Insurance Rates Going Up?

Let’s talk about the dark side of insurance for a minute.  Why your insurance rates are going up.  There are a lot of factors and algorithms that play into insurance rates (which are closely regulated).  Some things are out of your control, but I am going to help you focus on what you can do to help your rates stay steady year after year.

Here are 3 main reasons why insurance rates go up, and my tips to help you keep your rates relatively steady.

1. Increase in costs: Inflation

This is just a part of life my friends.  Wages are going up, the cost of materials are going up, so insurance companies are paying out more for repairs and damages.  This eventually trickles down to the consumer. Also keep in mind that our cars are becoming more expensive, with more and more technology.  I mean, we are basically driving around giant computers, which can cost a lot to replace in an accident.  Another huge factor in increasing costs, are medical bills.  There is liability coverage in almost all forms of insurance, cars/homes/businesses, and the increase in medical care has had a huge effect on insurance rates over the last 10 years.

Pro Tip: There is not much you can do to prevent these costs on your own.  However, you can lower your risk in other ways. Maintaining your home and car are great ways to prevent and incident from happening, which in the long run will help insurance companies to pay out less.  If everyone does their part, this will eventually help out all consumers.

2. People Cheating the System

I am not saying YOU and I are cheating the system, but there are “people” who do.  This effects the statistics on which insurance rates are based on, and eventually raises the cost for everyone.  Some examples of this include kids moving out of the house (off to college), but still being rated as living at home.  Teenagers driving the “cheapest” rated car rather than the new one they were bought.  Probably the most common one is when the zip code of a car’s location changes but is not reported. Companies insurance rates are based very strategically on statistical exposure information.  If you give the insurance company wrong information, they are not collecting for the right exposure or risk factors.  In the long run these miscalculations will effect all consumers.

Pro tip: Give accurate information, even if it means your rates might go up a little, this helps everyone long term.  There are new regulations regarding how rates are calculated.  No longer will your gender be a factor, and rates will be heavily based on how much you drive your car.  Makes sense, the more you drive the more of a risk you are.  So make sure you are providing your insurance company with the most accurate information you can give them.

3. The type of company you are insured with

Insurance companies are either set to grow or set to profit.  There is a new trend of “fly by night” insurance companies popping up offering extremely low rates for coverage.  That is an example of a company that is set up to grow.  They are bringing in tons of new customers with their shiny low rates.  This is not sustainable long term, as they begin to pay out on losses, so eventually those rates will go up.  They might even go up higher than average because they will need to make up for their initial low rates. Another concern with these companies is their reliability in the event of a catastrophe.  Recently there were huge brush fires all over California.  Insurance companies paid out billions for lost homes and belongings.  There was a small company that actually went under because almost all of their local customers had lost their homes, and they did not have enough money in reserve to pay out on all of those claims.  They did not pay out over $40 million in claims, leaving people without homes or options.

Pro tip: It’s worth it to pay a little more to be with a reliable company.  Long term, their rates will remain steady and you can count on them to help cover your losses for anything from a small claim to a large catastrophic event. 

Although large companies will also have some rate increases, their rates will be steady and fit overall industry trends.

-Kristin Francy Insurance and Financial Services Agent.

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