Thursday, December 13, 2012


MY RATE WENT UP AGAIN!!

Insurance rate increases! That annoying thing that seems to occur every renewal, whether it is every six months or once a year! They never seem to go down, EVER!
We all dread having to call our agent to find out, “what’s up with my rate?”  We are secretly hoping the insurance company didn’t find out about a ticket or an accident we had. 

So what if it’s not related to a ticket or an accident?

Back in 2010 an article was written about insurance rates. But this article addressed one aspect of what the public uses as the reason and disputes it. You can view the article here: http://www.huffingtonpost.com/joanne-doroshow/heres-really-why-your-ins_b_775077.html

There are many reasons rates go up and we may not like them because we do not understand them.  So let me explain very simply.

Insurance is based on statistics. For example:  If you “statistically” live in an area that has more accidents than other areas, you are bound to get into an accident. Insurance companies uses the past year or past couple of years to predict the future. They look at territory, type of vehicle, age of driver, sex of driver, driving record and coverage paid out the most. They also look at amounts of coverage you carry. 

LET ME EXPOUND.

TERRITORY

If the area you live in has an accident on the corner by your house once every week or two, insurance companies predict you will eventually be in one of those.  If you live in an area that is rural and not much traffic, the prediction is that you will not get in an accident anytime soon. Each year or two, insurance companies re-evaluate territories for accident history.

TYPE OF VEHICLE

Each year insurance companies evaluate what types of vehicles are stolen most often. You can check out Forbes for an article that was written about cars most stolen in 2011.  Here is the link:  http://www.forbes.com/sites/hannahelliott/2011/08/02/the-most-stolen-cars-in-the-country/

Also, vehicles are evaluated based on how well they do in an accident.  If your Toyota RAV-4 does well each time it’s in an accident, (doing well is defined as not incurring a lot of damage or keeping the passengers safe) then the premium for that RAV-4 will most likely go down. Now, if you have one of these vehicles, I am not saying your premium will go down.  Most likely there are other factors involved in your rate; which leads us to the next item.

AGE OF DRIVER

If you are a new driver, you are not very experienced driving on the roads. There is a chance, or prediction, that you will probably get in an accident. Some companies will apply an “inexperienced operator surcharge” to your policy because statistics have proved that you will get in an accident. It doesn’t seem fair, but statistics don’t lie.

SEX OF DRIVER

We all know that male drivers are more aggressive on the roads than females. Once again, this does not mean all male drivers.  When reports are scrutinized, they usually show more males are in accidents than females. Sorry guys.

DRIVING RECORD

Your driving record can be a bummer. Especially since it follows you for SEVERAL years! You may have sworn off getting any more tickets, but insurance companies will base your rate on those for three years, sometimes five!  A minor violation is usually a speeding, running a red light, missing a stop sign, turning on a red light when indicated not to or talking on your cell phone. They usually are counted for three years. A major violation is drunk driving, driving under the influence of drugs, driving on a suspended license (whether you knew it was suspended or not), running over a person on purpose, or leaving the scene of an accident. (Speeding in excess of 85 miles per hour can also be listed as major, depends on the state).

So based on your driving record, insurance companies predict how you will be driving. And that prediction ties in to how many accidents you will probably have or cause.  It’s similar to a trust issue you might have with your parents, partner or friends.  Once you have proven you can’t be trusted, it takes extra effort to gain that trust.  Once your ticket falls off after three years or five years, you can be trusted with lower rates again. (Once again, driving record does not completely drive the rates. I am  not promising lower rates when violations fall off).
 

COVERAGE

This is what you have chosen to put you back in the same financial situation you were in before an accident.  This is the sole reason for insurance. What coverage you choose is very important. If you have physical damage on your car, deductibles make it possible to share with the insurance company in the loss. This affects your insurance premiums.  Higher deductibles, lower insurance premiums.  And the insurance company knows with higher deductibles you will most likely submit fewer claims. The lower your deductible, the more claims you probably will submit.

When you have lower liability limits insurance companies assume many things about you.  Because rates are all about predictions, sometimes the assumptions do not apply to you.   However, it is the only way they can determine rates.  Discounts are offered as a way to give you credit for some of those predetermined “predictions”.   

When you have lower liability limits an insurance company is obligated to represent you in a suit. Whether your limits are state minimum or the highest a company offers, the obligation is still there. So an Insurance company spends the same amount of time & money for you with low limits versus higher limits. The difference is once your limits are reached, they no longer have an obligation to represent you.  Higher limits are better every time. If you can’t afford higher limits, then you need to find a middle of the road rate.  Skimp somewhere else, but not here.
 
So as you can see, explaining a rate increase isn’t always easy or even fun for an agent.  If it’s just a plain old company rate increase, you can google your company and find out yourself why.  Usually it’s because the company had more money going out in claims than it did coming in for premium.  This is another reason predicting which company will have a rate increase is almost impossible. 

As an insurance broker, we switch our policyholder to another company for lower rates one year and then the next year that company raises their rates!  It’s maddening!  But we would never know which company would take a rate increase. If we did, it would be pure guessing.
 
So next time your rate goes up, do some research of your own.

1)      Find out if your car is on the “most stolen” list or not as safe in accidents as you thought.

2)      Find out if your area you live in has had a plethora of accidents in the last year or so. (you might already know this if you had witnessed any of them).

3)      Check your motor vehicle record, had any violations you forgot about?

4)      Did you just add a young driver to your policy?  A son or daughter that is brand new to driving

 Here is a great cite for reading up on insurance situations with your car & the law:

http://www.ilawyer.com/iLawyer-com/Insurance%20Law/Insurance_Law_NY.cfm

 Most of us know it already, but it’s a great idea to brush up every once in a while.  Let me know what you think, I welcome comments.
My  next post will discuss your motor vehicle record and how insurance companies determine a violation.  STAY TUNED!!!