Auto insurance premiums are on the rise. They have been for years.
For nearly a decade, auto insurers have experienced claimed losses that are significantly higher than projected. Across the auto insurance industry, companies have been paying $1.05 in costs for every $1.00 in premium revenue received. Just ten years ago that amount was $0.95. Because of this phenomenon, according to the United States Department of Labor, the pace of premium increases is at a 13-year high.
Here are a few reasons costs are going up.
More drivers on the road
Part of the reason for the rising costs of insurance premiums is that there are simply more drivers on the road. As the economy has rebounded, more people are commuting to work and driving to vacation destinations. Coupled with lower gas prices, this trend has increased the number drivers regularly using their vehicles. More cars means more accidents, which means more payouts. And higher premiums.
Distracted driving
Texting and smartphone use has caused a spike in accidents. In the first nine months of 2016, vehicle-related deaths rose 8% over the same period in the prior year. When combined with rising medical costs, this doesn’t bode well for the bottom line of insurers. To cope with the higher costs, insurance companies have been forced to raise premiums to keep up with shareholder demands.
In a State Farm survey in 2015, 36% of drivers admitted to texting and driving, while 29% said they access the internet while driving. This is up from 31% and 13% in 2009. About 20% of people in the survey said they regularly take selfies while in the driver’s seat, and 10% actually record videos. It is no coincidence that industry experts note that insurance payouts began to jump in 2007, right around the time the first iPhone was released.
New technology
Features that improve safety and minimize accidents have reduced catastrophic injuries. But, at the same time, they have added to repair bills, sometimes doubling the traditional costs of replacing parts.
Bumper cameras and driver-assistance technology lead to higher repair costs for insurance companies. For newer cars, insurers don’t just simply replace the bumper in the case of a minor fender bender; they often have to replace very expensive technology. This has greatly driven up the price of claims, and will most likely continue to do so as car manufacturers implement new technologies.
If you’ve noticed your auto insurance premiums creeping up and want to make sure you are getting the best deal available, talk to the experts at John B. Wright Insurance, contact us here or call (800) 224-6693.
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