Why Insurance Rates Keep Increasing

Have you looked at your insurance rates recently? Like… REALLY looked? You might have noticed that your premiums keep climbing… in some cases, going up by 8% or more over the last few months. In this article, we’ll take a look at why insurance rates keep increasing and what – if anything – can be done about it.

The answer to why insurance rates keep increasing can be found in a couple of places. First, since the return to more “normal” traffic patterns post-pandemic, the severity of accidents has increased significantly. That simply means that while the actual number of accidents has dropped a little – the speeds involved in the accidents that do happen are causing more damage. 

Secondly, couple that with the fact that there continues to be a parts shortage that leads to delays in the repair process, and you’ll start to see how expenses that are passed on to the insurer (who pays for the repairs) start to add up.

According to Repairer Driven News, Allstate has raised their rates more than 40 times over the last several months, totaling an effective increase of 8.3% across all 50 states. That notwithstanding, they are still operating at a negative net revenue as they are paying out $1.08 in claims for every $1.00 in premiums collected.

It doesn’t take a rocket scientist to figure out that such an upside down cash flow isn’t sustainable, which is why Allstate (and perhaps other insurers) continues to ask the Securities & Exchange Commission for permission to keep raising it’s rates.  And that means that your rate increases are likely not going to be over any time soon.

So, what can be done if your insurance rates keep increasing? Well, the first thing we recommend is a candid discussion with your insurer. This might start with your agent or broker, but is likely to be escalated to an adjuster or supervisor when you ask questions like, “how much, or how many times has my rate increased in the last 6 months – and why?”.

And if you don’t particularly like the answers to your questions, you may want to start looking for another insurer. Don’t get us wrong here: some of the reasons for necessary rate hikes are beyond the insurance companies’ control. However – what is well within their control is their actual profit margin. And make no mistake – insurance is a highly profitable business! Like in the BILLIONS of dollars profitable!

There are great insurance companies out there. And there are some who won’t blink an eye when it comes to paying for the proper repair if your vehicle. Typically, those are not the ones who spend millions in advertising or who offer the lowest rates. But if you’re going to end up paying more anyway because insurance rates keep increasing… perhaps it’s not so difficult to wrap your head around securing a company who will actually take care of you when you need it most.

As always, we stand ready and willing to help answer any questions you might have. Feel free to contact us any time.