As an insurance agent, I cannot tell you how many times that I am asked why insurance rates go up. Over the years, this question, just wears insurance agents down.
Every week, I get gas. Every week I pay a different amount, but I never go in and ask the attendant why gas is ten cents higher this week.
Every year the cost I pay for most things goes up; I just expect it.
I do not go into a grocery store and ask the clerk why bread is more than I paid last year.
For some reason people always want an exact answer as to why their insurance rates increase.
Many agents have a standard line they use like, “It was a general rate increase, all of the companies are taking them.” Or they say, “I’m not really sure, we don’t control the rates they are set by the insurance company and approved by the insurance commissioner.”
As a consumer, I understand these responses do not sit well. I understand you want to know what specifically caused YOUR insurance rate to increase and why did they choose you to have to pay more.
I’m going to try to give you some insight into insurance and why your rates would increase.
First thing you should know, there is a possibility that you did something to cause an increase in your insurance rates.
One of the following things that you may have done could cause your insurance rates to increase. Did you:
- Move?
- Add a new car?
- Have a claim/accident?
- Have a ticket for a moving violation?
- Pay your premium late to your insurance company in the previous year?
Another thing you did was get a year older, which may put you in a different rating tier.
Your home and cars have also gotten a year older. So, you may be losing the new home or new car discounts that were on the policy.
Some carriers will give you a new client discount when they write your policy. This discount usually comes off over the first two to five years of the policy. Insurance carriers will add a customer loyalty credit to help off set this, but not all carriers do.
There are some things that you cannot control that affect insurance rates.
The cost of claims is always on the rise. Things like medical costs and costs to repair a vehicle.
On auto insurance, the cost of parts has increased dramatically over the past 15-20 years. In the past, if you had a small fender bender it would cost $30 to repair the other guy’s headlight. But just recently, an insured had to replace a headlight and it was over $1,000. Today’s headlights are usually LED and must be replaced as one unit, instead of just replacing the cover or a light bulb.
Home insurance is no different, labor costs and the cost of construction products are always increasing. The cost to replace your roof or siding is higher now than it was a year ago.
Most of your property policies, the value of the building and contents will increase each year due to the amount of inflation in the construction industry. When the dwelling value increases on your homeowners insurance, that automatically increases the coverage amount of your other structures, contents, and loss of use coverages. These limits are a percentage of the dwelling limit. So, when you increase the dwelling limit by $20,000 may actually increase your total coverage by $40,000.
The insurance carrier does increase their rates to remain viable sometimes. This is just like all businesses, the carrier’s cost to do business increases annually.
Can an insurance carrier increase their rates for no reason?
Short answer is no. Let me try to explain this better; insurance is a heavily regulated industry, so the insurance carriers cannot just increase rates because they feel like it. All rate increases must be approved by the insurance commissioner of each state and the rates must be statistically proven before they can be approved.
Now there are hundreds of factors that go into calculating insurance rates. Sometimes, the adjustment of one factor can amend the tier of the policy. There are times when us, agents, do not know what exactly caused your premium to increase.
What can R.C. Keller & Company do for you?
R.C. Keller & Company is an independent agency. We work with over six insurance carriers. We have our pulse on the marketplace. We can identify when your insurance rate increase is consistent with the marketplace and when it is not.
Reviewing your insurance policy is the first place to start. Rating factors such as education, occupation, credit score, updates to your home or building, payment history could all affect pricing. We also review your policies to make sure that you are aware of all available discounts.
When we review your account, we can ensure that your policies are properly rated and that you are maximizing the discounts that are available with your current carrier.
Should you shop your insurance every year?
Even though we have options, it is not always in your best interest to shop your insurance every year.
There are discounts and reward perks such as claims free cash back, discounts, or first accident forgiveness that you may lose or not earn by moving insurance carriers each year.
It is important to understand the value of the policy that you have and the assurance that you are making the best decision for your family or business.
None of us, including insurance agents, want to pay more for insurance. But we understand that things will go up every year and we want to know the value of what we are paying for.
Insurance carriers are coming up with new benefits and discounts every year, so reviewing them to make sure that you are taking advantage of hem is the best way to control your insurance costs. Things like telematics, or renovations discounts, or discounts for sump pump backup or water flow sensors are relatively new, but another way for you to help control your cost.