According to many insurance consultancy companies, more and more motorists are confused as to why the rates of car insurance premiums continue to go up when the prices of most consumer products have started to decline.
Speculations say that reports about the motorists’ confusion came out as an effect of the U.S. Department of Labor’s declaration early this week. The U.S. Department released information revealing that the Consumer Price Index went down by 2% from last year to October of 2009. The Consumer Price Index is a very reliable indicator that measures the cost of majority of the things consumers buy and use. US public motorist groups immediately picked up on the news and are now claiming that car insurance premiums have increased by 4.6%, which, according to them, is very contradicting to the steady decline in consumer prices.
According to the recent statistics compiled by the Insurance Information Institute, the cost of motor vehicle body work increased by 2.1%, legal services by 3.5%, and total medical care prices went up by 3.5%. An Insurance Information Institute said that all in all, the increase in the costs incurred by insurance companies is still way below the premium rate hikes that they are reaping.
Insurance experts say that the news may be good for private insurance providers since they are most likely to report an increase in profits on car premiums for 2009. However, this can be bad news for state regulators; those who make sure that insurance companies do not make excess profits from overpriced premiums may be alarmed. California Insurance Commissioner Steve Poizner said in an interview that state regulators need to be work harder in watching over insurance companies who may be going overboard.
When auto insurance is mandatory in a certain states, it needs to be monitored and regulated. However, there are states that have laws that allow insurance providers to have the advantage of “flex rating,” making it possible for them to increase their rates without regulatory approval as long as they do not go beyond 5%. According to Insurance Commissioner Steve Poizner, this is the fact that most regulators need to watch out for in doing their jobs.
Reports indicate that a survey conducted by a private insurance survey group shows that a greater portion of the American public is unhappy about the recent information from the Department of Labor. The survey points out that majority of the US policy holders are starting to believe that state controllers may not be watching over the auto insurance rates, particularly now when many of them are having problems managing and paying their bills.