Did your car insurance rate increase or decrease? Here’s why.
Written by The Clearcover Team | 5 minute read
Did your car insurance rate increase or decrease?
Picture this: your car insurance comes due for renewal, and your insurance carrier gives you a new rate that’s pretty far off from what you’re currently paying. You rack your brain, trying to figure out why your car insurance rate changed. I didn’t get into an accident, you think to yourself. No tickets or auto claims in the past year, either. As far as you know, nothing obvious has changed — so what gives?
If this sounds familiar, you’re not alone. Many American drivers have opened their renewal offer in the last year only to be surprised — or maybe even outraged — at an unexpected cost difference. And trust us, we totally get it. When you’re sending a portion of your hard-earned income to your auto carrier, it’s important to make sure you’re not throwing more money at them than you need to. That’s why it’s equally important to understand your new rate — so that you know why it has changed and can make a decision about the value of shopping around before re-committing.
Why do car insurance rates increase or decrease?
It's an industry standard that auto premiums are reevaluated just before a new policy term starts. This is when a carrier assesses if a customer’s current auto rate reflects their risk and discounts, and they’ll issue a car insurance rate increase or decrease accordingly. At Clearcover, this is done every six months — partly to make sure that we are charging an adequate amount in premium so we can meet anticipated claims costs, and partly to make sure that we’re giving customers a recurring chance to get their best rate possible. (Here’s more on how carriers like us determine whether car insurance rates will increase or decrease.)
What does reevaluating your rate mean?
Reevaluating your rate means that your carrier generates a new renewal rate using your personal information, driving history, and policy activity. They account for any recent life changes that you have made (more on that later) and apply their rating factors to decide how much you should pay. Keep in mind: every insurance carrier approaches this process differently because it’s highly dependent on individual business models. That’s why every insurer has its own intricate, regularly updated formula that its actuarial whizzes use to calculate renewal rates. Across the board, this formula relies on things called rating factors.
What are car insurance rating factors, and how do they cause my car insurance rate to increase or decrease?
A rating factor is an individual characteristic of a customer that companies use to price their car insurance premiums. If your car insurance rate increases or decreases, there’s a good chance that rating factors are to blame.
Most companies account for dozens of rating factors at once when determining premium costs. Some of these factors are completely unique to you, like driving record and vehicle use, and some are more broad, like location and type of vehicle. When rating factors are accounted into a rate formula, they can adjust the cost based on how heavily they’re being weighed. For example, a recent costly accident might cause a rate increase, while a recent move to an area where medical costs are generally lower might cause a rate decrease.
As for Clearcover, we trust our actuaries to determine which rating factors we include in our calculations based on state requirements, customer needs, and business objectives. And while we’ve worked hard to ensure that you can get a quote in just a few minutes, that kind of ease betrays the complex rating process that happens behind the scenes. Our rating factors are constantly revisited by our experts — so if our customers experience a car insurance rate increase or decrease with us, it reflects a likely re-assessment of the complex rating factors that determine your rate.
Understand your insurance renewal rate but still not ready to commit? Shopping around is the best policy.
Why did my car insurance rate increase?
Car insurance rate increases are arguably far more upsetting than a decrease — and unfortunately, they’re also far more typical. If you’re a customer with one of the big-name auto carriers, there’s a good chance that your rates have gone consistently upwards in recent years: the industry giants saw up to an 8.8% average rate increase in 2019.
These increases have a lot to do with those rating factors we just went over. If you’re looking for potential reasons why your car insurance rate increased, any of the following factors could be the cause:
Recent accidents or violations
Changes to your risk profile (added/removed drivers or vehicles, change of address, a lapse in coverage, etc.)
Outside factors (rising medical or repair costs, increased accident frequency in your area, etc.)
Discount changes
Recent accidents or violations
Traffic violations and at-fault accidents will almost always increase a car insurance rate in the long run — even if that increase is small or negligible. When you get into an accident, insurance calculations often put you in a higher risk category. Having an accident or violation often makes you a riskier policyholder and as such, your rates will rise to accommodate that.
Changes to your risk profile
Personal info
Among other factors that could impact your insurance rate, age and address come to mind here. If you’re a young driver, you might see a high initial quote or renewal rate. As you get older, your rates might drop as you accrue accident-free driving history (until you become a senior, when they often rise again). If you move, your rates could change due to geographic factors (like the cost of claims or the occurrence of severe weather in your area).
Insurance lapses
Having a lapse in your car insurance often puts you in a higher risk category with insurance carriers. Foregoing insurance coverage for long periods of time can indicate a higher likelihood of getting into an accident. This is an important rating factor and can single-handedly cause a premium increase. Makes sense, since most states have laws in place requiring drivers to maintain insurance coverage without a gap.
Outside factors
State of driving in your city and state
Are more people driving in your geographic area, increasing everyone’s risk on the road? Are claims rising? Are uninsured drivers getting into more accidents? If your carrier has noticed new trends like these in your location, they might increase your rate to account for greater likelihood of getting into an expensive accident.
Rising medical or repair costs
A rise in medical care or auto repair costs due to market adjustments oftentimes means a rise in your car insurance rate. Why? Because your carrier is anticipating that an accident will be more costly in your area than before, regardless of whether you’ve been in an accident yourself.
Discount changes
Loss of discounts
Every insurance company has its own list of discounts that it offers. Many of these are situational — like a military, good driver, and good student discounts. If your situation changes (or the drivers on your policy change), you could lose discount eligibility and face a car insurance rate increase.
Why did my car insurance rate decrease?
Even though many Americans have seen an increase in their car insurance renewal rate in recent years, there’s no hard and fast rule. Sometimes, the insurance models work in your favor and you’ll end up paying less in the immediate future. Here are some of the reasons why your rate might decrease:
Clean driving record
Activity fell off of your record
Personal info
Addition of discounts
Switching carriers
Maintained a clean driving record
While having an accident or committing a traffic violation affects your driving record and increases your rate, going accident-free during your last term could do the opposite. The longer you go without an accident, the less concerned your carrier will be with your risk and the lower your price.
Tickets fell off of your driving record
If you receive a ticket for a minor traffic violation, it will usually “disappear” from your driving record in 1-5 years depending on your state and carrier, which will cause your rate to decrease.
Personal info
Similar to how personal info can increase your car insurance rate, changes in things like age and address can also work in your favor.
Improved credit score
Since some carriers use a credit-based insurance score to determine your renewal rate, a recent rise in credit score could mean that you’ll see a lower premium. (It’s worth noting that some states don’t allow the use of credit scores during rating, and some carriers — like us! — don’t typically run credit score during renewal rating. Ask your car insurance company if you’re curious whether they do or not.)
Driving habits
Did you recently let your auto insurance company know that you’re driving less? If so, they could see you as a less risky customer and decrease your rate.
Addition of discounts
Depending on your situation, you might be eligible for new discounts during your renewal reevaluation. Maybe you’ve been with the company long enough for a persistency discount, or maybe you went back to school. When factored in, these discounts are likely to lower your rate.
Switching carriers
Of course, switching carriers could be a quick and easy way to save money on your auto premium. If your renewal rate increases drastically for unclear reasons, it doesn’t hurt to shop around and see what you’ll pay elsewhere. (Don’t forget to compare apples-to-apples when you get a quote — look at your coverage levels along with your price to ensure you get the peace of mind you need.)
Don’t just blindly commit to a high renewal price — do your research first. Get a Clearcover quote to make sure you’re not missing out on savings.
What should I do if my car insurance rate increases or decreases?
First thing’s first: if you’re facing a rate increase that looks scary, don’t panic. Sometimes, rate increases actually do make sense when they’re for reasons outside of your control. For example, some states have recently increased their required coverage levels because rising medical costs meant insurance wouldn’t cover the sum-total of some major accidents. Even though moves like this causes increased rates, it means that you’re far better protected against whatever lies on the road ahead.
That being said, it’s a good idea to get to the bottom of your rate change. If your car insurance rate increases or decreases, we recommend asking your insurance carrier if they can help you understand why. If you’re still not happy with your rate after that, consider shopping around to see if another carrier’s rating factors are more in-line with your budget.
At Clearcover, we care about helping people choose the best coverage for their needs. While we’ve designed our rating factors to bring most people savings, there are exceptions. If your renewal rate with us is different than you expected it to be, we’re happy to walk through it with you to make sure it accurately reflects your situation. Please get in touch with our Coverage Consultant team so that we can explain your price.
It’s worth mentioning that even if it doesn’t always feel like it, you’re in total control when it comes to your car insurance. You are always empowered to switch carriers — even if your current term isn’t over yet. If you’re interested in seeing what you could save with Clearcover, click the button below and check your price today. It only takes a few minutes!
