Can Auto Insurers Deny Renewal due to Claims or Tickets?

Car insurance companies may decline policy renewal due to a range of factors, such as a substantial at-fault accident, multiple claims made within a brief time span, numerous traffic violations, or a significant violation. These indicators show that the risks of future claims are increased, prompting insurers to opt for either discontinuing coverage or raising premiums at the end of the policy term. At times, their decision may be based purely on changes in underwriting guidelines that may lead to leaving a certain region or stopping to write certain policies and has nothing to do with the policyholder. The standard procedure involves issuing a notice of non-renewal to the policyholder, following the specific rules and regulations set by the state.

Although these regulations differ among states, their overarching objective is to prevent companies from solely rejecting policy renewals based on natural or weather-related damages. However, if there are multiple claims, insurers may be well within their rights to deny renewal. Vehicle insurance companies may be restricted to certain circumstances to cancel a policy mid-term by states, but they are significantly less restricted to drop a policyholder at renewals. Accidents, traffic violation tickets, claims and even an underwriting decision to stop writing certain policies or in certain regions may be enough to non-renew policies.

Nevertheless, companies don’t usually like to lose paying customers like any other business and their first response may be to increase the premiums when they realize that the policyholder is now riskier than before. Generally, one accident, traffic ticket or claim on its own may not be enough for most companies to drop a policyholder at renewal. But a combination of factors and emerging patterns may result in car insurance non-renewal. Also, drivers age, driving history and other details can play a role in the decision.

For example, vehicle insurers may be tempted to drop a teenager after an at-fault accident and a ticket. But they would be much more lenient if a long established customer has a bad year and has several claims or tickets.

Assessing Risk and Premiums:

Auto insurance underwriters evaluate various factors to assess the level of risk associated with insuring a particular individual. These factors include the driver’s age, driving history, location, type of vehicle, and other relevant data. Based on this evaluation, the insurer determines if they will offer coverage and how much they will charge for it. At renewals they reassess their policyholders and if they see notable changes in risk levels, they may adjust premiums accordingly or decide to drop the policyholder, depending on the records and company.

Importance of Claims as Risk Indicators:

Claims play a significant role in assessing risk for vehicle insurance companies. When a policyholder files a claim, it indicates that they have experienced an incident that resulted in financial loss or damage. Claims provide insurers with valuable information about the likelihood of future incidents and the policyholder’s potential to file additional claims.

Not all claims are viewed equally by car insurance companies. At-fault collision claims arise when the policyholder is deemed responsible for an accident. Even if they don’t have Collision coverage, these at-fault accidents may lead to liability claims due to injuries and damages to third parties. These claims have a substantial impact on premiums, often resulting in significant increases due to the increased risk associated with the policyholder’s driving behavior.

Comprehensive coverage claims, on the other hand, generally involve incidents that are not considered the policyholder’s fault, such as theft, vandalism, or natural disasters. While these claims can still impact premiums, they are usually viewed as less indicative of the policyholder’s driving habits and are therefore less likely to result in significant premium increases.

Significance of Claim Size:

The size of a claim also affects its significance to vehicle insurers. A sizable at-fault accident claim involving injuries and extensive vehicle damages is viewed as a higher risk indicator compared to a smaller claim, such as a glass claim for windshield damage. Insurers consider the frequency and severity of claims when evaluating policyholders’ insurability.

Impact of Claim Frequency:

In addition to the size of the claims, the frequency of claims is another crucial factor that insurers consider. Policyholders who file frequent claims are perceived as higher risks, as they demonstrate a pattern of incidents that may continue in the future. Insurers may become more reluctant to renew policies for individuals with a history of frequent claims, as they pose a greater financial burden on the company.

Understanding Traffic Tickets:

Traffic tickets are another element that automobile insurers consider when assessing risk. Tickets for speeding, reckless driving, or other traffic violations indicate a policyholder’s propensity for engaging in risky driving behavior. Multiple tickets increase the perception of risk and raise concerns for insurers.

The Combined Impact of Claims and Tickets:

The combination of multiple traffic tickets and frequent claims can heighten the risk associated with insuring an individual. In such cases, car insurers may choose not to renew the policy when it expires. However, it’s important to note that even a single traffic ticket or accident, especially if severe, can also lead to non-renewal of the automobile insurance policy.

Non-Renewal and Finding Alternative Coverage:

If a vehicle insurance company decides not to renew a policy, policyholders may face challenges in finding coverage with other companies. Insurers often share information through databases, making it easier for them to identify policyholders with histories of claims and they can see traffic violations on driving records. This shared information allows insurers to assess risk more accurately but can also make it harder for individuals with problematic records to secure coverage elsewhere.

In the event of non-renewal, individuals should take proactive steps to find alternative coverage. This may involve seeking quotes from multiple insurance companies, exploring specialized providers, or seeking assistance from an insurance broker who can connect them with insurers that cater to high-risk drivers.