Why are insurance rates going up?
Very often I am asked why insurance rates went up. It is sometimes hard to pinpoint but here are some reasons:
1. You changed vehicles. Even if the vehicle cost is less it doesn’t mean it costs less to repair it in case of an accident. Each vehicle has data on how likely it is to get into an accident, how likely it is that it will be completely totaled in case of an accident and how expensive it is to repair.
2. There simply was a rate increase for the insurance company. (Very common right now ) Insurers try to forecast how expensive future claims will be, but they can’t predict the future. For instance, they analyze the number of claims and payouts made due to events such as natural disasters, crime, and crashes in your neighborhood. There is a constant balancing act between claims paid and the money they have in reserves put away to be able to pay claims. They are regulated on the balance between the two. The rates are also regulated. They cannot just take a rate increase overall without getting approval.
3. You relocated. Each state has its own system. It is all regulated by the different state authorities. Even if you relocate in-state, you might move to an area with higher accident risk or more crime, which could cause your rate to skyrocket. I often have people tell me but I live in a good area. That really doesn’t mean anything. Sometimes the areas that are considered “good areas” actually have more accidents or more break-ins to homes. It’s all about the data. They cannot change your rate because an area is considered “a bad area”. That is considered redlining and it’s against the law. Often I have people tell me they changed their rate because they moved to an area that was not as good and that is not the case it’s all about the data on the chance of a claim.
4. Your credit changed. The majority of carriers use data from your credit reports to set home and car insurance rates. Having poor credit can cause you to pay as much as 91 percent more than those with excellent credit. Your insurance agent or broker does not see your credit score.
5. You might have lost a discount. If you have a multivehicle discounts and then you drop down to one vehicle your rate could be affected. As well as if you have home and auto together for a multi-policy discount and then you drop the auto insurance you would lose that multi-policy discount.
6. You got into an accident or your driving record changed.(tickets). People get really upset when an insurance company changes the rate because they got into an accident. They are regulated to have a certain balance between money going out and money going in on your policy. It is definitely not personal. There are times that a broker or agent can take a look at it and talk to an underwriter because it might’ve not been your fault or it was the circumstance beyond the normal circumstances. Sometimes, it’s just best to see if a different company will be lower because all the companies out there have their own little niche. Some are better with people with accidents and some are not. So, How do you keep track of all this? The bottom line is, you don’t. The benefit to working with an insurance broker is we can compare whether or not is best for you to have both your policies with the same company for a certain discount or if it’s still cheaper to have them separate with two companies. That is the benefit to dealing with the broker that can sell more than one company. All you can do is control your driving record, your credit, etc and let the professionals handle the rest to make sure you are covered correctly and getting the best rate possible. You get your renewal and noticed that your rate is going up? Talk to your agent or broker and see what they can do.
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