Why Cheap Gas Prices Are Increasing Car Insurance Rates
Americans continue to enjoy cheap gas prices, and it has brought them a lot of savings amounting to billions of dollars. Compared to the previous year, the average fuel prices are down to around $0.60 across the United States. However, the low gas prices do have their disadvantages, and one of them is higher car insurance rates.
Americans are driving more, which is the result of cheaper fuel costs and better employment rates. However, studies have shown that the low gas prices were connected to the increased traffic fatalities. The logic behind the conclusion is that there are more cars on the road because of the lower fuel costs. People are bringing their cars everywhere they go. And because of this, the streets and highways are congested, and this led to more vehicular accidents.
According to the trend, gas prices will continue to be on the decline. And that means cars on the road will not decrease anytime soon. However, there are other factors that contribute to the higher accident numbers. One of the major causes of accidents is unsafe behavior. Almost 90 percent of drivers engaged in at least one dangerous behavior while driving that include not wearing seatbelts and using mobile phones, just to name a few.
Statistics showed that traffic fatalities had gone up, and at the same time the size of car insurance claims increased. And that’s why insurers across the nation have raised premium rates on drivers. It doesn’t matter whether they were involved in accidents or not in the past couple of years.
Size of Car Insurance Claims
The trend for size claims is going up, and it has affected car insurance companies. The increasing costs for auto repair and medical care were two of the top reasons why claims have gone up. The higher prices of auto parts have also contributed to the increasing size of auto insurance claims.
However, it should also be noted that driving more miles have also resulted in more personal auto claims. This has led to the decrease in profitability of car insurance companies. Major companies such as GEICO and Allstate had stated that they recorded higher frequency than they expected with regards to personal claims last year. And that’s why they, along with other auto insurers, increased the insurance rates to be able to absorb it.
According to the Consumer Price Index, there was an increase of 6 percent year over year in April of this year. This was the biggest increase since October of 2003 when auto insurance rates increased by 7.2 percent.
It should be noted that car insurance rates were always above the normal inflation rates. However, consumers can still find affordable car insurance on the market. All they need to do is to do some research to find the best deals today.
Threat from Autonomous Cars
There’s a looming development in the automotive industry, and that is the introduction of autonomous cars that are being developed by Tesla, Google, and other companies. Experts have predicted that vehicular accidents will drop 80 percent by the year 2040. This development will undercut the car insurance companies. It was also predicted that during the same timeframe, the automobile insurance industry will decrease to below 40 percent of its present size.
At present, personal car insurance companies will continue to increase their rate from five to ten percent. One of the highest rate increases this year was made by Allstate. The company increased their rates by 25 percent in the state of Georgia last May. The company said that there was a 21 percent increase in deaths due to traffic accidents. This was the first time the number went up in the state after ten years of decreases. In California and Florida, companies are asking for an increase in premium of up to 10 percent.
The top five car insurance companies in the United States have a market share of a little over 50 percent. If all of them increase their rates, it will greatly affect most of the car owners in the nation. Hopefully, the number of accidents will increase in the coming years. That way, car owners can enjoy both cheap car insurance and fuel costs.
At Cheapest Auto Insurance we can help. We our independent agents and work with several insurance companies. It means we shop around for you so you don’t have to! It gives us the ability to find some of the most affordable car insurance rates! Find out with a free quote today!
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