Tackling one of our most frequently asked questions

November 20, 2013

“My car is getting older. Why does my insurance keep going up?”

  POSTAGE  by Rob Stamp

There probably isn’t a week that goes by when we’re not asked that question. It doesn’t bother me in the least to explain it to customers; it’s what I signed on for, right? Truth be told, a car’s value only comes into play on claims determined to be total losses. And that doesn’t represent a very large percentage of automobile claims filed with insurance companies. For those who get a rate increase and study the differences between their current policy and the renewal, they almost always find higher prices for liability coverages, something an aging vehicle has very little effect on. Costs for treatment for injuries sustained in auto accidents continue to skyrocket and, when you think about it, collision repairs rarely cost any less on older cars.

For those who point out that cars have never been safer, you’re right. Since being targeted by Ralph Nader’s “Unsafe at Any Speed” crusade, automobile manufacturers have made tremendous strides in this regard over the last 50 years or so. Auto accident death rates are down. According to the National Highway Traffic Safety Administration’s latest available study published in April 2013, an estimated 32,367 people died last year in U.S. traffic accidents. This number is the lowest since 1949 and represents a 25 percent decrease from 2005. The decline is welcome news and may be caused by a number of factors:

  • Newer cars on the road have more sophisticated safety features ranging from anti-lock breaks, improved air bags, headliner air curtains, improved seatbelts and warning devices like back-up sensors and crash sensors.
  • Seatbelt usage is also up, likely due to stricter seatbelt usage and child car-seat laws.
  • More roads are now featuring rumble strips and cable median barriers.

However, while auto related fatality rates are down, non-fatal automobile injury claims continue to rise. As previously mentioned, medical costs and treatment continue to escalate. Sad to say, but there’s a lawsuit awaiting around the next corner for some unlucky driver. The mean jury award for vehicular liability increased by 54% from 2002 to 2008. In 2010 alone, juries across the country returned several multi-million dollar verdicts in automobile related lawsuits. Drunk drivers beware: jury verdicts against intoxicated drivers were particularly punishing and included $16.6 million in Palm Beach County, Fla.; $33.2 million in Lake County, Ill.; and an incredible verdict of $330.5 million in Hernando County, Fla.

Our clients need to look beyond their own actions, too. Studies indicate that more and more uninsured drivers are on the road. The Insurance Research Council reports that as many as 13 percent of drivers, or one in every seven, on the road is uninsured. That number may have climbed to over 16 percent in 2010 and the poor economy no doubt contributed. An Ohio Insurance Institute study found a direct relationship between unemployment rates and uninsured drivers; for every one percent rise in unemployment, there was a three-quarter percent rise in uninsured drivers. If you have the misfortune of getting struck by some deadbeat driving around without insurance, it’s going to be your insurance company writing the checks. Sure, they’ll go after the responsible party, but I think the prevailing analogy toward the success of those efforts has something to do with squeezing blood from a turnip. Unless you’re lucky and pay for extra coverage that may include certain deductible waivers, you’ll likely be out your collision deductible that you probably won’t ever get back, either.

Here’s hoping legislation passes someday that prevents uninsured drivers from collecting claim settlements against those who abide by state law and carry insurance. Until then, the industry will continue throwing vast amounts of money away in this regard, and, guess who they’ll pass along those costs to? You got it.