Why Do My Insurance Rates Keep Going Up?
It’s a question that’s been asked by almost every insurance consumer and it’s a good question. All other factors aside, our national infatuation with litigation, as well as, economic inflation are two formidable forces that consistently nudge the cost of goods and services higher. To truly understand the answer to this question, it’s best to ask a few questions to better understand how risk protection products are priced. Let’s start with auto insurance. Most people understand that their auto insurance pricing is developed in part by their age, driving record, and track record of losses. These are, in fact, heavily weighted factors in determining what rate you will be charged. Some carriers may have some obscure rating criteria, but for the most part, carriers also consider the type of vehicles you operate, vehicle usage, number of vehicles in the household, number of new drivers, number of veteran drivers, number of drivers compared to the number of vehicles, zip code, and your current insurance score to name a few. Each carrier will consider these items and determine how each factor will be weighted and have the most significant impact in their rating formula. A relatively new rating innovation is “telematics”. Carrier’s can plug in a data collector in your vehicle or ask you to download and use an app on your mobile phone that gathers and tracks your driving patterns. It primarily looks at hard stops and quick accelerations. You should expect a rate reduction if you limit these or expect an increase if you scratch off at traffic lights and skid up to stop signs.
Let’s look for a second at what goes into the pricing of homeowners coverage. As you may already know, insurance carriers will consider property factors such as: age, year of construction, building materials, heated square footage, deck, number of miles to the nearest fire department, number of feet to the nearest fire hydrant, patio, garage, basement, golf cart, swimming pool, pets, number of miles to the coast, do you have other lines of coverage placed with them, farming, home based businesses, and more. They’re also looking at your loss history, zip code, insurance score, number of years you’ve been with a carrier and much more.
Life and commercial insurance rating follows the same philosophy, but will be addressed in future notes. Since the advent of big data, insurance carriers have been at the forefront of the collection, analysis, understanding, and application of what the numbers are saying, especially as it relates to their big question: “How can we sell our product at a competitive price and still be profitable?” Use great caution when insurance shopping to not get tunnel vision to the bottom line of every proposal. The coverages and limits on the rest of the page matter greatly, especially when you need insurance the most. Feel free to call, email, or stop by with any questions. We appreciate you and your business.