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Why Are Rates Going up?

Updated: Nov 29, 2018

Have you ever felt like the person in the picture over your insurance? Premium increase is so FRUSTRATING! Especially when you've not had any tickets or accidents in years. Rates should reflect your personal habits and history. At least that's what one would think. The reality is, the majority of the rate is determined by situations out of our direct control. Here's how it works, and what you do have control over. We'll make it short.

Discounts: (Control) Discounts are there to individualize your rate. For example: claims free, good student, longevity, multi policy, and others. These can lower your rate by about a 20% to 30% generally.

Surcharge: (Control) Opposite of discounts, surcharges individualize rate upward. For example: claims, tickets, accidents and other items. Increasing rate again around 20% to 30%.

THE BIG ONE........Premium Factor: (No control) The driving force behind rate is premium factor. Despite discounts or surcharges, "Premium Factor" trumps all and is the bulk of your rate. What is it? Simply put, it's cash "in" vs. cash "out." If a company is paying out more than it's bringing in adjustments must be made. Current issues in the industry would include, but not limited to: Increased cost of items insured, economy, population growth, unexpected disaster etc..

What Can You Do About It (Control)

Rates will always fluctuate. Chasing the lowest rates each year can be a huge pain and inconvenience with your time and money. Not to mention that approach can have some negative ramifications. The most cost effective approach is riding out the wave long term. The control you do have is determining which "wave" you choose to ride. Know your insurance companies history, premiums and underwriting. There are three types of companies in the industry. You want to "ride out the wave" with the most preferred and historically stable ones. Don't be tricked by catching a low premium with an otherwise historically high premium company. To learn more about what type of company to choose CLICK HERE. The Today show also had an interesting clip on rate CLICK HERE. Please let Sorensen Insurance know if you have any other questions, and thank you for your continued support


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