Why do my auto insurance rates continue to go up?

That’s a question people all over the country have been asking the past several months, and if current conditions are any indication, they’ll be asking for quite a while longer.

In June, I had the unique opportunity to sit in on an Independent Insurance Agents of Georgia board of directors meeting with their current insurance commissioner Ralph Hudgens.  During that meeting, members from all over the state of Georgia were asking the Commissioner why auto rates were going up so much.

The answer is the same regardless of whether you live in Georgia or Kansas, or just about any state in the country; it’s because the cost of claims continues to go up faster than the corresponding premiums.  But why?

A host of reasons, but let’s narrow it to just 3.

First, we have had a recent spat of bad weather.  The hurricane season of 2017 brought us Harvey, Irma and Maria, along with Nate that hit Costa Rica.  Those 4 hurricanes were so costly that their names have been retired.   Hurricanes obviously cause a great deal of damage to property, often loss of life and along with their high winds they often bring flooding.   Property is not covered for a flood unless you purchase flood insurance.  However that is not the case with auto insurance.  When you have purchased comprehensive coverage on your auto policy, you have covered your vehicle in the event of a flood.  Go back and look at all the flooded vehicles in Houston after Irma and now you get the picture.

Second, automobiles continue to cost more to repair.  In 2016, according to CarMD, the average vehicle repair cost countrywide had risen 2.7% over the previous year.   That doesn’t sound too bad, until you look at the upper Midwest that includes Kansas and repair costs are up 5.7% over 2015, according to the most recent data we have.   Labor costs are up slightly, but with more high-tech built into our vehicles – cameras, hands-free infotainment systems, GPS, and numerous other features, these costs are not going down anytime soon so an accident, no matter how small will continue to be more costly.

Finally, and most importantly, distracted driving is continuing to cause more and more accidents and they can so easily be avoided.  37,461 lives were lost on U.S. roads in 2016, an increase of 5.6% from 2015 according to the National Highway Traffic Safety Administration.   In 2015, 10% of all fatal crashes and 15% of injury crashes were distraction affected.  We don’t yet have 2017 figures, but with the increased use of cell phones for texting, talking, listening to music, finding places on a map, and all the various things we can now do on our cell phone, driving with that computer in your hand increases your risk of an accident, damage to your vehicle and someone else’s, and worse yet physical damage or death to you, others in your car and others in the car you just might hit.

There are some things we can’t control when it comes to increases in insurance costs.  But dollars are just one way to calculate cost.  Make sure you understand what you have, what you need and what you can control.