Many drivers can expect to pay more for their auto insurance in 2017. Rate increases are occurring all over the country according to news reports
GEICO; a subsidiary of Warren Buffett’s Berkshire Hathaway (NYSE: BRK.B), is planning to hit Illinois drivers with a 3.5% rate increase, The Chicago Tribune reported. That’s on top of a 6.9% nationwide rate increase GEICO reported last year.
The low-cost insurer is raising rates because the frequency, severity and size of claims it was hit with increased in 2016, The Tribune reported. GEICO customers in Illinois are not alone, State Farm raised rates in the state by 5.9% on Halloween Day. Allstate (NYSE: ALL) increased its rates by 7.8%.
Further west drivers in Las Vegas saw their rates increase by 2% and 5% on average, The Las Vegas Review-Journal reported. Some drivers in Sin City saw even higher increases of up to 10%. Rates are increasing in Nevada because auto insurers’ losses to claims in the state grew from $1.13 billion in 2013 to $1.4 billion in 2015.
Increased Accidents and Fatalities Driving Auto Insurance Price Hikes
The major cause of the rate increases is a sudden surge in fatalities and injuries on the nation’s highways. Deaths in car accidents increased by 10.4% during the first six months of 2016, The New York Times reported.
Fatal accidents drive up premiums because they lead to more and larger insurance claims. Fatalities also generate more lawsuits which leads to higher legal costs and more and bigger payouts for insurers. Injury accidents drive up premiums with higher medical costs.
To make matters worse the total number of accidents is increasing; in Nevada the rate of collisions increased by nearly 10% (9.7% to be exact) according to Federal Highway Administration data, The Review-Journal reported. The Las Vegas Metropolitan Police Department; or LVMPD (which patrols all of Dade County) responded to 2,500 more accidents in the first three quarters of 2016 than in the same period in 2015. The LVMPD responded to 8,500 collisions during the first nine months of 2015 and 13,000 during the first three quarters of 2016.
Just the cost of investigating all those accidents and processing all those claims will greatly add to auto insurers’ expenses. Those costs will be on the top of the additional claims payouts and all the additional legal expenses.
More Increases ahead in 2017
Disturbingly drivers will probably see more auto-insurance prices head in 2017. The rate increases will not be distributed evenly because it is easier to increase premiums in some states than others.
Southern and Western states where insurance regulations are weaker see rate increases first. Certain groups such as younger drivers who are less likely to vote and have less clout in state capitols are also more likely to see rate increases.
Expect to see more rate increases in 2017 and more efforts to ban, regulate or crack down on smartphone use in vehicles particularly from older drivers and insurers. Also most drivers should expect to pay more for auto insurance in 2018.