“My car is getting older. Why did my car insurance go up”?
Many car owners are getting “sticker shock” when they open their mail containing renewal information on their car insurance. Premiums are rising while prices in other areas of the economy are seemingly either stagnant or falling.
The most recent (Jan 18, 2017) figures from the U.S. Bureau of Labor and Statistics tell us, “Over the last 12 months, the all items index rose 2.1 percent before seasonal adjustment.”
So, we consumers experience, on average, an increase in our cost-of-living of something close to 2%. Yet, car insurance premiums have risen significantly more than that. What gives?
Given that the costs associated with fixing cars and fixing people make up a significant portion of the insurance premium we pay, we should look closely at these. The Bureau’s figures tell us that the cost of “Motor Vehicle Body Work” is rising 35% more than other costs are rising, And, the costs of “Hospital Services” has risen more than 109% compared to the increase in all other costs.
Well, just think about the costs insurance companies incur when it comes to settling a collision claim. I am old enough to recall the big, heavy, chrome bumpers that once guarded all cars. If you happened to clip a car when parallel parking on Main Street, you got out, looked at their bumper and yours, and what did you see? Many times, nothing. That big monster of a bumper was tough enough to withstand the impact without so much as a smudge.
Nowadays, such an impact would produce shards of plastic on the pavement and a dangling sensor or two; not to mention the damage to the impact-absorbing material behind the bumper. What, in the good-old-days, would have ended with a “Sorry about that, mister”, now ends with a repair bill, and a bill for towing, materials, labor, car rentals, and a lawsuit alleging whiplash.
These numbers reflect the reality which we agents and our clients see. Insurance companies are feeling pain –some are hemorrhaging. More than one of our insurance companies has decided to “suspend the issuance of new auto insurance policies” - since the more insurance they write, the more money they lose. Their rates are inadequate to make a profit.
Further, one of our agency’s most highly capitalized insurers, Nationwide, has decided to entirely exit the “high-risk” driver segment of the market in South Carolina due to uncontrolled increases in claims, and their inability to obtain from regulators rates which adequately reflect their exposure.
So here’s what we are facing in our county. We have a situation in which our local colleges are growing, our local population is increasing, and tourism is rising. We have more cars on our roads. We have more plaintiff attorneys appearing on TV and influencing more people to sue for greater amounts of money. And, it is more costly than ever to fix vehicles and fix people. One may only expect insurance rates to increase.
For these reasons your car insurance is going up – even though your car is getting older. In Part 2, we will see how silly people doing silly things also contributes to your and my car insurance rate increasing.