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Why does my premium go up every year?
The short answer is:
- Americans are driving more. That means more accidents.
- People are driving faster. More accidents are occurring.
- Distracted driving. Smart phones & infotainment screens are distracting drivers which leads to more accidents.
- Post-pandemic drivers are driving faster and more distracted than ever. The result is accidents with greater severity.
- US roadways are carrying heavier, more powerful vehicles operated by motorists who are older, driving faster and more often distracted. Each of those factors has a bearing on the frequency and severity of personal auto claims.
- The nation, as a whole is growing older — in part because both birth rates and immigration are lower than previous levels. The median age was 38.8 years in 2021, up from 35.4 in 2000 and 32.9 in 1990.
- Heavy vehicles lead to more severe claims, both for property damage and bodily injury.
- Modern vehicles are also more complicated than previous generations of automobiles, another factor that drives claim severity.
- Expensive auto parts & labor. Automobiles are more complex. It costs more to repair vehicles.
- It costs more to insure most (Electric Vehicles) EVs than traditional cars.
- For many electric vehicles, there is no way to repair or assess even slightly damaged battery packs after accidents, forcing insurance companies to write off cars with few miles – leading to higher premiums and undercutting gains from going electric.
- Supply chain disruptions have made automotive parts more expensive. and a labor shortage spurred in part by the aging population makes trained technicians in short supply.
- Supply chain issues. Getting replacement parts is taking longer.
- Labor shortage spurred in part by the aging population makes trained technicians in short supply.
- Building materials for homes is up
- Re-insurance rates are up. Insurance companies insure with Re-insurance companies.
- 40-year high inflation
- Interest rate hikes
- Depleted capital. Insurance company reserves are decreasing rapidly.
- Natural disasters: Fires, floods, mudslides, hurricanes and tornadoes.
- Marijuana is legal and decriminalized. States are reporting more vehicle accidents.
- Watch the nightly National News. Mother Nature is wreaking havoc in the US and Worldwide.
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How Insurance Works:
As an insurance policyholder, everyone's premium is pooled together at the insurance companies. When the pool is full, insurance premiums barely increase. However, when the pool is drained, insurance companies need to refill the pool with more money. They do this by increasing the rates even if you personally haven't had a claim.
Think about these devastating claims over the years whereby a fire burns down people's homes and businesses. In the olden days, it seem like one home at a time was destroyed by fire. Now, these firestorms are taking down whole neighborhoods and communities including the surrounding businesses.
Insurance companies are paying not only to rebuild the homes and businesses, but insurance policies include coverage for people to temporarily live elsewhere and provide meals while displaced by a disaster. Business policies include business interruption and extra expense coverages for down time. This adds up quickly.
Let's look at it another way, on a more individual level. Again, in the olden days, the cost to repair a car bumper from an auto accident wasn't all that much. Though, it seemed like a lot at the time. Today, car bumpers are more complex. They're covered in plastic to match the car. They're equipped with radar to assist with parking. Labor costs to repair and replace parts are at an at time high. That same bumper now costs several thousands to repair.
Distracted Driving:
It's not hard to spot a distracted driver on the road. Often times, they're looking down at their mobile phone while driving. In addition, the new infotainment systems in late model cars also take driver's eyes off the road. The more complicated the infotainment system, the more likely an accident is going to occur. Distracted driving is a leading cause of automobile accidents.
Natural Disasters:
The answer to this question is in the news. As you watch the evening news, you'll notice that there are stories about hurricanes in the East, Flooding in the South and fires in the West. This basically means that insurance companies are paying out on claims from all the customers suffering from some sort of damage.
Chances are, you're insured with an insurance company that provide insurance in most States. Lately, they're paying out billions and billions of dollars in claims.
Insurance Fraud:
Another important factor to consider is insurance fraud. The Coalition Against Insurance Fraud estimates that at least $80 billion in fraudulent claims are made annually in the U.S.. (Source: Insurance Journal, Dec 2018).
U.S. Tariffs:
Experts have warned that any move to increase US tariffs on foreign autos could also hurt the US car industry, as it relies on imported components. In a worst case scenario, tariffs could lead to the loss of thousands of US auto jobs and stinging price rises for American consumers. (Source: CNN Business, Feb 2019).
Continuing Developments in Health Care:
Medical insurance premiums are rising too. Research and Development, materials costs for life saving machines, drugs costs, administration are constantly increasing. We all want the latest life saving measures and it comes with a high price tag reflected in your health insurance premiums.
How Insurance Companies are cutting their costs:
Insurance companies are getting proactive to cut their costs. They're more automated than ever, they're reducing their labor force when possible and cutting commissions to agents. Once the insurance companies recoup enough money to refill the insurance tank, and claims frequency and loss amounts dip, then insurance premium rates will level off.
How to reduce your expenses:
Price matters, so reducing expenses always feels good, especially during economic downturns. At Nationwide, discounts vary by location and include:
There's value in a great insurance agent:
There's a lot going on in the insurance marketplace. Having a knowledgeable, experienced and trustworthy agent to guide you is going to provide you with the best value. It's not always about price. There's value in having a good agent that you can reach and rely on. Knowing that your insurance will pay your claim promptly is important. To learn more, call Shorr Agency at 888-737-6200.
As an insurance policyholder, everyone's premium is pooled together at the insurance companies. When the pool is full, insurance premiums barely increase. However, when the pool is drained, insurance companies need to refill the pool with more money. They do this by increasing the rates even if you personally haven't had a claim.
Think about these devastating claims over the years whereby a fire burns down people's homes and businesses. In the olden days, it seem like one home at a time was destroyed by fire. Now, these firestorms are taking down whole neighborhoods and communities including the surrounding businesses.
Insurance companies are paying not only to rebuild the homes and businesses, but insurance policies include coverage for people to temporarily live elsewhere and provide meals while displaced by a disaster. Business policies include business interruption and extra expense coverages for down time. This adds up quickly.
Let's look at it another way, on a more individual level. Again, in the olden days, the cost to repair a car bumper from an auto accident wasn't all that much. Though, it seemed like a lot at the time. Today, car bumpers are more complex. They're covered in plastic to match the car. They're equipped with radar to assist with parking. Labor costs to repair and replace parts are at an at time high. That same bumper now costs several thousands to repair.
Distracted Driving:
It's not hard to spot a distracted driver on the road. Often times, they're looking down at their mobile phone while driving. In addition, the new infotainment systems in late model cars also take driver's eyes off the road. The more complicated the infotainment system, the more likely an accident is going to occur. Distracted driving is a leading cause of automobile accidents.
Natural Disasters:
The answer to this question is in the news. As you watch the evening news, you'll notice that there are stories about hurricanes in the East, Flooding in the South and fires in the West. This basically means that insurance companies are paying out on claims from all the customers suffering from some sort of damage.
Chances are, you're insured with an insurance company that provide insurance in most States. Lately, they're paying out billions and billions of dollars in claims.
Insurance Fraud:
Another important factor to consider is insurance fraud. The Coalition Against Insurance Fraud estimates that at least $80 billion in fraudulent claims are made annually in the U.S.. (Source: Insurance Journal, Dec 2018).
U.S. Tariffs:
Experts have warned that any move to increase US tariffs on foreign autos could also hurt the US car industry, as it relies on imported components. In a worst case scenario, tariffs could lead to the loss of thousands of US auto jobs and stinging price rises for American consumers. (Source: CNN Business, Feb 2019).
Continuing Developments in Health Care:
Medical insurance premiums are rising too. Research and Development, materials costs for life saving machines, drugs costs, administration are constantly increasing. We all want the latest life saving measures and it comes with a high price tag reflected in your health insurance premiums.
How Insurance Companies are cutting their costs:
Insurance companies are getting proactive to cut their costs. They're more automated than ever, they're reducing their labor force when possible and cutting commissions to agents. Once the insurance companies recoup enough money to refill the insurance tank, and claims frequency and loss amounts dip, then insurance premium rates will level off.
How to reduce your expenses:
Price matters, so reducing expenses always feels good, especially during economic downturns. At Nationwide, discounts vary by location and include:
- Going paperless—Opting for email when bills, documents and other important insurance notices are available online reduces both paper waste and costs, a win-win.
- Quoting early—Quoting in advance of coverage start may save an extra 5% on a premium.
- Updating bill payment method—Paying in full or through a recurring EFT (electronic fund transfer) may yield reduced premiums.
- Choosing telematics—Electing a usage-based auto insurance program, such as SmartMiles and SmartRide, enables insureds to save up to a 40% discount based on mileage and safe driving practices.
- Bundling home and auto policies—Multiline policies for auto and home can bring up to 20% in savings.
- Installing Smart Home protection devices—Using innovative ways to help keep a home safe from water damage, break-ins, fires and more with support from in-home protection devices offers up to a 10% discount through the Smart Home.
- Earning home improvement credits—Renovating a home’s plumbing, heating, cooling or electrical systems, as well as roof, may qualify for additional discounts.
- Opting for higher deductibles— Increasing deductibles for home and auto may offer premium reduction opportunities.
- Remaining claims-free—By avoiding losses, homeowners may qualify for a lower premium on their insurance when they stay claims-free.
There's value in a great insurance agent:
There's a lot going on in the insurance marketplace. Having a knowledgeable, experienced and trustworthy agent to guide you is going to provide you with the best value. It's not always about price. There's value in having a good agent that you can reach and rely on. Knowing that your insurance will pay your claim promptly is important. To learn more, call Shorr Agency at 888-737-6200.
