Why Did My Car Insurance Rates Change?

Auto Smarts

It’s probably the biggest complaint in the industry. You get your quote, you’ve got your rate, and then after 6 months, a year, maybe a few years, you see your rate go up.

What’s with that? You haven’t filed a claim, and you’re a great driver (that’s why we insured you in the first place!).

Well, most people may not realize this, but all kinds of factors can affect your insurance rate over time.

What Causes Car Insurance Rate Increases?

Long story short, insurance rates are tied to costs and risks.

Generally speaking, auto insurance rate adjustments are caused by changes in:

1. Personal Risk

When you get a quote, you answer questions about your driving history, experience, age, vehicle, and location, among others. All this information gives the insurance company an idea of your personal risk.

The thing is though, once you get your initial rate, your risk levels don’t suddenly lock into place forever. They can change as life changes, and not just because you got a speeding ticket or bumped a parked car.

Depending on where you live, the following changes in life and in your policy may alter your risks to your insurer and affect rates:

  • Adding a new or inexperienced driver to your policy.
  • Getting a new vehicle
  • Moving to a new location
  • Changes in your commute
  • Changes in your credit score


2. Inflation and Higher Costs

If there’s one thing you can count on over time, it’s that prices will rise. Chocolate bars don’t go for a nickel anymore and your average car costs nearly 9x’s more than it did 40 years ago! So it’s no surprise that insurance costs more over time, too.

But why exactly?

Well, Auto insurance covers injuries to others, vehicle and property damage, medical and other expenses, and at times, legal fees. So, since insurance can pay for services from these industries, it’s inherently connected to them too. And as their costs fluctuate over time (due to inflation and other factors), Auto insurance rates are adjusted to reflect those costs.


3. Insurance Fraud

Claims are probably the biggest cost to insurance companies, but fraud is the biggest threat to the entire industry. Insurance fraud, like over-inflating damages and filing false claims, costs the industry billions each year. Unfortunately, that can drive rates up.

Insurance companies don’t just sit idly by though. They spend a lot of time and effort identifying and trying to prevent insurance fraud. But when fraud scams do slip through the cracks, or areas of the country become havens to fraudsters, companies have to react. Typically that means raising rates for customers in certain areas.


The Reality of Rate Increases

At the end of the day, whatever the factor, costs are going to fluctuate. And so they don’t have to sacrifice service, most companies are going to raise rates to compensate. But companies have all kinds of options to keep things from getting out of control. They’re:

  • Using the large size of their companies to negotiate better costs and keep rates lower.
  • Utilizing new systems and analytics to watch costs and risks.
  • Getting better data on customers and claims, to more accurately identify risks and adjust rates accordingly.
  • Using new technologies to offer customer-specific insurance rates, based on your exact and actual driving abilities and habits.
  • Working internally to run more efficiently, and keep internal costs lower, to pass on those savings to customers.


The information contained in this page is provided for general informational purposes only. The information is provided by Farmers and its partners, and while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to this article or the information, products, services or related graphics, if any, contained in this article for any purpose. The information is not meant as professional or expert advice, and any reliance you place on such information is therefore strictly at your own risk.