Why Rates Increase for Auto?

Have you ever wondered why your auto insurance rates keep going up even though you haven’t filed a claim or gotten a ticket or the like? I get asked this question on an everyday basis. Aside from the obvious factor of inflation, I want to share with you my own personal experience and hopefully also help explain why auto rates are increasing.

When you purchase your insurance policy, you go into what is known as a “risk pool.” You along with many others who purchase insurance from the same company pay your premium into the “risk pool” for your individual policy. Then the carrier, as claims are presented to them, takes money out of the risk pool to pay the claims. When the risk pool is starting to empty, carriers must raise the rates to fill it back up. Although you personally didn’t take any money out of the pool because you didn’t file a claim, if your neighbor did, along with a bunch of others, the carrier may not have enough in the pool to pay all the claims and therefore must raise rates. The interesting part is, why is the pool drying up faster nowadays than perhaps 10 or 20 years ago? Here is where my own story comes into play.

Recently while driving down the 202 highway in my GMC pickup truck, I had a tire blow out. It was the passenger side, right front tire. When the tire exploded, and it was an explosion, the tread did not completely peel away and it rumbled around in the wheel well until I could get pulled over and to a complete stop. I was probably doing 65mph at the time it occurred. The picture at the top of this article and below shows the damage that occurred.

Most of the damage occurred to the wheel well/fender. There was some minor damage to the bumper and my sidestep. However, based on the pictures it doesn’t look horrible right? I didn’t think so. I thought for a $1,500 to $2,000 it could all be fixed. Boy was I wrong. I just got my truck back and the bill for the repair work today. Would you believe it was $6,968.46 to repair? Attached is my receipt.

The cost to repair vehicles has risen dramatically over the last few years. Insurance Carriers are struggling to keep up with the claims. Not to mention, the frequency of accidents is skyrocketing due to distracted driving.

As long as this trend continues, rates will go up whether you file a claim or get a ticket or not. So what can you do? Find yourself quality broker like Insurance Professionals of Arizona. A quality broker with good carriers can shop your insurance every 3 years or so to make sure you are getting the best offering.

For the near future just know, rates are likely to continue to rise, but please don’t shoot the messenger. Insurance agents do not control rates. We only help clients with insurance and the carrier sets the rates.