September 17, 2011

Why Auto Insurance Companies Are Raising Their Rates

Auto insurance companies use actuaries to determine how much you will have to pay for coverage. Their job is to pore over every bit of information pertaining to anything connected with driving vehicles. They also figure how outside factors work to create more expenses for insurers. If your car insurance rates go up, it could because your insurer discovered an overlooked item that doesn't fit the criteria of good driving. It could also be because the insurance company is forced to accept larger operating costs for reasons that are beyond the firm's, or your, control.

Buy a new car and expect your insurance to become more expensive. It could be that you bought the exact same model as you previously owned. But because it's a newer model, it will cost more to repair if involved in an accident. Also, if the car is being paid for with a loan you are obligated to obtain full comprehensive and collision insurance. If your previous car had only liability coverage the added insurance costs can be substantial.

Among the outside factors auto insurance companies must consider when setting rates are medical costs. The cost of health care continues to climb. In order to pay for medical treatment that might be needed in case of a car accident, insurers are forced to improve their resource base. Of course, that base is provided by policyholders who absorb the cost of doing business.

Car insurance rates are sensitive to the legal procedures that often accompany accidents. In order to combat the injured party's effort to collect big following an accident, insurance companies must have expert legal support. Again, it's the cost of doing business that carries over into premium costs.

The most expensive element affecting car insurance rates is fraud. Many people adhere to that old bromide that only the insurance company suffers if they successfully follow through with a fraudulent claim. That really isn't the case. Everybody eventually pays. It isn't always policyholders who stretch the limits of legal claims. Body shops working on an insured car have been known to inflate repair prices. The car owner can be in on the scam that has him agreeing to accept the inflated costs. Once the insurer pays the bill, the body shop shares part of the added cost with the customer. Insurance experts say it is impossible to calculate how often such transactions occur.

The current anemic economy bears some responsibility for higher car insurance rates. People who can no longer afford coverage are driving without any insurance. That means there aren't enough insured drivers on the roads to pay the freight. And accidents still cost money.