Reasons for rising car insurance costs

In the past couple months, in North Texas, we have seen some substantial increases in auto insurance rates. As matter of fact, the rates have been steadily rising since the beginning of 2016 to make the jump very noticeable at 6-month or 12-month renewals. Our clients ask us all the time: “Why did my insurance increase? I have no claims. I have the same car. I didn’t do anything differently and they still increased my rates.”

The insurance companies create their rates based on complicated algorithms taking into account a lot of different factors. They analyze loss ratios and behavior of financial markets that affect their profitability. So, what are some of the factors that increase the loss ratios and therefore drive the rate hikes?

Weather losses

As I am sure you noticed, in past couple of years we have been hit by several hail storms, tornadoes, and floods, which have increased the number of weather-related claims on insured property, including cars.

More drivers on the road

The number of drivers on the road is increasing. With new drivers getting licensed, aging population staying active and licensed longer, and with the influx of drivers that have moved to Texas for work, more and more drivers are hitting the road, which not only increases risk but also the number of accidents and claims. Also, it looks like drivers sit behind the wheel longer and clock longer distances than before.

More expensive parts and labor

Cars are getting more sophisticated and sensor technology is now being embedded into everything. What used to be a feature of only luxury cars is now becoming common even in mid and lower range cars. Backup sensors, bumper sensors, light sensors, lane departure warning systems, as well as all sensors that just make your car run within your engine, increase the complexity of the cars and costs of their repairs after an accident. An average cost of a bumper replacement used to be a few hundred dollars, while now it’s going into thousands.

Distracted driving

Smartphones have been a major threat to driver’s safety. Even one-second lapse of attention can cause a major accident. Texting, social media and web browsing while on the road has significantly increased phone related accidents and we all know it’s not going anywhere.

 

So, what can you do about the rates rising in general? Unfortunately, not much. However, there are a few tips that can help keep your car insurance cost as low as possible:

  1. Avoid accidents at all costs (don’t text and drive, don’t drive intoxicated or tired, pay attention to what’s going on around you, be courteous to other drivers, be predictive).
  2. Avoid traffic violations like speeding (these too affect your rate!).
  3. Avoid small comprehensive claims (evaluate paying out of pocket for a minor repair versus claim on your record for years).
  4. Evaluate whether you need the new more expensive car (lower value car = lower insurance).
  5. Shop car insurance with your independent agent who can give you comparative quotes from several insurance companies.

If you need help shopping for your car insurance or just need some advice, give us a call at 972-584-1286 or send us an email!

 

Additional reading:

Great article summarizing average insurance rates for your car, home, and pet.

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