitive premiums for their ideal client.  Longevity with a carrier can lower your rate and often provide you loyalty benefits for being a long-time customer.

Carriers base your rate on many personal factors.  Your age, sex, location, marital status, credit score, vehicles, driving history, etc., all go in to determining your rate.  Many times consumers will say things like, “my neighbor is paying half of what I’m paying for insurance.”  That may be true, but we don’t know the specifics of their policy, or how their personal information may differ from yours.

When getting quotes from a new company, provide as much information as possible, so the proposals they prepare are accurate.  Inquire about the discounts they offer to see if you are eligible.  Most carriers offer price incentives for premiums paid in full or monthly payments that automatically draft out of a checking account. Because each carrier offers different discounts, be sure to ask if there are other ways to reduce your cost.

SERVICE:

Have you ever dined at an amazing restaurant where the food was spectacular, but the service left you with a bad taste in your mouth? (pun intended!)  In today’s world, service is becoming a lost art.  So many things can be done through automation that the personal connection is lost.  It matters who picks up the phone at claim time or when you need recommendations on coverage options.  Mistakes buying insurance can be devastating.  Because you are insuring your most valuable assets (even your life!), consider the person who will be taking care of you.  Like all industries, insurance policies change and evolve.  It can be invaluable to have a trusted professional answering your questions.  Insurance rates are easy to shop, but trusted advisors are not.

Not every carrier has licensed agents – many companies work via a call center environment where you will speak with a new person every time you call.   Don’t be afraid to ask questions.  You’re interviewing the new company just as much as they’re interviewing you.

In addition, consider the service from the claims department.  When it comes time to file a claim, you want to feel confident in your carrier to provide excellent service and prompt claim resolution.  There are websites who rate insurance based on different factors.  You can do you homework and look into some of these top carriers before you contact them for a quote.2

QUALITY:

Gucci said “Quality is remembered long after the price is forgotten.”  Strangely, nobody ever seems to ask about price when their home has burned down, their car was totaled in an accident, or they lost a loved one due to a premature death.

Carriers are not create equal.  Some provide quality policies with robust coverage and others offer basic policies that require more coverage be added through endorsements.  Have you ever read an insurance policy from cover to cover?  Probably not – you would be nodding off by the second page.  Because there is a plethora of information in a policy, having a clear understanding of how your assets are covered is not easy.  It is important you trust who you are working with, so they can explain the details of your coverage.

You don’t want to have a nasty surprise when you file a claim and discover there are gaps in your policy.  While you’ll never be able to insure against everything, there are quality companies with quality policies to best suit what you need.

Because insurance is intangible, buying it does not give us the excitement or instant gratification we get when purchasing a new car, home, or experience.  However, when we take our time to consider all of the details, there are great benefits to shopping your insurance and placing it with the carrier you feel best suits the needs of you and your family.Reference:

1 http://www.denverpost.com/2017/05/23/hailstorm-costliest-ever-metro-denver/

2 http://www.jdpower.com/ratings/study/U.S.-Auto-Insurance-Claims-Satisfaction-Study/1601ENG