Auto insurance is one of those things I have a love/hate relationship with. I love the fact I am protected if someone else hits me, I hate the fact I pay hundreds of dollars for peace of mind. The funny thing is that most states have mandatory insurance for most drivers, which means the insurers have a captive market. You have to have auto insurance to be a legal driver.
Insurance companies are probably the best example of legalized gambling in the United States. Armed with reams of statistics and models, they bet that the money they charge their customers will cover the money they have to pay out. But what if their statistics and models turn out to be wrong? That’s what’s happening now.
According to most auto insurance companies they are seeing a drop in claims . This means that fewer people are requesting coverage due to vehicle accidents. Have we become a safer driving society?
I’m an age where people are more concerned about teenage drivers and talking on cell phones while driving, you would think that claims would be rising. Here are a few reasons why they might be declining. I’m taking a stab at these and offer nothing but opinion to back up my thoughts on the auto insurance claims issue:
Older drivers: According to the article, the baby boomers have taken over the road. You become a safer driver as you get older, which means that the bulk of our population is now the safest driving in a generation. This makes sense since I’ve seen my own habits change as I get older. I stop on yellow lights, make sure my stop sign stops are complete, etc. My only concern with this theory is that with an increase in the population of an age group their tendencies should rise as well.
Drunk driving laws: Since the federal government has mandated thresholds for drunk driving limits for the states, the rate of drunk driving arrests has risen. It would make sense that the rate of accidents caused by drunk driving has decreased leading to less auto insurance claims.
Graduated teenage drivers: States have continued to institute programs for awarding driver’s licenses. Back in the day when you turned 16 you went, took your test, passed and had a full license. Today many states graduate people into full driver’s licenses. Many have stipulations relating to when teenagers can driver, the number of people that can be in their car and if they can talk on a cell phone.
Fear of claims: I think this is the number one reason there has been a decrease in auto insurance claims. If you’ve filed a claim in the last three years you’ll know that insurers are very quick to drop your coverage. Some states have consumer protection, but most don’t. Don’t underestimate the fear people have when making a claim.
The auto insurers have been slow to drop their rates, instead they’ve decided to increase their profits. If trends hold out, though, I would expect to see many companies start to drop their rates.
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