Even if you have a perfect driving record, you may have seen an increase in your car insurance premiums over the past few years. At Eastern Insurance, our customer service team is always looking to provide our clients with the best insurance coverage and premium available from over 20 companies that we represent, but recently some of our efforts have been less rewarding than usual. This is because auto insurance premiums are on the rise across the country with nearly all insurance companies and carriers. Nationally, car insurance rates jumped 5%-9% on average last year and increased by 3%-6% for Massachusetts drivers specifically.
There are many reasons why auto insurance premiums have increased and are projected to continue to rise, ranging from a strong economy to increased safety technology. Read on to learn the reasons behind the rising rates.
There are more drivers and cars on the roads
If you think your commute has been worse lately, you’re not imagining it. In 2016, Americans drove a record-setting 3.22 trillion miles, up 2.8% from the previous year, marking five consecutive years of mileage increases. This is a classic good news/bad news scenario. The good news is that the increase in traffic is attributed to the continued strength and growth in the American economy. As gas prices have stabilized and unemployment has dropped to near record lows, there are more people commuting in vehicles, who are also more likely to have funds for recreational road trips and vehicular travel.
The bad news, aside from the traffic, is that due to the increase of miles driven and vehicles on the road, more accidents are bound to occur, generating more insurance claims and payouts.
Vehicles are more technologically advanced
In 2016, 17.6 million new cars and trucks were sold in the country — a record high for the seventh year in a row. Even the most basic new vehicle is now equipped with advanced safety features such as backup cameras, blind spot sensors, and self-guidance. While these are great advancements that likely help drivers avoid accidents or other dangerous situations, the downfall is that even the smallest fender bender can cause thousands of dollars in damages.
Insurance companies have recognized this trend, reporting an average increase in claim costs of almost $300 per claim over the last five years, and as their costs rise, consumers' auto insurance premiums rise as well. The average payout for claims has risen 32% to more than $15,500 per bodily injury claim.
Health care costs are on the rise
Of the millions of car accidents that occur every year, we are thankful that most only damage property. However, when people are injured, the rising costs of healthcare impact the total costs of a claim by more than 32%. In fact, the average bodily injury claim payout has skyrocketed to $15,500.
Drivers are more distracted
According to the National Highway Traffic Safety Administration (NHTSA), 3,450 lives were claimed by distracted driving in 2016 alone. Being called the new American epidemic, Distracted driving is any activity that diverts attention from driving, including talking or texting on your phone, eating and drinking, talking to people in your vehicle, fiddling with the stereo, entertainment, or navigation system—anything that takes your attention away from the task of safe driving. These driver distractions are responsible for 80% of all car crashes and 16% of all fatal crashes, yet the vast majority of people admit to taking distracted driving actions. For example, 74% of drivers admit to using Facebook while driving.
Texting is one of the most alarming distractions as some studies have found that 36% of all drivers text and drive. Sending or reading a text while driving takes your eyes off the road for an average of five seconds. At 55 mph, that's the equivalent of driving the length of an entire football field with your eyes closed. Many states and insurance companies have recognized this danger, and drivers who are issued a distracted driving citation could see insurance premium penalties up to 40% in some states.
There are more car accidents every year
With the combination of more cars on the road and the increase in distractions, there are more accidents and injuries resulting from driving every year. In 2016, 40,200 people died in traffic accidents, an increase of 14% over 2014. This two-year increase is the largest in more than half a century.
More accidents equate to higher costs for insurance companies who are paying claims to repair increasingly expensive vehicles and cover associated lawsuits and medical bills, so the industry as a whole is increasing auto premiums to help cover the costs of these expensive and increasingly frequent accidents.
What to do if your auto policy rate increases
At Eastern Insurance, we represent more than 20 insurance companies and will work directly with you to find the best coverage and price available to you. A short conversation with a member of our customer service team may help them find a company that is a better fit, money-saving endorsements that are new to the market, or even cost-saving options that you were not previously eligible for. For example, some carriers are now offering devices for your car, or apps available to Apple and Androids users that will track how you are driving, which are fairly new to the industry. By driving carefully and being mindful of things such as hard stopping or quick acceleration you can earn rewards or discounts on your insurance premium. Many of our clients have turned these devices and apps into a lighthearted competition amongst their families to see who is the best driver in the house!
If you are shopping your policy online, please keep a watchful eye when requesting quotes from companies where you set the price and coverage limits yourself. While a lower premium might seem very appealing in the face of auto rate increases, you may be unknowingly leaving yourself exposed with costly gaps in coverage if you are ever found liable in an accident.
To learn more about our auto insurance policies and services, contact a member of our personal lines customer service team by either requesting a quote online, calling 800-333-7234 (Option 2), or emailing us at email@example.com.