Car Insurance Premiums Skyrocket While Insurers Only Cover Half of Crash Costs
What’s behind the rapid increase in car insurance rates?
Typically, drivers might see an increase in their premiums for a few reasons: they got a speeding ticket or other moving violation, a new driver was added to the policy, or there was an increase in claims in their area of residence.
But without much of an explanation, car insurance costs continue to rise.
According to new Consumer Price Index data, car insurance premiums are up almost 21% for the 12 months ending in February. A report from Bankrate shows that the average premiums for full-coverage auto insurance hit $2,543 in 2024. The last time car insurance rates rose that much annually was in 1976.
Insurance company executives offer several excuses for slamming Americans with these steep rate hikes. They are losing too much money, they say, because of inflation and the rising cost of car repairs. They point to the troubling increase in severe car accidents. They even attempt to blame their own policyholders, who sometimes have no choice but to take them to court when they refuse to pay insurance claims.
Is the industry really losing money? Or are they not telling consumers the whole truth?
Property Casualty Insurers are Raking in Historic Profits
Last year was a record year for the property and casualty insurance industry. In fact, the National Association of Insurance Commissioners says it was the industry’s most profitable year ever, with historic profits topping $88 billion.
According to AM Best, this year looks even better, with first-quarter profitability on pace to shatter 2023’s record high. As consumers pay soaring premiums, Wall Street is also rewarding the insurance giants with record share prices.
But wait, it gets worse.
Only Half of Motor Vehicle Crash Costs Covered By Insurance
Did you know the economic cost of motor vehicle crashes in the U.S. exceeds $340 billion a year? Meanwhile, auto insurance companies pay only 54% of the costs associated with motor vehicle crashes every year, based on data from the National Highway Traffic Safety Administration (NHTSA). That means crash victims are responsible for 23% of the costs, with charities, health care providers, and local governments (taxpayers) picking up the rest.
It’s a double whammy for policyholders who pay much more premiums but get less coverage after a crash. Denying claims and lowballing accident victims has become standard operating procedure for many auto insurers.
Sadly, It’s More of the Same Tactics Used By Insurers
The sidestepping of responsibility while justifying skyrocketing premiums is just the latest in a long history of unscrupulous tactics insurance companies use to scam consumers. The three D’s- Deny, Delay, and Defend- are the most common ways that experts say insurance companies try to sidestep insurance payouts.
- Deny claims: Insurance companies will outright deny that an accident occurred or that the policyholder was seriously injured. Some companies even offer gifts and bonuses to employees who deny claims and keep payments to a minimum. The hope is that denial after denial will defeat and deflate claimants, making them feel they have no choice but to throw in the towel.
- Delay paying: Insurance companies are known to send out incorrect forms and then blame claimants for the error or set short time limits on when a claim can be filed after an accident, injury, or illness. In cases involving elderly or gravely ill claimants, some insurance companies have even delayed payments in hopes that the customer dies before they have to pay.
- Defend in court: Billions of dollars in profits and thousands of high-priced lawyers on the payroll mean they are always ready for a trial. Insurance companies know many customers may be afraid or unwilling to hire a lawyer. They use that fear to convince claimants that a court battle would only end in an insurance company victory.
Do You Suspect Your Rates Have Gone Up Unfairly?
Businesses need to make a profit in order to thrive, and it goes without saying that Americans rely on insurance to protect their health and financial well-being. But smart consumers know a smokescreen when they see one. A consumer’s right to a trial by jury is the only way to hold these insurance companies accountable and right this wrong.