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Car Insurance Rates Going Up For the Year 2016-2017 – A Brief Overview

For most of the car insurers, 2015 was a difficult year. A significant rise in claims and subsequent pay-outs coupled with sluggish bond markets, there is no other way left for insurance companies but to hike premiums for drivers in 2016-2017. Huge number of drivers took to roads last year and this invariably resulted in an increased number of accidents.

This forced insurers from across America to settle large number of claims and see their fund reserves going down drastically. This is evident from reports appearing in media which say that almost 14 out of the 20 large insurance companies in U.S. reported losses more than 100%. Only firms such as GIECO, Travellers and Progressive accounted for losses which were less than 100%. Alternatively, it implies that these insurers had sufficient premium fund accumulations for payouts and other related expenses.

Most of the states prescribe minimum liability coverage for bodily injuries to drivers and victims as well as property damages resulting from accidents involving insured cars. And medical costs have increased manifolds these days and as a result, insurers face increased risk of shelling out more money to cover up for these rising costs. Consequently, they may think of hiking premium rates and the pinch is likely to be felt by drivers.

Even repair costs for cars have gone up significantly and so when an insured car meets with an accident involving another car, the damages can be extensive. Property liability coverage can cover the costs that are likely to be incurred on repairs of other person’s vehicle and these have gone up considerably over the past few years. Nevertheless, property liability limits could vary from state; check that in your state.

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Main Reasons for Which Better Car Insurance Rates May Be Hard To Get

More driving, more accidents, and higher costs

The main reason for which companies are considering hiking average car insurance rates for the next year is that they are facing the problems with hospitalization costs incurred by drivers. Besides, new cars with advanced technology have become expensive to replace or repair and these have added to claims settlement costs meaning thereby that the payouts were high and funds depleted.

Bad weather

Premier auto insurance providers like GEICO have reported losses during the first nine months of the year 2016 on account of settlement of claims arising out of car accidents and resulting claims because of bad weather conditions. One can conclude that depletion of funds for other insurers may be much greater than GEICO. The result is a pending premium hike.

Underperforming Portfolios

Apart from increasing operating costs and claims settlements, one more problem faced by auto insurance firms is decline in bond yields. Insurers invest funds in bonds with the hope of realizing 4 to 6% annual returns every year. But with the collapse of the market in 2008, the interest rates have dropped and so has the yield that was expected.

The Bottom Line on Premiums

Most of the companies are about to hike car insurance rates by about 12% to 19% for the next financial year. The impact of increase in premium rates will vary from state to state but its effect will be felt by drivers across the United States as they need to be ready to shell out more money from their pockets.

Know Why It Will Be Difficult To Qualify For the Best Car Insurance Rates

  • Insurance Fraud – Some drivers file false claims and dupe car insurance providers and their numbers have consistently increased over the past few years. Surveys indicate that insurers lose $ 32 billion every year on insurance frauds and this is because drivers are dishonest in providing true information. Many people have even filed claims for events that really never took place and such things have invariably propelled insurers to increase auto insurance premiums.
  • Unfair Rate Practices – While assessing risk levels, insurers may use different parameters and these may include driver’s age, gender and type of car being driven. Besides, there might be some other factors like driver’s credit history, past driving record and number of claims that were filed previously previous which may indirectly impact premium rates. From the insurers’ viewpoint, all these aspects have bearing when settling claims prompting them to hike car insurance premiums.
  • Credit History – Credit profile of drivers is another major factor which can lead to increased auto insurance rates. Typically, insurers use credit ratings for determining how responsible a driver is when on road. Studies show that drivers with bad credit scores may have higher probability of filing claims as compared to those with good credit. But only some states allow insurance providers to consider credit ratings as a factor for calculating premiums.
  • Price Optimization – The term has reference to the methods that insurers use to determine driver’s sensitivity to increase in premium rates. Although drivers who are loyal to insurers may reap enriched dividends, it is still advisable to switch over to new insurers. For that you can do extensive shopping and find out what other firms have to offer. There are chances that you might be able to secure a much better deal.
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