State Farm reported a loss on car insurance of $7 billion in 2016. It’s a staggering number, and they aren’t alone either. Allstate, Geico, The Hartford, and Travelers also experienced losses last year. One of my carriers shared with me for every $1.00 they took in for car insurance premium, they paid out $!.10 in claim losses, and that didn’t include the catastrophic car losses caused by our recent tornadoes and hail storms.
The question this raises is how will these losses impact consumers in the coming years? The answer is simple, most Texans will pay more for car insurance for the foreseeable future. I suspect we’ll see consistent annual increases. Let’s examine what’s contributing to these losses and how consumers minimize them.
The average cost of a new vehicle in 2016 was about $34,000. The cost will continue to rise as more vehicles are equipped with new technology such as lane departure warning, automatic braking, blind spot warning, back up cameras, smart headlights, and more. For instance, the cost of replacing a deployed airbag can run anywhere from $1,000 to $6,000 or more. Even a minor accident can result in a significant claim amount.
There’s also been an unexplained rise in traffic crashes over the last five years. After several decades of ever lowering crash numbers, they began to dramatically rise in 2011. Traffic related injuries and fatalities have increased over 20% in Texas since 2011. 3,757 died in 3,390 accidents last year with another 263,536 injured in 175,347 crashes in Texas. Not only do we lead the nation in traffic related fatalities, we are number one in alcohol related driving fatalities.
Population growth is also another factor contributing to the losses experienced. Every year over 80,000 people move into the Dallas / Fort Worth area and they bring their cars with them. More cars on our already overcrowded roads and highways means more accidents and more claim dollars being paid to repair the vehicles involved in accidents. This will only get worse if we continue to grow at this rate.
There are several actions consumers can take to minimize the annual increases I’m seeing in car insurance rates.
- Avoid anything that distracts your attention from driving such as talking on your smart phone and texting. Distracted driving surpassed drunk driving last year as a cause of accidents.
- Don’t drive impaired. With services like Lyft and Uber, there’s no excuse for drunk driving.
- Wear your seatbelt. Seatbelts save lives and there are still too many people not wearing them.
- Leave earlier for appointments so you can avoid rushing and not driving defensively.
- If you’re 70 or older, take a safe driving course to re-learn good driving habits. AARP offers one!
- Drive defensively by expecting the unexpected.
- Shop for car insurance. Don’t become locked in to one company, compare!
- Take advantage of discounts offered for having your driving monitored.
If we all do our part, we can lower the number of accidents across all of Texas and reap the savings that accompanies it. What do you think? Share your questions, suggestions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!