As long as there is inflation, there will be insurance premium increases. Ideally the increases are small, however on occasion the increases are larger. Our agency endeavors to contact customers who receive large, unexpected, insurance rate increases to discuss the reasons for the increase as well as options for lowering premium. Below are some of the factors leading to insurance premium increases.
Hard Market
Insurance is cyclical. During a hard market, there is less monetary capacity and insurers have a lower tolerance for risk. This leads to higher insurance premiums and tightening underwriting guidelines.
Combined Loss Ratio
Combined loss ratio measures the total claim payouts and expenses in relation to the total premiums collected. If the combined loss ratio is over 100%, the insurance company is losing money, and must raise insurance rates to remain solvent.
Natural Disasters
Natural disasters include winter storms, floods, tornadoes, volcanic activity, hurricanes, earthquakes and wildfires. As natural disasters increase in frequency and severity, and insurers pay out more in claims related to these natural disasters, it drives up insurance premiums.
Inflation
In general, insurance pays for injuries and property damage. As medical expenses, wages, property repairs, and property replacement increase over time due to inflation, so does the cost of insurance.
Skilled Labor Shortages
Fewer skilled workers in the automotive, construction and medical industries lead to higher wages. This in turn leads to higher claim payouts, which drives up insurance rates.
Claims, Tickets, Accidents
Insurance premiums are based, in part, on risk. Statistics show that those who file claims, receive tickets, and cause accidents are higher risk, and are more likely to file claims in the future. Therefore, premiums are higher, at least until time transpires (usually 3-5 years) from the claim/ticket/accident.
Auto ISO Symbol Changes
For each vehicle within a vehicle series (defined by such characteristics as make, model, and body style), a symbol is assigned. This symbol is based on historical loss data. If this symbol changes, it can increase auto insurance premiums.
Automatic Coverage Increase
Insurers will often automatically increase property coverage on homeowners insurance, condo insurance, renters insurance, and many business insurance policies in order to keep up with inflation and ensure coverage is adequate. This additional coverage will lead to premium increases.
Accident Frequency and Severity
The frequency of accidents impact car insurance premiums, as do the severity of those accidents, since the more severe the accident, the larger the payout for property damage and injuries.
Crime
When crimes such as burglaries and auto thefts increase, so do insurance premiums. The theft of auto parts can be especially troublesome.
Credit Changes
One of the many factors that impacts insurance premiums is a credit-based insurance score. Most insurers in Washington use these scores. This score may be rechecked on occasion, which is sometimes required by law.
Regulatory Environment
Ideally insurance companies would increase premiums slowly over time, however premium increases must be approved by the Washington State Office of the Insurance Commissioner, which can take time. If necessary premium increases are delayed, then larger premium increases may be necessary.
