The continuous onslaught of the economic recession has hit many American motorists hard. Despite the grim situation, most drivers are choosing to retain the same level of auto coverage. To cut costs, some are resorting to increasing their deductibles, industry specialists and data reveal.
A recent survey conducted by the Insurance Research Council has found out that 28 percent of respondents are looking for lower premium rates because of the recession. Another 15 percent expressed their readiness to increase policy deductibles or trim down on coverage to save more money.
Industry players say that even before the economy turned for the worst, there was already a trend toward increased deductibles. However, the recession is speeding up the demand for higher deductibles.
A representative for a well-known car insurance firm says that people are scrutinizing their policies and looking for expenses they can cut back on.
Another research firm, Manhattan-based Insurance Information Institute, reports that higher deductibles often lead to lower insurance costs. If a policyholder chooses to raise his deductibles from $200 to $500, he can cut coverage costs by some 15 to 30 percent. Drivers can even save up to 40 percent of insurance costs if they decide to increase deductibles to $1,000.
Frank Peruzza, a licensed adjustor, admits to seeing more and more people coming with deductibles ranging from $500 to even $1,500. Because of the relatively high deductibles, consumers cannot receive substantial payments from their insurance companies especially if the damage to their vehicles is less than their deductibles. This has lead to some motorists asking Peruzza for inflated bills to collect on deductibles. Peruzza says he has refused customers because they assume that body shops will give in and let them collect insurance claims.
In 2003, the percent of uninsured drivers was estimated at 14.9 percent, according to the Insurance Research Council. This figure went down in 2007 to 13.8. However, the research group warns that due to the bad economy, it’s most likely to increase to 16.1 percent in 2010.
The group’s senior vice president, Elizabeth A. Sprinkel, says that the predicted increase is closely tied to the nation’s unemployment rate. She points out that new uninsured driver are the victims of the recession.
Peruzza also added that because of tougher economic times, more people might suffer credit problems, adversely affecting their credit ratings and scores. This could then lead to higher premium rates. He says that a consumer’s credit score is linked to car insurance rates.