Why Auto Insurers Are Feeling the Pressure To Raise Rates
The auto insurance industry is being negatively affected by several factors right now including the following:
- An inflated used vehicle market
- More expensive auto repair costs
- More deadly traffic accidents
Let’s take a look at each of these factors in more detail.
Higher Priced Used Vehicles
I've written extensively about how used vehicles have skyrocketed in price of late. The COVID-19 pandemic's effect on the economy, especially the supply of semiconductor chips used to make cars, has led to record high prices on new and used vehicles alike.
Prices are so out of whack right now that Clark has advised those who need a car to purchase a cheap, older vehicle just to buy you some time and wait to buy the car you really want when prices stabilize.
Higher Repair Costs
Clark observes that the unusual market conditions have resulted in car repairs costing everyone more — including the insurance companies.
“When a car is totaled in an accident, what the insurer has to pay out is much, much higher now because of the dramatic rise in the value of used vehicles,” Clark says.
“They’re having issues finding affordable repairs,” Clark adds, “and everything is really expensive right now.”
More Deadly Traffic Accidents
Fatal accidents are on the rise in the United States according to the most recent report from the National Highway Traffic Safety Administration.
The report says an estimated 31,720 people died in car crashes during the first nine months of 2021: a 12% increase over the same period in 2020.
Clark says auto insurers are likely to pass the expenses for those claims onto the consumer, which is bad news for our wallets.
So with repairs being higher than normal and the expensive car market, “Plus, the spike in accidents because, well, we’re driving like fools,” Clark says, “All this is combining to lead to severe pressure on auto insurers. And I know they’re not the type of people you’re going to cry a river for.”
Case in Point: Allstate
As an example of a company bent on raising prices, Clark points to Allstate, which is America's second-largest publicly traded insurer.
In a news release about its fourth-quarter 2021 earnings, the company said, "Allstate is taking comprehensive action to improve profitability, including rate increases, reducing expenses and claims loss cost management actions."
“I want you to know that when your claim comes up, even when you’ve had no claims, no tickets, you could see very, very large increases in your premiums from Allstate,” Clark says. “And I’m not saying that Allstate is the only one that could do this.”
What You Can Do To Combat a Potential Car Insurance Rate Hike
Even if you’ve had a wreck or gotten a ticket recently, you may be able to get a lower car insurance rate by shopping around. If you don’t have those, your chances are even better.
“This year is going to be a very important year for you to re-shop your auto insurance,” Clark says. “If you do get a notice of a massive increase and your record’s clean, other insurers likely have an interest in you, and shopping your coverage with someone else could make a big difference.”
Here’s how to go about shopping for new car insurance.
1. Make a List of Auto Insurance Companies
Including the company you’re already with, write down a list of insurance companies you want to shop with.
A great resource is our guide to the Best and Worst Auto Insurance Companies.
2. Get Quotes and Compare Them
You can use an online broker (beware though, my experience is that you might get spam calls for a day or so from different companies).
You could also opt for The Zebra or Compare.com, websites that let you compare insurance prices.
After shopping for insurance on both of the sites, Team Clark's Theo says, "I've concluded that — just as with Compare.com — The Zebra is probably best used to get a general sense of the price for generic coverage, not to customize your perfect policy." Read Theo's review of The Zebra here.
Are you a member of AAA, AARP or any other organization? Take a look at the rates and companies they offer as well.
No matter whether you're getting quotes for just liability insurance or for comprehensive and collision, make sure you're comparing the same coverages across all companies. Here are the differences between comprehensive/collision and liability insurance.
3. Don’t Forget To Ask About Discounts
To further lower your rate, don’t forget to ask about discounts, which you may qualify for based on things like where you work, your age and your military status.
For example, Geico offers a discount of up to 15% for veterans. Here's more about car insurance discounts.
4. Choose Based on More Than Just Price
While price should be a major factor, you should also consider the insurance company’s reputation.
"Sometimes you're better off paying a little more to be with a quality insurer who will be there when the chips are down," Clark says.
If you don’t have personal experience, ask your friends and family members who they have car insurance with.
You can also go online to read reviews of insurance companies on sites like Trustpilot and the Better Business Bureau. Pay especially close attention to what customers say about how the company handles claims.
It may be that not every auto insurer decides to raise rates in the near future, but it will likely be to your benefit to shop rates especially if you haven’t done so in a while.
“This is a circumstance where you might find a big gap in price for the same coverage for the same driver with different insurers, even more than normal,” Clark says.
More Car Insurance Resources From Clark.com:
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