A common dilemma for newly licensed drivers to obtain auto insurance has been on the rise. Drivers may lose coverage even for small offenses, such as missing one payment. There seem to be no more grace periods. If a driver is matched with a coverage plan, sometimes, there is a waiting period for coverage to start 15 days later. For Californian drivers who already have policies in place, the challenge for many is the increase in premiums.
Many reasons are being presented from various sources, but a few main ones that have been repeatedly brought up were:
- Fraud Claims
- $2.6 billion in returns of premiums for COVID
- Inflation
- Poor underwriting results
- High Insurance operating costs allocated
Responses from good drivers are usually more critical since they also face some premium increases when they have had no traffic violations or accidents for years and years. Responses from not-so-good drivers are concerned about the affordability. With some of the visible actions being taken recently by the insurance carriers, may be a positive direction if persists. Rewarding the good drivers will increase insurance carriers’ policy volume, which statistically reduces their future losses. Insurance carriers then take the premiums paid by the good drivers and invest in a greater return to help keep the premiums low in the long term.
What is considered a “good driving record” generally?
- No serious criminal traffic offenses, such as driving under the influence of intoxicants, (these may remain permanently on your record).
- No major accidents or incidents in the last 5 years.
- No speeding tickets or minor violations in the last 3 years.
- No Late or missed payments (newly implemented)
When insurance companies focus on making the premiums more affordable to high-risk drivers, many times, the percentage of loss in the future may be much greater than the premiums collected. Thus, resulting in poor underwriting results. Consumers need to understand these basic concepts to help prevent future drastic rate increases. Many things are not apparent immediately, but will eventually catch up to reality.
While many insurance carriers will need to perform a deep dive into their operating costs and cut unnecessary expenses or improve more streamlined (cost-effective) measures, at the same time, it is also important for consumers to be more cautious when operating a vehicle to generate a win-win for both the insurance carriers and policyholders.
Please visit Affluentopia Auto Insurance page for more details.
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