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Reasons Why Auto Insurance Premiums Are Rising

Updated: Apr 19, 2019


Increased Distracted Driver Accidents

Auto insurance companies losing money.


A slew of devastating natural disasters struck the U.S. in 2018:

It's resulting in insurance claims that cost billions of dollars. While home insurers are usually hit the hardest by these disasters, auto insurers are affected as well. Additionally, distracted driving has led to an increase in accidents on the road. These factors, coupled with the fact the the auto industry is moving toward higher-tech cars that are more expensive to repair, contribute to high losses for insurers.


Preliminary reports from the California Department of Insurance estimate that the November 2018 wildfires caused more than $123 million in auto and nonresidential insurance claims. Additionally, hurricanes Michael and Florence, which pummeled the Southeast in the fall of 2018, caused between $7.7 billion and $14.6 billion in insurance losses.


Increased Distracted Driving Accidents:


An additional possible contributor to future rate hikes is the increased frequency in car crashes attributed to distracted driving—caused in large part by more people using their phones while driving. The National Highway Traffic Safety Administration (NHTSA) reports that 2.443 million people were injured in distracted driving crashes in 2015, which is an increase from 2.217 million people in 2011. Insurers respond by raising rates to make up for the increase in insurance claims they have to pay out.


More Expensive Vehicle Repairs:


New vehicles are increasingly packed with sensitive and expensive technology. Insurers are likely to increase premiums to make up for this increase in losses. As of May 2018, all new vehicles are required to have rear-view video systems (backup cameras) in accordance with NHTSA regulations. Although this type of vehicle technology has proven to reduce the number of accidents caused by human error, it has also made common and previously inexpensive repairs—such as bumper replacement—more expensive, increasing the potential losses for insurance companies.


In conclusion:


The combination of record-setting natural disasters, an uptick in distracted-driving accidents and the increasing prevalence of tech-loaded vehicles that are expensive to repair mean insurers are likely to raise rates in 2019. Despite year-over-year rate increases—rising costs in general, indicates that drivers will pay more for car insurance in the coming year.




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