Brace your­self for higher auto in­sur­ance rates

To stay in the black, many firms will need to raise pre­mi­ums.

Los Angeles Times - - MARKETPLACE - By La­cie Glover Glover writes for NerdWal­let, a per­sonal fi­nance web­site.

You may have no­ticed your car in­sur­ance rates go up at your last re­newal, even if you’ve had no new ac­ci­dents or tick­ets.

If your rates haven’t gone up yet, brace your­self: Car in­sur­ance com­pa­nies have been los­ing money re­cently, and many will raise pre­mi­ums to stay prof­itable.

Car in­sur­ance rates typ­i­cally go up about 3% or 4% each year, ac­cord­ing to the con­sumer price in­dex. But in De­cem­ber 2016, they rose 7% from a year ear­lier. Be­cause the in­dus­try is ex­pected to lose even more money this year due to more claims — and more ex­pen­sive claims — we can ex­pect in­sur­ers to kick up their rates even more. Here are some causes be­hind the big­ger bills.

More peo­ple are com­mut­ing to jobs

A bet­ter job mar­ket isn’t help­ing in­sur­ance rates. Unem­ploy­ment has dropped from 10% in Oc­to­ber 2009 to 4.3% in July 2017.

With more peo­ple em­ployed, “We see more peo­ple on the roads, more peo­ple com­mut­ing,” says Janet Ruiz, the In­sur­ance In­for­ma­tion In­sti­tute’s Cal­i­for­nia rep­re­sen­ta­tive. That means more ac­ci­dents, she says.

Fewer peo­ple are look­ing at the road

Most of us have been dis­tracted by a cell­phone be­hind the wheel. A re­cent NerdWal­let study found that 67% of Amer­i­cans sur­veyed who had driven in the last 12 months had used a cell­phone while driv­ing dur­ing that time.

Cell­phones aren’t the only dis­trac­tion. The prob­lem “is a com­bi­na­tion of so many things,” Ruiz says. Peo­ple are still dis­tracted by the same things they al­ways were be­hind the wheel: groom­ing, eat­ing, chil­dren in the back seat and so on.

Dis­trac­tion played a role in 14% of all po­lice-re­ported mo­tor ve­hi­cle traf­fic crashes in 2015, ac­cord­ing to the Trans­porta­tion De­part­ment.

Claims are get­ting more ex­pen­sive

State Farm, the largest auto in­surer in the U.S., has seen a con­tin­ual rise in claims costs due to more ex­pen­sive ve­hi­cle re­pairs and ris­ing med­i­cal costs in re­cent years, says Se­vag Sarkissian, a State Farm spokesman. Many in­sur­ers are see­ing the same trend.

You might not think of med­i­cal bills as a big con­trib­u­tor to car in­sur­ance pre­mi­ums, but auto in­sur­ers, not health in­sur­ers, of­ten end up pay­ing for med­i­cal costs due to car ac­ci­dents. The cost of hos­pi­tal care rose 32.5% from Novem­ber 2010 to Novem­ber 2016, ac­cord­ing to the La­bor De­part­ment.

The safety fea­tures, cam­eras, sen­sors and com­puter sys­tems now com­mon­place in new cars may help make driv­ers safer. But th­ese so­phis­ti­cated car parts are ex­pen­sive to re­place af­ter ac­ci­dents, Ruiz says.

The num­ber of crashes rose 3.8% from 2014 to 2015, the most re­cent year for which data are avail­able, ac­cord­ing to the Trans­porta­tion De­part­ment. Dur­ing that same time, in­sur­ers paid out $7.5 bil­lion more in claims and ex­penses than they made from pre­mi­ums, ac­cord­ing to the in­sur­ance in­sti­tute. And auto in­sur­ance rates were up 7.7% from June 2016 to June 2017, ac­cord­ing to a con­sumer price in­dex that mea­sured all ur­ban con­sumers.

In 2017, the pri­vate pas­sen­ger auto in­sur­ance in­dus­try is pro­jected to lose $154 bil­lion, a new record, re­flect­ing an in­crease in the num­ber and cost of claims, ac­cord­ing to a re­cent re­port by S&P Global Mar­ket In­tel­li­gence, an in­dus­try re­search com­pany.

Here’s how to keep your rates down:

Com­pare in­sur­ance quotes ev­ery year and af­ter ma­jor life changes such as mov­ing or get­ting mar­ried.

If you drive less than 10,000 miles a year, con­sider a us­age-based or per-mile in­sur­ance pol­icy.

Take steps to im­prove your credit, which af­fects car in­sur­ance rates in all states ex­cept Cal­i­for­nia, Hawaii and Mas­sachusetts.

Ask your agent to do a pe­ri­odic re­view for pos­si­ble dis­counts.

Con­sider buy­ing your auto and home in­sur­ance from the same com­pany for a bundling dis­count.

Luis Sinco Los An­ge­les Times

WITH MORE peo­ple em­ployed, more of them are com­mut­ing to jobs. And that equates to more ac­ci­dents. Above, traf­fic streams into down­town L.A. in March.

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