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April 2018
48
Fresh Water Boats For Sale
What You Can Do About
Rising Insurance Rates
Your Insurance
with
Cathy Karas
T
he industry trend for many types of personal insurance
is that rates are on the rise. I don’t know why this comes
at a surprise to many consumers since all you have to do
is turn on the TV or radio or read the newspaper to hear of
the volume of vehicle accidents involving distracted driving
while texting, talking on a phone or changing controls on the
dashboard, or wildfires, floods, or snow and rain damaging
homes. There are some proactive measures you can take
to reduce your costs that I will discuss later in my article,
but let’s first understand the nature of what insurance is and
the role the insurance companies play. Basically the idea
of insurance is to “spread the risk” among a segment of the
population and having the rates reflect an “average” cost for
this group where the insurance company will have enough
money to pay for losses that group will probably experience in
the upcoming year, make a profit, but not raise their rates so
high as to lose customers. Actuaries determine the chance
of a loss for a projected year, based on past history of prior
years for certain groups and come up with a premium. These
actuaries look at prior year’s experience for certain areas,
drivers, vehicles, home, boats, etc and base the rates on past
experience. There are many factors considered to determine
a rate. If the company paid out more than they collected in
premium for a certain population group, then the rate basis
was too low and they increase it, anticipating the claims
activity will be similar in the year upcoming. The reverse is
also true, where companies often take rate decreases, based
on favorable loss experience. For example after Storm
Sandy, many insurance companies either increased their
rates substantially for any properties with a coastal exposure
or chose to withdraw from issuing policies for those areas
altogether. After several years, some companies are now
accepting some business in the areas where they declined
it before or reduced their rates when other companies
re- entered the market place. Keep in mind insurance
companies are not charity organizations but companies
in business to make money. They have expenses as all
other business have such as payroll, insurance, rent, taxes
and other related expenses, as all businesses would .
Insurance companies are also required by the Insurance
Departments for each state to maintain a certain amount of
“reserve” to pay claims from.
Here are 3 common types of personal insurance and
rating factors that can affect your premium:
AUTO
Where you live (more congested
areas usually mean more traffic and more
accidents)
• Types of vehicles you own
• Your driving records and ages
• Limits of liability and deductibles if you
have comprehensive or comprehensive and
collision coverages
• Number of years you are with the
same company
and Why It’s
Happening