Why Does My Car Insurance Keep Going Up? [FAQ]

Your insurance renewal just came in the mail and your rate went up for no reason! You’ve been insured with the same company for a long time and haven’t had any new tickets or accidents. Why? Most likely it is a general rate increase, spreading the cost of the claims the insurance company pays among its policy holders.

No matter what you think, insurance companies are in the business of paying claims. We all pay our small share into the pot so that if, by a stroke of bad luck we are in an accident, our insurance will take care of things.

Let’s take a look at how car insurance works, what causes car insurance to go up, and what you can do about it.

Ever Increasing Car Insurance Rates

You’ve been a good driver – you have haven’t had any tickets or accidents in years. Yet your car insurance has gone up for no obvious reason. If this frustrates you, you’re not alone. You’re a safe driver. Shouldn’t your insurance be safe from rate hikes? Not necessarily. This may surprise you but it’s not all about you.

Why does my car insurance keep going up?

The fact that your car insurance rates keep going up may have less to do with you and more to do with the ever increasing claims your insurance company is having to pay and the cost to cover those claims. Many insurers are paying out more in claims and expenses than they are collecting in premiums.

How does insurance work?

Insurance is just a way for people to share the risk, pooling their money together in the event of a catastrophe. An insurance company is the middle man that collects the money needed to pay for the claims incurred each year as well as manage the policies.

How are insurance rates determined?

Insurance companies determine rates by spreading the anticipated cost of claims plus the cost of servicing the policies across their policyholders. Rather than dividing them evenly, those who the insurance company deems are least likely to have a claim this next year get a discount and those determined more likely to have an accident pay a surcharge. The insurance companies try to entice good drivers to buy insurance from them by giving them a lower price and encourage bad drivers to get insurance elsewhere by charging them more.

What causes car insurance rates go up?

Car insurance rates go up for everyone when the insurance company anticipates that the overall cost for covering claims for the coming year are going to go up. Even you might be involved in an accident this next year, so everyone has to cover their share of the risk. Those who have had a claim during the past year will see the biggest jump but unfortunately even the good drivers will see their share go up, too. An auto insurance company is a business, if their costs go up, they must pass this increased cost on to their customers, even those who have done everything right in the past since they still might have an accident this next year..

Are insurance rates regulated?

In Washington state, insurance rates are regulated by the Insurance Commissioner’s Office. When a car insurance company wants to increase rates, they must submit the new rates and documentation explaining the change and get approval from the Insurance Commissioner before they are allowed to implement the new insurance rates. The process usually takes months to complete as the Insurance Commissioner’s Office reviews the request to see if the request is reasonable and they only approve the increase once they are satisfied the increase is justified.
Why Does My Car Insurance Keep Going Up? [FAQ]

Causes of Car Insurance Rate Increases

As mentioned earlier, when an insurance company anticipates having to pay out more in claims than it will collect in premiums, it must raise its rates to stay solvent but what causes these costs to go up? When we see rates go up, we usually think back over the last year and come to the conclusion that there is no reason our rates should have gone up. But as we mentioned earlier, it is not all about you.

Why do car insurance companies raise your rates ‘for no reason’?

The main reasons car insurance companies are forced to raise rates have nothing to do with you in particular but instead have to do with the economics of insurance. The increase in the number of accidents each year and the increase in the average cost of these accidents are forcing insurance carriers to raise rates across the board to everyone in the state. Even the largest auto insurers are reporting that their costs to cover claims are exceeding the premiums they collect.

What is causing the number of car accidents to go up?

More and more accidents happen each year because:

  • More driving
    Economic growth, urban sprawl, and lower gas prices have people driving more than ever. With more cars on the road traffic is more congested and there are more accidents. If there are more accidents then the likelihood that you will be involved in one also goes up. Even if you’ve never been in an accident (yet), your chances of being in one this next year increases and, even if you are not, your insurance company will be paying out more on average and therefore your share of that cost goes up.
  • Distracted drivers
    The number of accidents attributed to distracted driving in recent years is on the rise and distracted driving-related accidents tend to be more severe. It is too easy to allow ourselves to focus on something other than our driving. Whether the distraction is from in-dash tech, talking and texting on our phones, or eating and drinking while we drive, paying attention to actually driving sometimes takes a back seat. With more distractions there are more accidents and they are more severe. The insurance companies pay for these claims and your share of that cost goes up.
  • Uninsured drivers
    As the cost of insurance goes up, people decide to take their chances and hope they are not in an accident. But, when you are hit by an uninsured motorist, you expect your insurance company to take care of you and fix your car. Where does the money come from to fix your car? Sure, they might recover some of the money by taking these drivers to court and getting judgments, but, for the most part, the cost of these uninsured motorist claims is spread across all policyholders.
  • Acts of God, vandalism, and theft in your area
    Weather related events such as flood, wind, and hail damage may cause your insurance company to raise rates in your local area to cover anticipated claims. Increases in car theft rates for your make and model of car in particular or in your area generally can affect your rates. Both new cars and older cars can be affected. When insurance companies notice these patterns in an area, they must adjust their rates accordingly.

What is causing the average cost of an accident to go up?

The average cost of an accident is going up due to:

  • Higher repair costs
    We are paying more for just about everything nowadays. Vehicle repair costs are no exception. A minor fender bender if either car has to go into the body shop, can cost thousands to repair just a bumper. Part of this is due to higher labor costs but a big part is the advanced technologies built into newer cars.

    Advanced safety and driver assistance systems help keep you and your passengers safe but these systems involve complex sensors and computerized components that are expensive to repair. Forward collision sensors in windshields, sophisticated warning devices in the front and rear bumpers, back-up cameras, blind spot detectors, they get more sophisticated and common every year but when these things get damaged, even in a minor fender bender, it costs more to fix the car. Whether it’s your car or the one you hit, these extra expenses increase the average cost of an auto accident.

  • Rising medical costs
    Medical costs are not going down. Car insurance companies do not get to negotiate with the hospital or doctor like your health insurance and must pay full price for your medical care. These ever-increasing medical costs multiplied by a rising number of accidents are skyrocketing the amount paid out and must be spread out among the whole pool of policyholders.
  • Increased insurance fraud
    Insurance fraud can be the seemingly innocent inflating of damages after a car accident to profesional fraud rings fabricating and staging accidents. Everyone wants lower premiums and thinks the insurance company is gouging them, so claiming to be married or forgetting to mention a new driver in the household might lower your premium but not risk. When the insurance company does not collect the correct rate from a large pool of people or has to pay inflated claims, they ultimately must increase rates on all of their policyholders to cover the expense.

Why do my rates go up when I have done nothing wrong?

If you’re involved in an accident or get a moving violation ticket you expect your insurance company will raise your rates at your next renewal but there are some less obvious reasons your insurance might have gone up.

  • Change In Your Credit
    Your car insurance can go up for what appears to be no apparent reason when, in fact, you have had a change in your credit. Statistically, people who do not pay attention to their bills are also not paying attention to their driving. Using credit may seem unfair to the clean driver but is it any different than your rate going up for getting a speeding ticket for 5mph over?
  • Not-At-Fault Accidents
    Another factor that is hard to understand and seems unfair is when your rate goes up because someone else hit you. The insurance companies raise the rates on drivers who have not-at-fault accidents for 2 primary reasons: they are more likely to be in an at-fault-accident this next year and they are more likely to be involved in another not-at-fault accident and your not-at-fault accident costs your insurance company money that they must spread over their policyholders.

Why do your rates go up when someone else hits you?

Most insurance companies believe that if you were involved in an non-at-fault accident this year, you are more likely to be involved in another accident in the near future than someone who was not involved in an accident. Even a non-at-fault accident can cost your insurance company money, between medical payments, uninsured motorist, collision coverage, and staff costs to handle all that and dealing with the other insurance company. If they don’t raise the rates of those who had the not-at-fault accidents then they would have to raise everyone’s rates since the costs have to be spread out, and spreading the increase cost over those most likely to use it again makes the most sense.

Most companies will say they do not actually charge for the not-at-fault accident. Instead they remove the claim free discount or move you to a more expensive tier within their rating system. Which to you and me means they charge for the accident no matter how they word it.

Every carrier has their own factors used to measure credit and factor accident-free discounts. We understand that bad things can happen to good people and usually when you can least afford it. By using an independent agent like Mid-Columbia Insurance we are able to shop your insurance with multiple companies and can find the one that gives you the best rate, whether your credit is good, bad, or ugly.

How to lower your car insurance rates

Even with all these factors at play, no one wants to pay more than they have to for car insurance – especially when it feels like your car insurance went up for no reason. You don’t have to just accept your new increased auto premium rate. Below are a few things you can do to help lower your premium.

What can I do to lower my car insurance premium NOW?

Even though there are a number of factors that are out of our control which contribute to increased car insurance premiums, the good news is that there are plenty of things you can do to lower your car insurance premium.

  • Choose a higher deductible.
    Choosing to have $1,000 comprehensive and collision deductibles instead of $250 or $500 deductibles will immediately lower premium. It may also keep your rates low because having a higher deductible prevents you from turning in small claims and losing your accident-free discount. You will have to decide if it is more beneficial in the long run to pay for a small claims like replacing a broken windshield or paying more so you can turn it in to your insurance company.
  • Enroll in the insurance company’s telematics program
    Insurance company telematics programs, like Safeco’s RightTrack™, Progressive’s SnapShot™, and State Farm’s Drive Safe & Save™ are becoming more and more popular. These programs collect information about how you drive, how much you drive, and when you drive. The insurance companies then use this data to personalize your car insurance rate based on your actual driving data. Your safe driving habits could save you up to 30% off your premium.
  • Bundle and save
    Most insurance companies offer a multi-policy discount when you insure your home and auto with them. Some will even give a discount if you insure your motorcycles, boats, or RVs with them. This discount can be as high as 25%, so it makes sense to have as many of policies as you can with the same company.

What can I do to keep my rates low in the future?

There are a number of things you can do to make sure your rates stay as low as possible.

  • Drive carefully
    Observing traffic rules and speed limits and avoiding moving violations and accidents is the best way to reduce your insurance costs over time. Anymore even a not-at-fault accident may raise your rate because companies have seen drivers who are in 1 accident are more likely to be in another (at-fault or not).
  • Move
    Yes, probably not an option, but just realize where you live affects your insurance price.
  • Work with an independent insurance agent
    There is no one-size-fits-all solution when it comes to insurance. Unlike a “captive” insurance agent that works with just one company (think State Farm, Farmers, Allstate, Geico, etc), independent agents partner with a wide range of insurance companies. This means we can find the best combination of price and coverage for you. Insurance pricing is based on hundreds of variables and can vary dramatically from company to company.

How much will car insurance cost in the future?

Rates seem like they will continue to rise in the foreseeable future. If the loss-causing trends continue, we will continue to see premiums go up each year. We can only hope and do our part to help these trends reverse.

How can Mid-Columbia Insurance help?

The best way to save money on insurance is to shop around and find an agent that not only offers great rates but can offer sage advice on how you can protect yourself from potential claims. As an independent agent, we can compare quotes from a number of companies to ensure you’re getting the best car insurance possible.

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