How The Recession Has Affected Car Insurance Hikes And Increases
The Great Recession has hurt everyone economically in some way or another, including drivers who pay more for car insurance due to rate hikes and increases in premiums. If your wallet has taken a hit due to bigger car insurance bills, then you might wonder why. Are insurance companies simply taking advantage and lining their pockets, or are there valid reasons for these car insurance hikes and increases?
It is estimated that the US economy has shed 8.4 million jobs since the recession began in 2007, making this the worst economic downturn in the last 60 years. With the national unemployment rate consistently hovering close to 10%, a great many people have fallen behind on their bills. Some drivers are choosing to carry less liability coverage in order to lower the cost of their premiums. Others are going without car insurance altogether, and yet continuing to operate their automobile on public roads. Both of these trends result in car insurance hikes and increases due to higher costs on the claims side of the business.
When your vehicle is involved in a car accident with an uninsured or underinsured driver, then two types of damage usually result: property damage and bodily injuries. Collision is the type of insurance a policyholder would purchase to protect their vehicle from damage. There is also a coverage known as uninsured motorist property damage. Bodily injuries are typically covered by one of the following types of insurance: Medpay or personal injury protection (PIP), underinsured and uninsured motorist. These types of insurance are all complicated and your agent is best qualified to help you choose a plan suited to your needs.
When an insurance company pays out on a claim for a car accident that was the fault of another driver, it typically seeks to recover what it has paid through a process known as subrogation. When the other party is insured, then their insurance carrier would pay the bill for damages which their driver caused. However, when a driver is carrying liability limits that are too low to cover these costs, then they may be absorbed or written off by your insurance carrier. This is also true when the at-fault driver is uninsured, and a policyholder uses their policy to be made whole.
It can be argued that these costs are built into the price of the premium and are therefore a cost of doing business which the insurance company should anticipate. However, severe economic downturns do result in much higher incidences of both underinsured and uninsured motorists on the roadways. This results in corresponding rate hikes and premium increases as the car insurance company endeavors to pass their costs on to the customer.