Three Ways The Recent Earthquake In Japan Will Affect Auto Insurance Rates
A major natural disaster like the earthquake and tsunami that hit Japan is a humanitarian catastrophe. Costs from these types of disasters are often difficult to assess at first, because nearly every type of market and industry will be affected. Auto insurance rates are no different - after a natural disaster, it can be very difficult to find cheap auto insurance for several reasons. Understanding the effect of the recent earthquake can help drivers stay protected from future natural events and keep insurance costs under control.
When an earthquake hits, it's typically covered under the act of God clause in a car insurance contract, provided that the driver was paying for comprehensive coverage. An insurance company will see an influx of car insurance claims as a result of the natural disaster, and by law, they're obligated to pay for all of the valid claims. This means that the insurance company will be paying out a massive amount of money, and unfortunately, the company has to make up for those costs in some way. This generally involves a raise in auto insurance rates. It may also be more difficult to get a car insurance policy in the first place. This is because fewer policies will be issued following an earthquake or another natural disaster to limit the risks that the insurance company is taking on and to give them time to recover.
The earthquake in Japan will also destabilize the economy in the region, as every industry will share some of the massive costs incurred. Auto insurance companies depend on bank loans and backing in order to offer car insurance policies. When an economy is impacted by a major natural catastrophe, there's less money to back an insurance company, so rates will go up and fewer policies will be issued. It's similar to the effect of numerous claims, although it's more related to the overall state of economy than the internal workings of an auto insurance company. Larger insurance companies may be better insulated from this type of effect.
The earthquake may compel more drivers to look for comprehensive car insurance as they see the huge financial costs in Japan. This could somewhat counteract the rising costs of auto insurance as a result of the disaster. However, it's safe to say that cheap auto insurance will be very difficult to find around the world. Drivers who are trying to find insurance should look for any new coverage that they need as soon as possible and try to use online auto insurance quotes to keep their costs low. A natural disaster like the Japanese earthquake will probably have a long-lasting negative effect on the worldwide insurance market.