Why Are My Car Insurance Rates Going Up in the Bad Economy?

2009-02-16
Even if you are a safe driver with a stellar driving record, you might be seeing an increase in your auto insurance rates due to the lagging economy. Car insurance companies are raising their premiums across the board, and sometimes this is at no fault of your own. True, if you get a ticket or are in an accident you expect to see an increase in your auto insurance rates, but there are other reasons for this overall increase associated with the recession. Here are some of the economic causes for rising auto insurance rates:


Everything is More Expensive:

Everything is more expensive nowadays. From restaurants to auto parts stores, nearly every industry in America has raised their prices. This is because the cost of raw materials, energy, and shipping has increased, as well as other costs to do business. These costs are then passed on to the consumer at the end of a long chain of price increases. For example, auto parts suppliers are charging more for the parts they sell to service centers, so service centers are charging more for repair costs, so auto insurance companies are spending more to fix vehicles, and therefore consumers must absorb the cost by paying higher auto insurance rates. This chain of events also applies to health costs and other outlays by car insurance companies. Put simply, when the car insurance company must pay more, their customers must pay more.


Losing on Investments:

Another reason auto insurance quotes are going higher is the result of the poor investment performance. That is, car insurance companies are losing money in the stock market and other investments. Again, this is at no fault to the consumer, but they are the ones that will end up paying for the losses with higher auto insurance rates. Many car insurance companies use the money they collect from auto insurance premiums and invest it to grow that money. They invest the money in other industries to diversify their own holdings and make a profit. But, markets across the world have been underperforming, and therefore car insurance companies are either not making a good return on their investments, or even worse, they are losing money. To make up for these losses, auto insurance rates are rising for current customers, and new customers are being presented with high auto insurance quotes and rates.


Credit Rating:

Believe it or not, a driver's credit history also affects their auto insurance rates. No matter how good of a driver you are, or how long its been since your last accident, if you have poor credit you will pay higher auto insurance rates than if you had good credit. People with poor credit are deemed to be more risky to insure because they might not make their payments on time, or not make their payments at all. Therefore a poor credit rating means higher auto insurance rates. This applies even if you always pay your auto insurance premium on time, because a foreclosure or defaulted loan would negatively affect your credit rating.
Consumers can still find cheap auto insurance quotes online, however. Visit CarInsuranceQuotes.com and compare quotes from several different companies competing for your business. You'll find the cheapest car insurance quotes from respected companies across the nation.