What Does An Auto Industry Turnaround Mean For Auto Insurance?
With sales down and stocks up, consumers everywhere are intent on saving a buck or two, wherever it may be. This includes not only sticking with their used cars and not buying new ones – putting the auto industry in the red – but also doing what they can to drop their auto insurance policy to an all-time low price – causing even well-known insurance agencies to flounder. What then would the effect be on the auto insurance industry if the auto industry turned around?
Though it isn't the first market people think of when considering industries affected by the economy, the auto insurance industry has fallen on hard times, despite the fact that law mandates it. While drivers are searching online for comparable auto insurance quotes, insurance companies are struggling to balance, maintaining comparable rates and staying afloat. Those they insure are opting to have minimal coverage, or dropping coverage completely, leaving agencies unable to pay for claims made by other policyholders. As a result, these insurance companies are not only having to hike premiums for existing clients, but also having to lay off employees and even close their doors. Unless there's a turnaround, the future is not boding well for the auto insurance industry. According to the Insurance Research Council, it is possible that by 2010, as much as 17 percent of the U.S. will be driving uninsured. Apparently, car insurance doesn't place high on the priority list of "things not to cut from the budget" in American households.
However, this could all change if the auto industry turned around. Though the auto industry was labeled by U.S. bankruptcy/restructuring professionals as one of the hardest hit by the economic crisis, recent government aid is pulling it up to its feet again. If vehicle lots continue to move vehicles, leading to a greater production demand – bringing jobs back on the market and increasing the cash flow in people's pockets – it is possible auto insurance rates could go down. New vehicles cost a substantial amount more to insure than used cars. With a new car comes a higher auto insurance rate, which means higher premiums. The more money more people will be paying to insure new vehicles, the more capable auto insurance companies will be to pay claims up front. In turn, they will be able to drop insurance rates for policyholders.
With the cost of everything rising these days, an increase in the amount drivers have to pay to insure their vehicles should come as no surprise. However, if the auto industry continues to thrive with help from the government, that may no longer be a fact auto insurance holders need to accept.