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insurance renewals going up

Why Are Insurance Renewals Increasing? Understanding the insurance department’s policy

Today the questions are a little different. These are questions I saw on the Department of Insurance’s (DOI) website about insurance rate increases. The question that got this started was from Austin in Oregon: Why does the Department of Insurance (DOI) allow the insurance companies to price gouge our insurance rates?

 

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General Rate Increases Explained

First question, I have not received any tickets or filed any claims, but I just received my policy renewal offer, and my rates increased. How can they raise my rates if I haven’t made a claim or gotten a ticket?

Your auto insurance rate can increase due to general rate increases even if you haven’t made a claim or gotten a ticket. These increases are assessed to all policyholders. If your renewal notice shows your premiums are increasing and the notice does not indicate this increase is a result of a surcharge for an accident or ticket, it is usually a general rate increase.

DOI’s Role in Rate Increases

My insurance agent told me that the DOI required this rate increase. Is this correct?

This is incorrect. The law requires insurance companies to file any rate increase requests with the DOI, which reviews the filings. The filing must include the insurer’s data justifying the amount of their premiums and any proposed increase. The DOI reviews the request to be certain that the increases and rates are not excessive, inadequate, or unfairly discriminatory. The law also requires the DOI to make certain that insurers remain financially stable to protect their policyholders so they have enough funds available to settle claims.

Reasons Behind Rate Increases

I still don’t understand why my rates increased. It seems like price gouging to me. What exactly caused this?

General rate increases can be necessary for a number of reasons and are not price gouging. For example, insurers are impacted by rising costs and inflation, just like all of us have been affected. The cost of repairs and parts has increased. The value of used cars has gone up, so the cost to settle a total loss claim has increased. Business costs—from the cost of electricity to wages to the cost to mail policy documents—have increased as well. If an insurer expends more money than they receive, they could become insolvent and unable to pay claims. The DOI’s responsibility is to make sure these companies stay financially strong so they can pay claims.

Impact of the Stock Market

How does the stock market affect my rates? It doesn’t seem fair.

Yes, another factor that impacts rates is the requirement that insurers maintain a reserve. These funds are held in the event of a catastrophic loss, such as a hurricane. Generally, these reserve funds are invested, and the insurance companies earn money from these investments. If the stock market is down, the earnings from these investments are also down. Again, to remain solvent and financially strong, insurers must increase their premium rates to offset this loss in revenue.

Claims and Rate Increases

My rate increased because of a claim, and not a general rate increase. I don’t think I was at fault. Is there anything I can do?

If you think your rate is being improperly increased because you were not at fault for the accident, you can contact your insurance agent or insurance company and ask them to review the rate increase to ensure it is correct. Under state law, an insurance company is required to mail a notice of renewal premium increase at least 30 days before the renewal policy goes into effect. This notice may be sent with the renewal package or separately. So, make sure you request the review before your renewal.

Protesting Rate Increases

If my premium increase is not due to a claim or change in driving history, but I still want to protest the increase, is there anything I can do?

Generally, no. If your policy rate increase is due to a general rate increase that has been properly filed with the DOI, there may be nothing you can do to require your insurance company to remove the increase. However, you certainly may file a complaint, either on the DOI’s website or by writing to the DOI directly. The DOI will be glad to review the increase to make certain it complies with the state’s insurance laws. You will receive a written determination following that investigation.

Factors Influencing Premiums

What factors impact how much my insurer charges me for my auto policy?

There are many factors that go into how your premium is calculated. Some of the factors that insurers use to determine a policyholder’s rate include age, gender, length of time as a licensed driver, where you live, type of car, and how it is used, as well as driving and claims history. For instance, a teenage driver will generally have rates much higher than an older driver because the crash rate for younger drivers is statistically higher than that for older drivers. Another factor that impacts a rate is where you live. A policyholder who lives in a densely populated area with a lot of traffic and who must park their car on the street is statistically more likely to present a claim. Also, we’ve seen auto theft rates skyrocket in 2022 and 2023, contributing to higher rates.

Tips for Lowering Your Rates

So what can I do to lower my rates?

You may ask your insurance agent if you are getting all the discounts you qualify for. One way to lower your premium is to bundle multiple policies with the same insurance company. This is called a multi-policy discount. This applies when you pair your auto insurance along with your home or renters’ policy through the same insurer. Your insurer may also offer a discount for safe drivers, good students, claims-free, and/or safety equipment your car may have.

You may also want to ask your insurance agent to review your policy to make sure it is based on your current driving habits and coverage needs. For example, are you retired or mainly telework? Let your insurance agent know that, and the approximate number of miles you put on your car in a year. You might also want to discuss the amount of your coverages and deductibles. While it is true that lower coverages may be less expensive, if you have a loss for which you are liable and don’t have enough coverage to fully settle the claim, you could be held personally responsible for that additional amount. The purpose of insurance is to protect you in the event you have an at-fault loss.

Handling Deductibles

Both comprehensive and collision coverage usually have a deductible. The higher the deductible, the lower your rate. When choosing the amount of your deductible, think about what you can afford to pay if your car is disabled by a covered peril. Comprehensive coverage is less costly than collision coverage, so many people select a lower deductible for comprehensive than collision coverage.

Shopping for Better Rates

I spoke with my insurance agent, and we reviewed my policy. I am still not happy with my rates. What else can I do?

Different insurance companies may offer more competitive rates for the same insurance coverages, so you can shop around to see if you can get a better rate. When shopping, be sure you are comparing apples to apples. It is advisable to have the current copy of your policy available when speaking with other insurers so you obtain a quote with the same coverages that your current policy provides.

Conclusion

Alright… well, wow, that was a lot of great information from the Department of Insurance. So, my advice, if you are not happy with your insurance rates… reach out to my team here at Trailstone Insurance Group. We understand the issues the DOI outlined and will shop your insurance with more than 40 insurance companies to find YOU the best price and coverages available.

FAQs

Why does the Department of Insurance allow rate increases?
The DOI allows rate increases to ensure insurance companies remain financially solvent and able to pay claims. Rate increases are not approved without a thorough review of the insurer’s financial data and justification.

What should I do if my rates go up without any claims or tickets?
If your rates go up without any claims or tickets, it is likely due to a general rate increase. You can review your policy with your insurance agent and ask about any available discounts.

Can I protest my insurance rate increase?
While you can file a complaint with the DOI, if the rate increase is due to a general rate increase that complies with state laws, there may be little that can be done to remove the increase.

How can I lower my insurance premiums?
To lower your premiums, ask your insurance agent about available discounts, consider bundling policies, review your coverages and deductibles, and maintain a good credit score.

How do external factors like inflation and the stock market affect my insurance rates?
External factors like inflation increase the costs of claims and business operations for insurers. The stock market affects the returns on insurers’ reserve funds, impacting their financial stability and leading to rate adjustments.

Why should I consider increasing my deductible?
Increasing your deductible can lower your premium. However, you should choose a deductible amount that you can afford to pay out-of-pocket in case of a claim.