Many people believe that if they do not have any tickets, accidents, or claims that their car insurance premium will not go up. This is not true as there are many things that factor into the pricing of a policy. Insurance companies have actuaries whose entire job is to figure out how much money an insurance company will need to pay their expenses, pay their claims, and still remain profitable. This is one reason that it is recommended that individuals get new car insurance quotes at least every three years to make sure that you are still getting the best price for your individual insurance needs.
One of the factors into insurance premiums is what insurance companies call their loss ratio. This is a math equation that figures out how much money the insurance company collected verses how much money they paid out in total claims. The higher the ratio gets, the more likely the insurer will raise their rates. However, before a company can raise their rates, they have to submit their rate change to the Department of Insurance for the state in which they want to change the price. The company can only change the car insurance rates if the Department of Insurance approves the change.
Along with this, car insurance rates can also go up if a company that writes both home and auto insurance experiences a profit loss in their home division. For example, some major insurance carriers suffered great property losses with Hurricane Katrina. In the first few years, customers of these companies noticed that their car insurance prices went up. Because the insurance companies lost so much money in their home division, many of them raised their auto rates to help compensate for the losses.
Insurance fraud is another large factor in car insurance premiums. Many people commit insurance fraud without even realizing it. One of the most common insurance frauds is when an insurance company pays a claimant for a loss, but that person does not fix the damage to their car. Another common fraud is when a person has called for roadside assistance, yet the person turns in a claim to their insurance company to pay for towing or labor. This “double dipping” is illegal. A person can only collect for damages or towing and labor if they get the work done they claim to need, and if they have not already collected from another source.
Fraud can be committed even if a person does not file a claim against their car insurance company. If a person does not tell the whole truth when the agent is asking questions about who drives the cars, how far you drive to work, and safety devices on your vehicle, then they are also committing insurance fraud.
Finally, if any other aspects changed about your policy, your rate can go up. If you recently changed cars, added drivers, changed your home insurance to another company, or if your age changed then you can expect that your car insurance may change. Every car has their own “cost symbol” assigned by the Department of Insurance. This symbol estimates the costs associated with repairing damage that occurs to and from a particular car. So changing cars can change your car insurance premiums. It is a smart idea to get car insurance quotes on a vehicle before you purchase a different car. Similarly, adding a driver, especially a youthful driver, can have a huge impact on your premiums. The higher the risk the driver has for having an accident, the higher their insurance costs will be. If you cancel your home insurance that you have with your car insurance company, chances are you will loose a multi-policy discount. In some cases this can be a 20% increase for the previous discount you had received from the company. As you age to the upper 70s, car insurance will begin to go up because older citizens have a higher risk for being in an accident.