I’ve had a couple of interesting discussions with clients about their car insurance renewals. In both cases, their car insurance rate increased and both wanted to know why. Most of the carriers systems don’t give me a clear reason, so I called each company and we reviewed each client’s policy together. Most of the factors that led to rate increases were understandable and one was a surprise.
There are reasons car insurance rates go up in price including:
- Rate increase
- Tickets & Claims
- Credit score change
- Your payment history
Rate Increase: One of the most common phrases I hear when discussing a change in someone’s car insurance rate is, “I didn’t have any tickets or accidents, so why did my rate change?” In instances like this, the most common answer is insurance pricing changes. Just like there are price changes for food, gas, clothing, and all the things we buy, insurance prices change too. Sometimes insurance rates go up and sometimes they go down.
Most car insurance companies have increased their rates in north Texas over the last 8 months. The most frequent reason agents are given is the two storms that struck the Dallas / Fort Worth area last year. The storms combined total for insurance claims paid was between $2 and $3 billion. Cars and trucks were hit just as badly as homes, so insurance companies are adjusting their rates to compensate. In times where there’s no storm to blame, rates vary for a number of reasons:
- Rates tend to go down due to competitive pressure, growth goals, or they want to enhance the balance between home and car insurance.
- Rates tend to go up when inflation runs up, other carriers increase their prices, or they want to write less auto insurance in a particular area.
Rates aren’t static and will change regardless of who the insurance company is.
Tickets & Claims: The two clients I mentioned at the beginning were impacted by tickets and claims. In one case, Client A had two speeding tickets in a 6 month period and in the other case, Client B had two comprehensive claims. Any type of activity can cause your rate to increase.
In the case of the client with the two speeding tickets, they, like most people didn’t realize all carriers routinely pull Motor Vehicle Record (MVR) and Clue reports every 1 to 3 years. MVR reports show violations or tickets while Clue reports show claim activity. Most clients don’t call me to let me know they got a ticket. If they did, I’d let them know it usually turns up at some point, so if you don’t want that to happen, take defensive driving!
Credit Score Change: Insurance companies do update credit from time to time similar to pulling MVR and Clue reports. I’ve not found any pattern or frequency when insurance companies do this which makes it hard to provide a rule of thumb. My advice to clients is:
- Pull your credit annually
- If it’s improved, have your agent rerate your policy
- If it’s worsened, sit tight or compare with other companies
Credit is not used in all States, but it is used in Texas and it can have a big impact on what you pay. Taking the time to know your score and improving it is worth the effort.
Payment History: This one surprised me, but it’s true. Some insurance companies look at how well you pay your insurance bill when they renew your policy. When I began talking with Client B’s company, I talked with customer service, as well as underwriting, and it was my underwriter who advised me of this. In this client’s case:
- The client had 2 late payments during the year
- These late payments were factored into their renewal
- Add this to two claims and their rate increase was about $500 for the year
Why does payment history factor in? Companies are looking for clients who are financially responsible and have a strong credit score. While not every carrier factors payment history into the renewal premium, but there are some who do. If you want to minimize your rate increase or improve on your car insurance rate, pay your bills on time.
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