Resources & Insights

Why Your Auto Insurance Rates Are Still Going Up

January 2, 2018

You never drive above the speed limit. You signal well ahead of turns. You’ve never had a single collision or filed any claims with your insurance company. In short, you’re a safe driver.

So why are your auto insurance rates still rising?

As it turns out, your rate, like everyone else’s, isn’t based on any one single factor but on a multitude of things over which you have very little control.

That’s not to say staying accident-free isn’t important. It definitely is. A claim will undoubtedly lead to higher premiums. But your rate is based on more than your personal driving history.

There are at least four big reasons rates have been rising and are likely to rise again at renewal time in the year ahead:

  1. Road congestion. More of us are driving than ever before, thanks to a steadily growing economy and cheaper gas. With more people working, our roads are more crowded. More drivers simply mean more accidents, including those caused by an epidemic of distracted drivers. It doesn’t help things that one of the largest insurance companies did a study finding Colorado drivers are some of the worst in the nation.
  2. Higher repair costs. Today’s vehicle safety features, including cameras, sensors and computer systems, help make drivers safer. But these sophisticated car parts are expensive to replace after accidents.
  3. The weather. All those hail storms we see in Colorado every year cost auto insurers billions of dollars. The May 8, 2017 storm that pounded the Denver area alone resulted in more than $1 billion in insured losses.
  4. Low interest rates. That’s right. The very same low rates that have frustrated everyday investors are a problem for insurance companies, too. Insurers rely on the income they earn from their bond portfolios to offset their losses in bad underwriting years. With interest rates low, they’re left with no choice but to raise rates to maintain some semblance of a profit.

Also read: 6 Ways to Save on Homeowner’s Insurance

Given these factors, it may be that we’ll continue to see rate hikes for years to come. That said, there are some things within your control.

First, you can put that cell phone down while driving.

Secondly, you can talk to us about adjusting your deductible. A higher deductible will do more than bring down the cost of your premium. It will also help you avoid the temptation to make small claims, and that can save you plenty. One industry study found that people who made a car insurance claim in 2015 saw their premiums rise by 44 percent on average.

It’s a stretch but there is one possible bright spot on the horizon: the rollout of self-driving cars.

Most accidents are the result of driver error; if a computer can more safely drive your car for you, we should see fewer accidents on roads. But autonomous vehicles aren’t expected to be fully implemented for years to come and how much, if at all, they’ll make roads safer will become clearer only as that time approaches.

If it’s any consolation, the Insurance Research Council has noted that rising rates aside, auto insurance has, in fact, become more affordable over time for all income groups.

Comparing auto insurance expenditures to people’s incomes, the council found that about 1.5 percent to 1.6 percent of household earnings are spent on auto insurance. That figure was about 2 percent in the 1990s.

Auto insurance prices vary from insurer to insurer, so it pays to shop around. But don’t shop by price alone. You want to be sure you’re working with a financially stable company – one that you can rely on should you ever have to file a claim. Contact your insurance experts at CCIG to make sure you’re getting the best coverage at the right price.


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