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by Ken May            

            You have a perfect driving record. You drive a sensible car and you are not driving more than the average California driver but your auto insurance rate keeps creeping upward. Is this fair? Well no, it’s not fair but there is a legitimate reason for it. Rates are increasing all over the country mainly due to the rising cost of claims. Historically, increased claims costs were due to a severity problem. In other words, the number of accidents each company handled each year stayed pretty consistent but there were much larger payouts for the accidents than in prior years.

            Cars cost more to repair or to replace. I drive a 2005 Mustang while my son drives a 2015 Mustang. The difference between these two cars is astounding. His car has many more electronics and features not to mention that it is an extremely high performance machine. My car doesn’t even tell you what the temperature is outside and I get passed by Priuses (or whatever the plural of Prius is). He stopped into the office last week to purchase an extended warranty from us with the electronics package. A very smart move considering that his car could control the space shuttle.

            While severity has continued to steadily increase, the frequency of claims has increased as well. In other words, while the cost to replace or repair a car has increased, the number of accidents has increased as well. This is a double whammy for insurance carriers. With the reduced cost of gasoline, people are driving more because they can afford to do so. Many people commute longer distances because housing costs are lower in areas which are further from their jobs. And have you noticed how many people are on the road with you during your commutes? Driving on Highway 78, I-5, or I-15 is a real live taste of NASCAR. I am far from being a physicist but know that when you have a lot of fast moving vehicles packed together there are going to be collisions.

             So, cars cost more to repair or replace and more cars are involved in collisions but there is a third reason that your auto insurance rates are going up and again, it has nothing to do with you. It is estimated that between 25% and 33% of drivers in California are uninsured. Most times, that means that the insured’s policy ends up paying out uninsured motorist claims. Though you may not be at-fault for the accident, your company may still have to pay to fix or replace your car. I read that at least 15% of your auto premium is due to uninsured motorist claims.

             Insurance companies are in the business of making a profit. As the costs of claims go up, those costs get passed along to you and me, the consumers. And all auto insurers are increasing rates. It’s not a matter of if, it’s a matter of when and how much.

Posted 7:09 PM

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