Car owners are putting on their seatbelts in preparation for another bumpy ride as auto insurance providers plan to increase premium rates again.
Although it has been reported that a 15% increase has been made from 2008 to 2009, a number of insurance companies still feel the need for a 10% increase from 2009 to 2010. These companies blame it on delinquencies of their current customers and the unsteady market forecasts.
A survey conducted by an auto insurance consultancy firm showed that almost 50% of auto insurance companies in the United States have scheduled a premium increase next year from 5% to 12%. Roughly, 25% of the country’s auto insurance companies plan to pump premium rates up to more than 10%.
While these companies seem to be unstoppable in their price increase plans, consumers are also planning to do something to stop needless price increases. Consumers argue that planned increase in premiums is not that necessary, especially with the recent remarkable improvement in road safety. Safety on the roads has improved, bringing down the number of fatal accidents and road injuries for three consecutive years since 2006. The concern of the citizens focus on being cheated by big companies who run away with huge profits while they file fewer claims and continue to pay big amounts that increase year after year.
The US Senate has responded to this issue and has asked auto insurance companies to submit properly audited financial statements. Reports say that auto insurance companies that are very vocal in their planned premium hikes claim that roughly 87% of their earnings are spent on medical claims and coverage for property damage. However, after much investigation, evidence was found that this claim is not so true for all auto insurance companies who plan to steepen up their premiums.
A recent Senate analysis revealed that a number for profit oriented car insurance companies are spending a lot less than the initially claimed 87%. Bulk of the clientele of profit oriented car insurance companies are employed individuals and small business organizations, and studies show that policies sold to these customers rarely result to medical claims and property coverage.
Recent Senate analysis shows that only $0.65 cents of every dollar spent to pay for premiums go to hospital bills and doctor’s fees; the real amount car insurance companies spend on claims is pretty much lesser than they claim.
The question on everyone’s mind is where does the money go? The rest of the money consumers spend on premiums goes to marketing, administrative costs, company profits.
At this point, consumers need to keep a sharp eye on their current premiums as the planned increase is set to take effect next year.