If you’re like a lot of free-wheeling Americans, you’re loving the lower gas prices. Road trips are affordable again, and you can skip the inconvenient carpool because your morning commute won’t break the bank.
But all that extra driving comes with a nasty surprise: higher insurance rates. More cars on the road and more miles driven add up to more accidents, which leads to more costly payouts for your insurance company. That means higher premiums are on the way.
The Scope of the Problem
The nation’s major insurance companies saw a substantial shift in their fortunes in 2015. Allstate lost over $13 million in their auto underwriting business last year, compared to profits of almost $540 million the year before, a huge swing. GEICO, another auto insurance giant, fared much better, generating about $471 million in revenue last year, but during the same period the year before, revenue exceeded $1 billion.
The average cost of auto claims is on the rise as well. According to the National Highway Traffic Safety Administration, losses from car crashes, including property damage, lost productivity, and loss of life, exceeded $1 trillion. The average auto liability claim is about $3,300, while the average bodily injury claim exceeds $15,000.
All these claims and underwriting losses lead inevitably to premium rate increases. Allstate, for example, has requested premium hikes on all of its major brands, from 3.4 percent on its namesake line, to 4.1 percent on the Esurance brand, and a whopping 7.4 percent on the Encompass line.
Of course, the insurance industry is one of the most heavily regulated, and rate increases tend to lag at least a year behind. Industry experts predict an even bigger jump in premiums in 2016 and 2017 after a full year of higher accident rates and claims payouts.
What You Can Do to Lower Your Rates
Instead of simply bracing yourself for hefty premiums, try these proactive steps:
- Go over your existing policy to make sure your coverage limits are appropriate for your situation and within your budget; not everyone needs the maximum default coverages most companies recommend. Also make sure that your policy accurately reflects your driving habits. If you drive fewer than 10,000 miles per year, your premiums should be lower than those of someone who drives 25,000 miles or more.
- Consider raising the deductible amounts on your policies; this can drop premiums significantly.
- Check to see if your state or insurance company offers discounts for completing a defensive driver course. In some states, premiums can drop 10 percent or more, meaning the course will pay for itself in a very short time and provide savings for years to come.
- Talk to your agent about discounts for bundling your insurance policies. If you need homeowner’s insurance, or you want to cover your belongings with a renter’s policy, you may save money on both by moving all your coverage to one company.
- Don’t be afraid to shop around. If your policy is coming up for renewal and your rates are going up, get quotes from other companies to see if you can get a better rate.
Forewarned is forearmed when it comes to insurance hikes; prepare yourself now to minimize the impact.