June 29, 2011

Why Auto Insurance Rates Are On The Rise

Auto insurance rates are on the rise, even for safe drivers. Actually, new customers may even start to notice that the auto insurance quote they are being provided is higher than last year's number. Customers wondering why the increase is taking place can look to state auto insurance laws, economic downturn and fraudulent claims for answers.

When state auto insurance laws are changed, auto insurance rates can be affected. Recently, the effects of changing auto insurance laws have been raising auto insurance prices. States such as Texas and Michigan have passed laws that increase the amount of liability coverage that drivers must have. Because drivers must now have more insurance, it makes sense that they must pay more for this required product. Customers who are searching for new auto insurance coverage may want to check recently passed auto insurance laws before searching for an auto insurance quote. This way, they will not be surprised when they find prices higher than they expected.

In addition to changing laws, the economic downturn can be blamed for some rising auto insurance rates. Like all merchants, insurance companies struggle during a recession. When they are having trouble making ends meet, they have to raise their prices. Customers see the after effects when their insurance prices rise. Even when the economy bounces back, it can take some time before insurance companies have recovered enough to lower their rates.

Finally, and perhaps as a result of the economic downturn, fraudulent insurance claims are on the rise, and fraudulent insurance claims cause insurance companies to lose money. Of course, when insurance companies lose money, customers literally pay the price by paying more for the same auto coverage and same risk level.

Although there is not much that auto insurance customers can do stop how state laws and the economic downturn affect auto insurance rates, they can take steps to reduce the cost of their auto insurance. First, despite all the information listed above, one of the primary reasons for higher auto insurance rates and higher auto insurance quotes is unsafe driving. Drivers who have been in an accident, whether or not it is their fault, have been cited for traffic infractions or are in a high-risk group (like younger people or those with very fast cars) are more likely to pay higher rates for their auto insurance. Further, some customers may not be taking advantage of the many auto insurance discounts available to safe drivers, good students or people with multiple policies from the same company.

Although auto insurance rates will likely continue to rise as a result of legislation, economic problems and fraudulent claims, this does not mean that customers cannot save on their own auto insurance.