Car insurance rates are on the rise. For the last decade, this has simply been common knowledge. The World Trade Center bombings, the housing market bubble bursting and natural disasters such as hurricane Katrina have conspired to make insurance companies extremely conservative. This has led to a sharp increase in the cost of car insurance for the average citizen, but without a substantial increase in car insurance coverage to match. Here are just a few of the reasons why car insurance rates are going steadily up across the nation.
The first is the simple fact of economic downturn, coupled with several large insurance events. Both September 11, 2001 and the hurricane which hit New Orleans in 2005 greatly affected the insurance industry. While both of those events were more housing and life insurance focused, the entire industry felt the aftershocks. As well, the massive downturn in many Western economies has led insurance companies to try and cover their losses as property they insure has become unlivable or sold off to pay out massive debt. Secondly, in part because of the current economic issues, fraud in the insurance industry is rampant. Many motorists are claiming to live in one state when they commute to and work in another, in order to receive a better car insurance quote. Some of these drivers have poor records or are uninsurable in their home state, which means greater payouts by insurance companies and greater amounts paid by consumers.
A third reason for increasing insurance rates is the large number of drivers who are simply uninsured, despite law to the contrary. Often, it can be cheaper for an individual to purchase no car insurance and pay the fine, than go through the expense. This is especially true in no-fault states where legal action is prohibited between parties in an accident. As a result of under and uninsured drivers, many companies are increasing their rates to protect their own drivers in case of an accident.
Lastly, car materials and driving habits have changed. With more aggressive drivers on the road than ever before, and many driving cars encased in only mere plastic shells, accident numbers are on the rise in terms of sheer amount and in severity. This has also led insurance providers to raise their rates, as their risk has increased – both in paying out for a possible injury and because even a slight impact can cause substantial frame or structural damage to a car. Although this can be a frustrating position for consumers, in some respects the increased fees are necessary. In a world of limited economic growth, lightweight vehicles and difficult drivers, a higher premium can be worth the piece of mind having insurance brings.
