August 31, 2020


Why Did My Auto Insurance Increase?

Insurance carriers calculate auto insurance premiums using a multitude of factors — not just speeding tickets and individual accidents. There are several rating elements such as driver information, vehicle garaging territory, vehicle year, make and model along with additional rating variables to adequately price exposures carriers are insuring. Other factors are considered as well, including:

Number of vehicles on the road.

In the United States alone, there are over 273 million cars registered.* With many vehicles on the road, accidents are more likely to occur, which actuaries must account for when calculating auto insurance premiums.

Frequency of fatal accidents.

In 2019, 36,120 people died in motor vehicle crashes. Factors such as distracted driving, impaired driving, number of vehicles on the road, and number of miles driven may contribute to this number.

Frequency of distracted driving accidents.

Distracted driving claims nine lives per day, approximately 3,500 per year in the U.S. In 2018 alone, distracted driving claimed 2,841 lives. Today, drivers face more distractions than ever, with manual, visual, and cognitive elements. Manual distractions include anything that requires you to take your hands off the wheel. For example, you may be eating, using your cell phone, adjusting the radio or temperature, grabbing your purse, wallet, or another item from the passenger seat, etc. Visual distractions include anything that diverts your eyes from the road. You may be checking your GPS, glancing at your phone to check your text messages, or looking at a passenger. Cognitive distractions include anything that diverts your mind from the road. You may be listening to an audiobook or podcast, engaging in a hands-free conversation, daydreaming, and more. Remember to keep your hands, eyes, and mind on the road.

Frequency of drowsy driving.

According to the NHTSA, drowsy driving claimed 795 lives in 2017. Drowsy driving crashes occur most frequently between midnight and 6:00 a.m. or in the late afternoon. Additionally, the accidents may involve only a single driver running off the road without utilizing the brakes.

Expensive vehicle technology and costly repairs.

Vehicles are becoming more expensive to fix as a result of new technology used to keep us safe. For example, modern collision avoidance systems consist of radar, laser (LIDAR), and camera-based systems, which not only provide collision avoidance but also provide cruise control and park assist capabilities. These systems consist of park assist sensors, front impact sensors, vehicle radar/speed sensing systems, surround cameras, laser systems (LIDAR), and more. When an accident happens, all if not most of these expensive and intricate systems may need to be replaced.

Number of miles driven.

According to the U.S. Department of Transportation’s Federal Highway Administration, Americans drove 3.225 trillion miles in 2018. While this may reflect a prosperous economy, it means Americans are spending more time in their vehicles, which may contribute to an increase in automobile accidents.

Actuaries use these statistics to predict the frequency and cost of possible accidents and collect enough premium to pay for potential auto losses. For more information, contact your independent insurance agent.

*According to 2018 data

This summary is for general informational use only and may not include all relevant information.

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