The combination of record-setting natural disasters, an uptick in distracted-driving accidents and the increasing occurrence of tech-loaded automobiles that are costly to repair mean insurers are likely to increase rates in 2020.
These factors, coupled with the detail that insurers have unsuccessful to turn an guaranteeing profit in recent years—despite year-over-year rate increases—specify that drivers will pay additional for car insurance in the coming year.
Why are vehicle insurance rates continuing to climb?
One of the key reasons insurers are likely to increase car insurance rates is to regulate for reliable increased losses. These are usually credited to an increase in the frequency or cost of car insurance claims.
Heightened damages in recent years have led to a 1.6% rate hike across the 10 major auto insurers in 2018.
Insurance companies cannot increase premiums suddenly to reflect incurred losses. That’s because rate changes—in most states—must be submitted and studied by the state’s department of insurance in advance they can go into effect. As a result, rate changes that are gotten on by a loss-causing occasion—such as a hurricane—may take some time to go into outcome.
Why are vehicle insurance companies losing money?
A slew of shocking natural disasters hit the U.S. in 2019, resultant in insurance claims that cost billions of dollars. While home insurers are usually hit the durable by these disasters, vehicle insurers are affected as well.
Additionally, unfocused driving has led to an increase in accidents on the road. These issues, coupled with the fact the auto industry is moving toward higher-tech cars that are more costly to repair, give to high losses for insurers.
Record-setting natural disasters
Natural disasters inflicted massive losses on insurers in 2018 and 2019. Initial reports from the California Department of Insurance estimate that the November 2018 wildfires produced more than $123 million in auto and nonresidential insurance claims. Moreover, hurricanes Michael and Florence, which pounded the Southeast in the fall of 2018, caused between $7.7 billion and $14.6 billion in insurance losses.
Damage resultant from natural disasters—such as your car flooding through a storm or burning up in a wildfire—is typically covered by comprehensive car insurance. This coverage pays to repair or exchange your car in the occurrence it is smashed in something other than a car crash. Increased comprehensive claims lead to more losses for automobile insurers.
Increased distracted driving accidents
An additional possible contributor to future rate hikes is the improved frequency in car smashes attributed to distract driving—caused in large part by more people using their mobile phone while driving.
The National Highway Traffic Safety Administration (NHTSA) reports that 2.443 million persons were wounded in distracted driving crashes in 2015, which is an increase from 2.217 million people in 2011. Insurers answer by raising rates to make up for the increase in insurance claims they have to pay out.
More expensive vehicle repairs
Superior repair costs for new cars—which are progressively filled with sensitive and costly technology—mean insurers are likely to increase premiums to make up for this increase in fatalities.
As of May 2018, all new cars are compulsory to have rearview video systems (backup cameras) in accordance with NHTSA principles. Although this type of vehicle technology has proven to decrease the number of accidents produced by human error, it has also made common and before low-cost repairs—such as bumper replacement—more expensive, increasing the possible losses for insurance companies.
How much will car insurance cost in the upcoming?
It is difficult to project whether rates will continue to rise, as there are so various factors that determine car insurance pricing. If damage causing propensities continue—such as more expensive automobile repairs, unfocused driving crashes and vehicle destruction due to extreme weather—customers should see premiums increase.
However, if these trends opposite and there are less accidents and milder weather, then car insurance rates could plateau or even decrease.
Because there are so many factors that drivers can’t governor, the best way to save money on insurance costs is to shop around for coverage. Comparing quotes from smallest three or four companies is the only way to ensure you’re getting the inexpensive car insurance possible.
Joint loss ratio and direct written premium info for private auto insurance was gathered from the National Association of Insurance Commissioners (NAIC) and S&P Worldwide, a financial data source for the insurance industry.
Rate increase figures were got from Rate Filings.com and represent a weighted average across the 50 states based on written private automobile insurance premiums.