In last week’s blog, we looked at three reasons insurance premiums change from year to year. They include;
- Inflation
- Large scale losses such as hurricanes, hail storms, etc.
- Personal losses such as accidents, water claims, etc.
In this blog, let’s explore two more reasons;
- Policy discounts
- Business reasons
Policy Discounts
I know it sounds crazy, but policy discounts can actually contribute to premium increases or decreases. The number of discounts carriers offer has grown over the years. There are discounts for;
- Multiple policies (home, auto, life, umbrella)
- New(er) homes (typically homes that are 10 years old or less)
- Homes with new roofs (or roofs less than 10 years old)
- First time home buyers
- Homes with significant updates (electrical, plumbing, roof & HVAC)
- Mature homeowners & drivers (50 plus age group)
- Accident free drivers
- Cars with side impact air bags, alarms, 4 wheel antilock brakes, etc.
- Vehicle recovery devices (On Star, BMW Assist, Toyota Safety Connect, Lo-Jack, etc.)
- Early shopper (a discount some carriers offer if the policy is bound 7 or more days before it’s effective date)
Many of these discounts remain intact throughout the life of the policy such as multi-policy discounts). Others end after the first year (early shopper or first time home buyer for instance). Other discounts decline over a period of years. For instance, many carriers love homes that are brand new to l0 years old. These discounts typically reduce over a period of 5, 10 or 20 years depending on the carrier.
Know what discounts you’re getting upfront and then confirm what their life span is.
Business reasons
Business reasons have as much impact on premium adjustments as anything. If prices are increasing, it may be due to;
- Carriers have an ideal amount of risk they’re willing to write. Once that’s attained, prices may increase to limit their exposure.
- There are competitive pressures to raise rates. How much price difference is there between gas stations at the same intersection or airline rates?
- Rate increases to meet profit goals, pay for more people, newer systems, etc.
Lower prices may be due to;
- A carrier is in a growth mode (several of the New England based carriers have a strong presence in the northeast but a smaller presence in Texas and they want to grow their presence here)
- The insurance company is taking corrective actions to improve their competitive stance within a certain demographic or marketing area
- Some carriers offer longevity discounts or claims free discounts (this is becoming less common than it used to be)
The days when your renewal would go unchanged aren’t long gone but they’re becoming the exception rather than the rule. That’s why it’s important to review your renewals and compare the upcoming premium to your current premium. That level of comparison is important in saving money on your insurance dollars and there’s no better comparison helper than an independent agent!
