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Auto insurance rates rocket: What consumers can do

Auto insurance rates are rising

When a state insurance consumer issues a "consumer alert" against an insurance company, you know something big is on the horizon.

That’s what happened in early April, as Georgia Insurance Commissioner Ralph Hudgens when he triggered a consumer alert to residents after Allstate Insurance filed for a 25 percent auto insurance rate hike that goes into effect on May 22, 2016.

This from the alert:

Hudgens warns policyholders that the 25 percent figure is only an average rate change for the entire state, and that many policyholders should be prepared to see a rate change as high as 58.3 percent.

 “I am deeply concerned about this filing and the impact it could have on consumers,” Hudgens said. “Georgia law prohibits me from stopping or delaying this increase unless an actuarial examination proves the rate to be legally excessive.”

See also: Cheap gas driving up insurance costs

On the same day, Hudgens directed Georgia department staff to initiate a professional level examination of the Allstate filing to determine if the rate increase is defendable under state law. If the results of the examination show that the filing cannot adequately support the increase, he intends to take every measure allowed to him by law to protect policyholders.

The Georgia Department of Insurance is advising statewide policyholders to talk to Allstate and discuss the reasons for the increase and options available to them. “These options could include revising deductibles, reviewing coverages needed or comparison shopping to find the right mix of coverage and price,” the GDI reports.

For its part, Allstate claims cheaper oil and gas have led to increased driving among policy holders, thus elevating the risk of an accident

"We adjust rates very carefully to charge properly for the risk we assume and ensure our ability to protect customers from life’s uncertainties,” noted Allstate spokesperson Daniel Groce. “As is industry standard, changes in market conditions require that we set rates that are adequate for the coverage we provide. Increases in the number of miles driven, the amount of traffic fatalities, and the costs associated with repairing vehicles have caused the insurance industry to experience a significant increase in both the number of claims received as well as the cost associated with settling these claims.”

Auto insurance rates move higher around the nation

It’s not just Georgia. Auto insurance consumers across the nation say they are feeling the pinch of higher rates.

“My husband and I were very surprised by our latest auto insurance renewal offer from our current provider, and even more frustrated when competitor rates didn't offer any relief,” says Kendal Perez, a savings expert for Coupon Sherpa in Fort Collins, Colorado. “According to our insurance provider, an increase in uninsured motorists has driven up the rates for everyone else.”

See also: Check out our calculator to see the average cost of auto insurance by state

The couple didn’t take the rate hike lying down.

“My husband met with our agent and was able to shave $250 from our bi-annual bill,” Perez says. “Interestingly, adjusting our deductibles didn't have nearly the impact as reducing our bodily injury coverage from $250,000/$500,000 to $100,000/$250,000. We also removed coverage associated with rental car costs if our vehicles ever needed repairs due to an accident.” Perez says she figured her auto insurance deductible for accidents was low enough that the couple could afford to cover the cost of a rental (or carpool, or borrow a vehicle from a loved one) in the event their vehicle ends up in the shop.”

Parent companies, stockholders push higher auto insurance rates

Industry experts also say insurers are feeling pressure from parent companies and stockholders to take aggressive steps against rising claims.

“In the case of Geico, this ‘float’ is a major source of funds for (parent company) Berkshire Hathaway to invest both inside the company as well as outside the company through acquisitions and investments in publicly traded companies,” says David Kass, a former economist for the U.S. government. “The insurance businesses in Berkshire are the engine that drives the company. The float provides the fuel.” 

Without an underwriting profit, insurance float gets eaten up, with paid-in premiums going out as fast as they come in, depriving the company of their use in the meantime, Kass explains. “So preserving underwriting profit via rate increases is axiomatic, and ratepayers are going to absorb it,” he says.

Consumers can save by shopping providers and adjusting coverage

Jordan Perch, insurance analyst at, says consumers can cut insurance costs by doing what Perez did – get in touch with your auto insurance provider. “The first thing they should do is talk to their insurance agent, and if it turns out that they cannot avoid increased premiums, switch providers,” Perch advises.

“Consumers should also start thinking about raising their deductibles, which always helps lower monthly premiums, since they already know that rate hikes are on the horizon,” Perch says. “Also, reducing the coverage is another way to curb insurance costs. Motorists should think about what type of coverage is not absolutely necessary for them and drop them. In most cases, it's recommended to drop collision and comprehensive coverage.”

See also: Raise your car deductible and save big

In an era of rising auto insurance rates, don’t accept higher costs without fighting back. Talk to your insurance provider, let them know you’re prepared to walk if you don’t get a price break, and cut insurance costs by accepting higher policy deductibles.

Do all that and chances are you can contain a major auto insurance rate hike this year.

See also: Auto insurance rates nearly double after one moving violation

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