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Auto insurance rates have been steadily increasing year after year. Many factors are causing this but the most important thing to remember., insurance companies are a for-profit business. If they lose money or have a bad year due to claims, rates will go up. If the investment market is bad and the only way for the companies to make money is by the premium they collect, rates will go up. 

There are many reasons why an Insurance Company could have a bad year or lose money due to excessive claims. 

1. Distracted Driving
2. Cost of Vehicle Repairs
3. Number of Vehicles on the roads today/Amount of miles driven
4. Medical Expenses
5. Lawsuits

Distracted Driving
This might be the easiest one to understand. In today's world, people are busy and are trying to multi-task any chance they got. What this has done is increased the number of activities that drivers are doing while they should be focused on the road. The major driving force of this is texting while driving but that is certainly not the only one. Other common forms of distracted driving are eating, drinking, putting on makeup, or changing the radio station. 

The main problem with distracted driving isn't just the number of accidents, it is the severity of those accidents. Distracted driving accidents are becoming significantly larger with extreme property damage and high risk for injuries, causing large payouts from the insurance companies. 

Cost of Repairs
The smarter and more high tech our vehicles become, the more it will cost to repair them. If you are driving on the road today you may or may not remember a time where you could get a brand new bumper replaced on your vehicle for around $800. Materials and labor included. With Labor costs being significantly higher and the more technology needed to be replaced in these parts, an average bumper is between $2,500-$3,000 to repair now in the year 2020.

This gives you an example of what the cost of a minor repair can do to an insurance companies loss ratio. Package the cost of repairs to the severe accidents caused by distracted driving and you may start to see why insurance rates are rising.

Number of Vehicles on the Road
The third reason why auto insurance rates are on the rise is due to the number of vehicles on the road today and the number of miles you are driving. Studies have shown that there are more vehicles on the road today then there were 10 or 20 years ago. Also, people are putting more miles annually on their vehicles than ever before. Changes in lifestyles are one of the significant reasons for that. 

One of the most common arguments we get when auto rates increase is, well I haven't had any accidents, why did my rates go up? This is where you need to remember that everyone is lumped into this together. Insurance companies look at the facts and statistics when working their rates. If more people in your town or county are getting into accidents, then you might see an increase in your entire territory. If the type of vehicle you have is seen in more accidents with a higher cost to repair that vehicle, then you may see your rates increase. 

Insurance carriers use analytics when seeing how to rate their insurance products. We gave you a few of the factors they look at but there are many more.

Medical Expenses
We all know the cost of medical expenses is increasing, this is why we see health insurance rates at an all-time high with usually 10%+ annual increases. The more major accidents causing injuries the higher the medical expenses that will be paid due to an auto accident. 

Lawsuits
In case you haven't noticed, all of these reasons are starting to intertwine together. With the number of people on the road, we are seeing an increase in distracted driving accidents, causing major payouts due to the increasing cost of medical expenses and the cost of repairs. The higher the claim payout is along with the pain and suffering someone occurred from an injury, increases the likely hood they are going to file a lawsuit. We live in a litigious society and the moment someone thinks they can profit off an unfortunate accident, then they are more likely to try. 

As auto insurance rates are rising, we are seeing consumers being less loyal to a specific insurance company. The best way to make sure you have the right insurance and have options in case your rates do go up is to use an independent insurance agent who can shop your rates for you.

Working with an independent insurance agent will allow you to build a relationship with someone who is going to help you get the right coverage for your specific needs.

If you don't have a relationship with an independent agent or want a review of your insurance?
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