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How The Recession Has Affected Auto Insurers

Friday, July 30th, 2010

In the second half of 2007, the world was hit by an economic recession. All businesses were threatened by this. The auto insurance industry was one industry that was hit hard. The current state of the economy has many people in search of an affordable auto insurance quote. The economic recession has affected auto insurers so much that they have no choice but to raise their premiums.

One reason why premiums are rising is because many people are reducing their coverage. Ironically, they are doing this to lower their premiums. A recent study indicated that in 2010, 17% of American drivers will be driving uninsured. Much of this is at the expense of insurance companies that could have covered them. In response to this loss, insurance companies are compensating by raising the premiums of all their policyholders.

Auto insurance companies have to raise premiums for other reasons as well. They are not only losing money to people that are switching or dropping policies. They are losing money from people who are staging accidents so that they can claim money in these hard economic times. This is at the expense of auto insurance companies.

Another issue has affected the auto insurance industry as well. Since we are in a recession, people are generally less willing to spend money. As a result, people are less willing to buy cars. Naturally, there is less demand to purchase auto insurance policies. Once again, auto insurance companies must compensate by charging higher premiums.

Americans are now trying hard to bargain for better deals with their auto insurance companies. In some cases, they’re doing this just to save a few dollars a month. Many people have chosen to go online to find a decent auto insurance quote.

There is a large effort to keep many Americans from switching their auto insurance policy. Insurance companies desperately need their business. However, the practices of certain insurance companies may only make the situation worse. Some insurance companies are firing agents lacking in sales performance. This increases the unemployment rate, making the economic recessions worse. It’s a vicious cycle.

Always remember: insurance is important. This is true whether we’re in an economic recession or not. The money you spend on insurances guarantees the safety of you and your family. Money spent on your loved ones is money well spent. In addition, spending money on insurance helps stimulate the economy in these hard times. Don’t let the economic recession keep you from having auto insurance. If you don’t have insurance, like many Americans, it’s not too late to find a good auto insurance quote today.

Is the Auto Insurance Industry Recovering from the Recession?

Tuesday, December 15th, 2009

While nearly everybody living in this bad economy has struggled, the auto insurance industry has been hit especially hard. So, is the auto insurance industry recovering from the recession? Two prime auto insurance companies beg the question.

Allstate Corp., the largest publicly traded personal lines insurer, has been trying to formulate a plan to keep itself afloat. Recently, the company has announced a few changes to adapt to the changing preference of customers. “Our goal is to have fewer, larger agencies that provide a more consistent experience for our customers,” said Thomas J. Wilson, chief executive of Allstate. He said that insurers who have traditionally used agents to bring in policyholders have to adapt to increased Internet use, which has a growing appeal for policyholders. Wilson estimates that nearly half of their policyholders initially make contact using Allstate’s easy-to-use website, rather than going through an individual agent to obtain coverage. To make sure they take advantage of that trend, those at Allstate are adjusting to accommodate customer preferences.

Wilson estimated that around 87 percent of Allstate’s Website prospects end up closing the deal with an agent. Therefore it is understandable why another big part of Allstate’s plan indicates the use of fewer agents with an “enhanced” local presence and consistent operations, as opposed to larger current agencies that may seem more impersonal. The presence of agencies, as opposed to completely depending on the Internet, is crucial to assist those customers who prefer dealing with an actual person. This face-to-face interaction gives agents the opportunity to offer other Allstate products, such as life insurance, which can obviously increase Allstate’s profits. “This would strengthen our agency force and ensure [the agents] remain a significant part of how we serve customers,” said Wilson. Shares of Allstate recently traded down 1.7 percent to $27.80 amid a generally down market for insurers

Also hit hard by the recent turn of events has been top insurance provider, Progressive. Auto insurance premiums rose for Progressive Corp. (PGR) in November from the previous year, as did the number of policies. Progressive said its November net profit was 80 million dollars. These numbers are down 42 percent from November 2008, when sales of securities boosted Progressive’s investment gains by more than $100 million. November premiums rose 2 percent from last year to $942.1 million, but total personal lines policies rose even more, up 5 percent to 10.97 million. This increasing numbers suggested a combination of sluggish prices, customers cutting back on coverage, and people holding back on buying more expensive vehicles to insure.

It seems the auto insurance industry is doing everything it can to make sure it stays on its feet and is able to offer consumers decent auto insurance rates.

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