Is an Increasing Car Insurance Premium Normal?

This is probably one question that lurks at the back of our minds quite a lot. Is it normal for car insurance rates to go up every year? This is in the face of your car losing one year worth of residual value and also considering any “no claims bonus” that you might be experiencing. Some people think that this is just a type of scam that car insurance companies are playing to get more money from their clients.

In some cases it could certainly be your insurance company trying to get more money from you by giving you 1001 reasons; It certainly isn’t illegal to quote a higher rate for the next year. The truth is that in most cases it isn’t as straight forward as that. The costs of car insurance quotes factors in so many different aspects that to it simply isn’t as straight as we all make it out to be sometimes.

The first thing to notice is that the costs of cars increase every year. It’s a known fact that the costs of cars grow disproportionately to the price of the resources used to make the cars and also disproportionately to the inflation figures every year. The reason why the cost of cars increase so much is the subject of another article that I will write at a later date. This basic increase in the cost of vehicles will factor into the costs for car insurance by making it higher.

You will also find that the cost of repairing cars is increasing every year too. You will find that many new cars are component based meaning that if something breaks, you will need to buy the whole component just to change the faulty part. This contributes significantly to the costs of repairing cars. This increase also translates to an increase in car insurance quotes over time.

Another reason for the increase is the costs of medical bills associated to healthcare claims from car insurance. The costs of medicine is going up. Even with vehicles advancing in safety by leaps and bounds, you will also find that cars are getting more powerful and drivers thinking they are invincible behind of their “engineered-to-thrill” cars. The latest figures by the Insurance Information Institute (III) states that the amount for health claims is rising very quickly simply because people are getting more injured in their motor accidents. The III also stated that this could also be due to the increasing popularity of large SUV vehicles which are inherently less stable and also cause much more damage to average cars if an accident were to take place. The cost of medical claims last year was $20 billion and it is set to rise even further this year.

The National Association of Insurance Commissioners (NAIC) states that through initiatives to crack down on fraudulent claims, suspicious claims have been reduced substantially. Even with this improvement the amount for claims is increasing as theft and crime relating to cars is increasing nationwide. In their latest report they state that the number of claims has dropped compared to last year (2009) however the severity of the claims has increase compared to 2009. This has somewhat off-set the increases that I have mentioned above but the affect is still quite minimal.

As you can see there are so many facts that could influence the costs of car insurance. What was described above is systemic risk that car insurance companies apply to all their customers. The increase in car insurance rates could actually be something that you did during the year. It is a little know fact that car insurance companies also use your credit report to define your risk tolerance and will also adjust your quote based on that. Has your driving record become tarnished this year? Have you moved into an inner city address lately? Have you changed your job lately? All of these factors will have a bearing on the costs of your car insurance.

Generally over time, your car insurance rates should decrease however there are so many factors that dictate the actual price; It becomes very hard to make a definitive answer. This, coupled with the fact that insurance companies have to pay out more money per customers on average will mean that the car insurance companies will want to pass on the costs to their customers too. Even with the off-set of your No-Claims Bonus or your Loyalty discount, car insurance could still work out to being more expensive for you every passing year.