Filed under: Trends, Safety, Earnings/Financials
Car insurance claims drop; industry unable to explain phenomenon
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The good news for auto insurance companies is that claims have dropped 15% in the last four years, with the result of a similarly healthy bump in profit. The bad news, at least for an industry that depends on the reliable statistical prediction of trends, is that there is no clear reason for the reduction in payouts for dented sheetmetal and bodily injury.
While modern technology can help prevent collisions, it likely doesn't account for the drop in this particular five-year period (but, check back in another half-decade). More likely is that drivers in the 45-64 age group are the safest on the road, and the average driver continues to get older as the Baby Boomers age. Additionally, it's thought that many drivers opt not to report accidents that don't involve any injuries, and contemporary safety technology may account for an increased number of people who walk away from an accident without so much as a scratch.
One thing seems certain - insurance companies may be making more money from this trend, but it's not being reflected in the average insurance premium. What a surprise, eh?
[Source: Chicago Business via Instapundit]
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Reader Comments (Page 2 of 2)
Tri-Bob 2:35PM (8/01/2006)
Allstate just removed my "new car discount" which raised my rate by $38. I want to know where the "older car without a claim discount" comes in? It just bothers me that we have laws forcing me to pay for insurance, yet I have no recourse when rates go higher. Hmmm....$38, that was a tank of gas Allstate raised me.
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emulous1974 2:36PM (8/01/2006)
I just got a letter from USAA saying that they are lowering the majority of their customer's premium will be lowered because of the lower claims than they were expecting over the last few years. That includes the yearly re-imbursement they send out each year if you make no claim yourself. The letter stated that my premium would lower $300.00 a year. Even with it lowered, I'm still paying over 1K more than I did now living in Hartford, CT then I did while living in Madison, WI.
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David P B 2:36PM (8/01/2006)
From a person who is a claims adjustor for an insurance company...
Yeah the number of accidents maybe going down, but the costs to fix cars are going up. Just replacing one airbag can cost $400-$1000. A xeon light, $300-$1500. Also rates change due to changes in an area or zipcode. Like theft increases or due to weather more accidents, etc.
Everyone complains about having to pay insurance premiums. Just wait until you total out a $65,000 car, your car gets stolen or even worse kill someone. That $10,000 you spend on premiums will be looking like a good deal.
And if you are more likely to get into an accident, you should pay more. Why should I pay more for YOUR driving?
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apple_box 2:52PM (8/01/2006)
I am quite fond of the idea of a public fund and have thought of it many times myself. The problem though is fraud. Plain and simple. There is enough fraud in the regular insurance industry. Just imagine what would happen in a low in, high out fund.
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Tri-Bob 2:56PM (8/01/2006)
David P B, I totally agree I shouldn't have to nor, want to pay for someone else's driving record. So explain why my premiums go up when I have no accidents, no tickets, on 2 cars in over 5 years? I believe I am either paying for someone else's driving record or higher claims in another area the company needs to account for.
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Scott 3:10PM (8/01/2006)
It also might be due to reports of insurance companies refusing to play claims on stolen vehicles, claiming that said vehicles are "impossible to steal":
http://www.wired.com/wired/archive/14.08/carkey_pr.html
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Drewboy 3:16PM (8/01/2006)
To those of you complaining of rate increases, have you ever considered shopping around? I'm an independent agent, all I do most of the day is compare the rates of different companies for people. There can be a great deal of variation from company A to company B! I've done my homework on companies, and some of the bigger-name companies are some of the ones that are least concerned with taking care of you...
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lalaland 3:44PM (8/01/2006)
Here's the reason why: Most people with collision insurance have a $500 deductible to keep the premium down. You get hit by someone. The fender bender costs $700 to repair. You have to pay out the $700 before the insurance company pays you $200 after the deductible. When the insurance company goes after the after guy's insurance company, they are just looking to recoup their $200, they don't care about your $500 you're already out. So not only are you likely screwed out of $500, your premium goes up. So that's why you see more folks driving around with scraped-up cars -- it makes no sense to file a claim. At least, that's the way it is with Geico.
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Richard Warren 3:53PM (8/01/2006)
Or, How about you're charged because of your Zip code, good driving or not, regardless of your own personal driving record?
ATTENTION!! ANKLES AT THE READY! BENDOVER!!! SECOND COLUMN (Insurance companies) INSERT!!!!!!!!!!!!
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Allin 4:27PM (8/01/2006)
Not to mention they use your credit rating to set rates also. Kind of ridiculous on a prepaid insurance service.
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