Car Insurance. Premiums Driven Down By The Internet.
Car insurance premiums are driven down by the internet.
It’s no longer viable to keep your rates set high so that they can be adjusted down as you get older and less risky on the road. Now, insurers have access to information about you and your car from a variety of sources. They know how often you drive, where you drive it, who else drives it (and for what purposes), and how much time is left until it can legally be scrapped or passed on to somebody else with a clean driving record. They have access to the dutiful police officer who is willing to file a ticket every time you’re caught speeding. And they have access to your social circle, where people can upload pictures and experiences that show that you or someone you know is a bad driver.
The combination of all this information means it’s easier for insurers to adjust rates as needed. If your state has the information publicly available, you may even be able to find out how much various factors affect your rate. Given the right conditions, some people could find their rates nearly halved by doing things like driving less often or agreeing to pay their tickets on the spot instead of waiting until they get home and contesting them.
As rates are lowered, insurance companies have a financial incentive to sell as many policies as possible. With so many customers coming on board, it’s easier to make the rates go up again if the industry sees a decline in demand. Where there was once a natural tendency for premiums to rise and fall over time, now the only thing holding rates steady is actuarial predictions of driver trends and risk assessments of why people are choosing one type of policy over another. An insurer with lower costs might be more inclined to offer coverage that was considered too cost-prohibitive five years ago. The rate increase has major consequences for people who do not have alternative options available where they live.
In order to stay competitive, the insurance industry has to lower rates, which means that the people with the lowest rates have to change their behavior. Drivers who drive infrequently are often being penalized for driving infrequently because they’re worth less when it comes time for insurers to pay out on claims. They might be in their early 50s, a relatively protected age for driving accidents, and yet still have a young enough number of claims on their record that insurers are reluctant to cut them a break just because they’ve been driving less.
The answer to this problem is to drive more, but that can be a risky proposition. In most states, new violations will not be considered in determining premiums if they’re less than two years old. In California, however, new violations can be considered at any time and will not go away over time. This ensures that drivers who do have new violations on their record are always paying higher rates than drivers who don’t. Insurers want to keep you paying the premiums you owe, even after the state has agreed that your previous violations should not lead to increased rates.
Insurance companies have been able to profit off of older drivers by converting them into riskier customers. Yet the real driver of rates is the internet, which allows insurers to find out more about how you’re driving than they ever would have imagined possible. When you have access to all this information, it becomes difficult to justify keeping your rates high when you know that your car can be replaced for a fraction of the cost that newer or safer cars are now. The internet is driving down premiums across the board, and everybody who has been left behind as rates climb and depreciation continues is going to pay later on down the line.
Articles of Interest:
Insurance law and regulation (real world) - Wikipedia, the free encyclopedia
Is your car insurance rate too high? Here are 12 ways to find an affordable policy | NBC News
How to Cut Your Insurance Costs Without Changing Cars - NerdWallet
'State-Run' Insurers Are a Growing Challenge for the U.S. Auto Industry - Bloomberg Businessweek
Timeline: How Your Car's Insurance Rates Have Changed Over the Years | Consumer Reports Magazine - This Old House Magazine online today! For less than $1 a day, you can get access to all The most popular articles and videos from cr.org.
Onward!
I hope you will stay subscribed for updates on this topic and others. This blog explores what happens when a person has been in an at fault accident, regardless of fault. It doesn't matter if you were the one to get hit or if you were the one who hit someone else; it is possible for you to be denied insurance or have your rates adjusted up based on the incident. What happens afterward can be confusing and difficult to understand. I hope to help explain those things so that you can better handle your situation, whatever it may be, so that you can move forward with a fresh start towards financial recovery.
Thanks for taking the time to stop by and read. I am also maintaining a new blog on Facebook titled "A Free Spirit of Recovery" and you can find me there at facebook.com/pages/Free-Spirit-of-Recovery/161705388978. I will be posting more about what is happening in the real world, as well as my personal life. You'll notice that it is much less oriented towards insurance and more focused on recovery from personal or financial issues. Feel free to stay tuned!
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Hi Dr. Sterrett, thank you so much for helping to educate people about these insurance issues. You are right: the laws are convoluted and hard to understand. My husband and I have been driving safely our entire lives - zero accidents or violations - and we've gotten hit with rate increases multiple times, even though we have a "safe driver" discount. So it's not just new drivers who need to be careful! One other thing I'd like to add: we live in NC, and starting in 2012 (or later, I forget when), insurance companies started penalizing people if they had not driven at least 12,500 miles per year. So that means that if you are a responsible person and don't let your insurance lapse because you are not driving, then your insurance company will jack up your rate to punish you for not driving! As it is now, there is no way to get around a rate increase based on a lapse in coverage. We can only thank our lucky stars we have an excellent income and don't need any assistance from the government. But if we did, I shudder to think what would happen...one slip-up and it's all gone. Reply Delete
Hi there! Thanks for sharing this info about mileage requirements; most of the states that do this do not give any sort of warning to people about it.
Conclusion
If you are driving safely and making a habit of carrying less than 10% of your driving record behind you, then the insurance companies will find some way to penalize you. They might not be able to confiscate your vehicle, but they can certainly penalize your rate. You need proof of why these drivers can't get into cars or travel. There is often a lot of information available where the driver has gone bankrupt or been in rehab for an addiction problem, but these things can also be faked so make sure that what your insurance agency says is true. Getting good legal advice on how to proceed is important as well.