The Truth About Why Auto Insurance Rates Are on the Rise in FL
When it comes to auto insurance, there is one word on everybody’s mind: price.
Let’s be honest – no one enjoys spending money on auto insurance. It’s not very glamourous. There are a lot more fun things to spend money on. However, since auto insurance is a necessity, we tend to consistently ask the question – “How can I get the best rate?”
Not only that, but we expect that the longer we go with no tickets or accidents, the lower our price for auto insurance should drop, right?
While this method of thinking makes sense conceptually, unfortunately it doesn’t always translate to reality.
The reality is that every major auto insurance carrier in FL has filed for a rate increase this year, including the following: State Farm, Geico, Progressive, Hartford, Nationwide, Liberty Mutual, Allstate, Travelers, Mercury, Infinity, Nationwide, and 21st Century. (Geico and Progressive have actually both filed for two rate increases in the past year.)
These rate increases are across the board, which means they affect all customers, even those with a clean record.
The question that customers everywhere are asking is “Why does my rate keep going up?!?”
Below, we will look at three of the main factors causing insurance carriers to raise rates:
- Cost of Claims
The increasing cost of auto insurance claims is one of the biggest culprits in the rise of auto insurance rates both in Florida and across the country.
Florida is a great place to live, but unfortunately we have much higher claims costs than other states. Why? In the United States, an average of 50% of bodily injury auto insurance claims involve attorneys. In Florida, however, 79% of bodily injury claims involve attorneys.
This isn’t hard to believe considering how many attorneys advertise something to the effect of “If you have been injured in an accident, call so and so.” The truth is that attorney involvement in claims almost always results in higher claim pay out. Unfortunately higher claim costs don’t always mean more for the claimant, they’re just added cost.
- Frequency of Claims
According to a recent article by the Insurance Journal, in most states the cost of claims has risen in recent years, while the frequency of claims has decreased. However, Florida is one of the few “lucky” states where both the cost AND frequency of claims has increased.
The bottom line is that insurance carriers have to raise rates in order to keep up with the increasing cost AND the increasing number of claims.
Just as any business would have to raise prices in order to keep up with increasing costs, the insurance industry is no different.
Think about it – if insurance carriers were experiencing this increase in the cost and frequency of claims and DIDN’T raise rates, it would mean that they were paying out more and more money without collecting the adequate amount of money.
This would ultimately result in financial instability and probably eventually insolvency.
- Number of Drivers on the Roads
There are two reasons there are more drivers on the roads in Florida than ever before:
First, our population has grown by about 1,000,000 people in the last five years. This naturally means more drivers on the road, which leads to more accidents, fatalities, and yes… more auto insurance claims.
Second, since gas prices have been consistently low, people are driving more than they used to.
“More miles driven, more cars on the road, more accidents,” said Allstate CEO Tom Wilson in a recent interview.
According to the National Safety Council, the number of traffic fatalities was up by 14% for the first six months of 2015.
This is a very disheartening statistic, and does in fact affect insurance rates.
What Can I Do About My Auto Insurance Rates?
We have looked at why auto insurance rates have risen, now let’s talk about what you can do about it.
Here are two things we recommend to everyone:
- Save money by taking advantage of discounts rather than cutting coverage.
There are two ways to get your auto insurance rates down: you can either utilize more discounts or you can cut coverage.
Our recommendation as trusted insurance advisors is always to go the route of taking advantage of every possible discount. Considering everything we just talked about, having good coverage is more important than ever. We never recommend cutting coverage to save money. When you think about the bigger picture, what you save is not worth putting yourself and your family at a greater risk.
- Change the way you think about auto insurance.
Price will always be a factor in auto insurance. However, it shouldn’t be the only determining factor. We have to think about the value of auto insurance as well.
Instead of asking the question “How can I save the most money”, we need to ask “Do I have the coverage I need to protect my family and my assets?”
You also want to take claims service, customer service, and financial stability into consideration when evaluating the value of your auto insurance. You deserve to talk to people who you know, not someone in a cubicle on the 3rd floor of an office complex.
More importantly, when thinking about value, you want to consider things like Accident Forgiveness. For example, Allstate offers Accident Forgiveness (either one time or unlimited depending on the package). With the number of accidents and claims increasing as much as they are, Accident Forgiveness has never been more valuable.
If you would like to discuss auto insurance with a knowledgeable and caring agent, contact East & Greenwell Insurance today. We look forward to hearing from you.