For some reason there are few things as frustrating as getting a notice from your insurance company that they are raising your auto insurance rate, and it is even more frustrating when it seems like it is going up for no reason; in other words, you haven't had a ticket or filed a claim, then why are you getting a rate increase? I'm not trying to defend the "big, bad" insurance companies here, but I'm hoping to shed some light on why insurance goes up. Outside of inflation, there are other reasons insurance goes up. Inflation plays a role in everything increasing in price, gas, food, utilities, homes, etc. all seem to increase each year but people seem to get really ticked off when their insurance goes up, more so than the other things mentioned here; I'm not sure why that is, but it does.
When you buy insurance, you are placed into a "risk pool" with the other people who have purchased insurance from that carrier. The carrier is banking on the likely hood that the majority of people in the risk pool will file claims is very small, smaller than the money they have come in by way of premiums. Insurance companies use those premiums to make investments and get a return on the premium dollars from the pool. When investment returns are poor, it become harder for the insurance company to make money. If they are not making money and simultaneously have claims, the likelihood that rates will increase will be high. In fact, it is said that most insurance companies, if you compare what they payout in claims to the premiums they take in and factor in overhead, actually lose money. The only way they make money is by getting a solid return on their investments.
Recently, I have noticed a bunch of insurance company's raising rates. I think we are experiencing some of the "fallout" from the 10/05/2010 hailstorm that hit Arizona. If you were here when it happened, you know from Arizona standards, it was a pretty powerful storm. It did billions of dollars of damage. In fact, I had one policy on which the claims were around $800,000 alone. When losses like these are realized, insurance companies tend to raise rates on the whole group, not just those that filed claims. I have heard of one large insurance company, a company I do not represent, is raising their home insurance rates by 30%.
Insurance rates are filed with the State of Arizona and although insurance carriers can surcharge for tickets or claims, etc. they cannot individually select someone out to raise their rates, "just because they feel like it." If they raise their base rate, they do it for everyone.
Another factor is the cost of cars and homes is increasing. Cars are becoming more expensive to replace and repair. As those cost go up, so does the cost of insurance, which pays to replace or repair those expensive cars when they are damaged or destroyed.
Also, the cost of fighting lawsuits has skyrocketed over the last few decades. Everyone sues everyone for everything. Insurance companies are often at the core of these lawsuits and they foot the bill for defense costs and for settlements, often paying out when they are not even legally liable but just because the attorney's fees and court cost are higher than what the settlement would be.
So there are lots of reason why auto insurance prices go up outside of someone getting a ticket or filing a claim. The best way to combat raising prices is to shop your home and auto insurance regularly. If you have a great independent agent, you won't need to do this because they will do it for you. Insurance Professionals of Arizona often shops our clients coverage and we inform them when we find a better deal for them. If you would like us to shop your insurance for a better deal call us at 480-981-6338 or visit us online for a FREE QUOTE. We would be happy to assist you. We service all of Arizona. Our products include home, auto, life, health, dental and business insurance. We are located in Mesa AZ but we do service Gilbert AZ, Chandler AZ, Scottsdale AZ, Tempe AZ and Phoenix AZ.