Hi, this is Chris Reynolds, agency owner at Dormon & Reynolds Insurance here in Anniston, Alabama. We had a question submitted to our website, which is a common question we hear pretty much weekly on car insurance. And it’s, “Why does my auto insurance keep going up when I haven’t had a claim, don’t have any speeding tickets or anything?” And the common misconception is that companies give you one rate that’s just specific to you, and that’s not the case. They determine a base rate, which they give to everyone. And then of course, everybody has different quotes, because some people qualify for some discounts, some people add coverage to it, which cause the premium to go up and down. But that base rate is applied to everyone. And some of the things that come into play that change that base rate and cause it to go up, the biggest one’s claims.
So if a company collects $10 million in premium for car insurance, but they ended up paying $11 million in claims, then they have to increase their rates to compensate for how much they’re paying out in claims. So that base rate goes up for everyone. And some of the things that cause claims to go up over the last five, 10 years, cars cost a lot more nowadays to repair than they did 10, 20 years ago. An example would be the side mirror. 20 years ago, the side mirror’s very simple, low cost to get repaired. Nowadays, they have cameras and computers inside of them so it costs a lot more to do the same claim than it did 10, 20 years ago. Another one is that there’s a lot of lawsuits being attached to these auto claims. And when that happens, the amount that they’re paying out on claims goes up. So as the claims go up, it ends up driving up the base rate for everyone.
Call Dormon and Reynolds Insurance in Anniston AL at (256) 237-1768