Many policyholders blame inflation when their automobile insurance keeps going up a bit every year. Usually, it should be the other way around and your premium should come down every year that passes without a claim or traffic violation ticket. So, when you see a rate increase out of the blue you should ask your insurer why did my car insurance go up for no reason? The next question to ask is what to do about these rate hikes?
Did Your Auto Insurance Increase for No Reason?
One of the reasons why policyholders consider leaving their carriers is because they get upset with renewal quotes. It is unusual and disappointing to see auto insurance rate spike for no reason. Actually rates have been very low recently even though it may not look like it. According to one study, current California vehicle insurance rates are lower than 1989. Saying that, if a vehicle insurer is not making enough money or making losses they have no option but to raise their rates for everybody across the state. This may be the source of your problems if you are with one of those companies.
Also, it may be a problem that affects a particular region. If it has been suffering from large claims in the last few years that explains why car insurance increased. The main source of income for insurers is premiums. Therefore, they don’t have much option but to increase premiums when they face large number of claims from their policyholders due to freak weather conditions, increase in auto crime and vandalism or changes in state laws.
Why Does my Car Insurance Keep Going Up?
If you cannot think of any changes in your policy, driving history, listed drivers or other circumstances like moving home or changing jobs you are entitled to ask what is the reason for car insurance rate hike? Your agent must be able to give you a good reason for it and inflation isn’t really a good enough explanation. If this has been happening every year perhaps the first thing you should look at is changing auto insurance companies. Small increases may be acceptable but your premium shouldn’t go up a lot without a valid explanation. Below are some of the reasons we can think of that may explain auto insurance rate rise.
1. It May Be Down to Your Insurer
It is not unusual for companies to adjust their rates every so often depending on various inside and outside changes in carriers. Some companies are known to be aggressively undercutting everyone else in the market for some time. This may be an attempt to increase exposure to a particular market. After a while they may feel confident enough that their policyholders will not leave them if they start increasing rates. Your carrier may be struggling to cope with recent claims or going through restructuring. Any one of these reasons can answer your question of why is my auto insurance going up? When the problem appears to be your insurer and not you it is time to look for cheap automobile insurance quotes.
2. Your Insurer May Have Run Out of Discounts
Another point to note is that you may have been getting discounts year after year until recently. After a while your insurer runs out of discounts they can offer you. At that stage, you would see a levelling out of premiums. Slight increases or decreases may be acceptable but the changes shouldn’t be exciting anymore either way. However, this doesn’t mean that another insurer cannot offer you better rates. That is why you should always do quick auto insurance quotes comparison online to find out how competitive your current premium is.
3. Changes in Metrics Used in Premium Calculations
Companies are using new metrics and factors every day that may explain the recent premium changes. Your past driving history may be clean but it isn’t the only factor insurers look at these days. A few companies have already moved to using new indicators to determine who is more likely to make a claim, rather than purely relying on the past claim data. This sort of a fundamental switch in the way companies measure risk can explain why your auto insurance keeps going up year after year because it is a gradual process that may be affecting you negatively.
4. Factors that Are Unknown to You
This brings us to the next point to consider. Many people can only count handful of factors that affect car insurance rates like driving history, age, gender, type of automobile driven and address. These are only some of the long list of points companies consider. There are a few new factors that are influential in premium calculations and you may not be aware of them. If you don’t know what it is to avoid you cannot do the right things to keep your rates low. You may be asking why is my vehicle insurance going up all the while not knowing drop in your credit score can increase your rates. Your zip code, occupation, education and home ownership status are some of the factors that affect rates more than you may think.
5. Changes in Demographic Factors
There are many factors internally and externally that can be responsible for an unexpected premium rise. External factors are influential enough to drive your premium up even though there is no chance in your driving record and personal circumstances. Your zip code may be seeing increased level of accident, auto theft and vandalism that needs to be taken into account. It could even be state level and average car insurance costs may have been increasing in your state lately that reflects on your premium. This may be down to competition rather than demographic factors. Competition is the key to a healthy market conditions. If only one of the top car insurance companies pulls out of your state it can affect the prices because of reduced competition. They don’t actually need to pull out of a state entirely. If several insurers stop offering competitive rates it will push the prices up.
In any case, you shouldn’t have unexplained premium increase. You can try to talk to your insurer and get to the bottom of it. Some companies may be happy to discuss it with you and few of them may offer a little relief. And some companies may be blunt about it and give you generic excuses like prices go up. Then you can decide what you will do about it. But you shouldn’t be quiet or shy about it and ask questions?
However, there are plenty fish in the sea as far as insurers are concerned. Get a few quotes for the same coverage you currently have and see if you are seeing unfair premium increases or your provider is still one of the most competitive carriers in the market.