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Why did my Oklahoma car insurance go up?

Jul 26, 2017
 
When your Oklahoma car insurance rates go up have you ever asked yourself a variation of the following questions?
 
“My car is another year older; why does my car insurance continue to go up?"

“I have never gotten in an accident; shouldn’t my car insurance get cheaper every year?"

“My car is depreciating more and more; shouldn’t my car insurance rate also go down with it?"
 
If you’ve ever had these thoughts or something similar, you’re not alone. These are questions we as insurance agents face and answer every day with new and existing clients. And before we go any further let me dispel a huge rumor and myth about the insurance industry: when I buy insurance, I do not receive a discount.  It’s not like working for a company that gives an employee discount.
 
 It only makes sense that as you and your car get older, your car insurance rates should go down. However, what you’re undoubtedly experiencing is the opposite, and your Oklahoma car insurance premiums are rising! Why?
 
 
Before we get into the reasons, let’s consider how insurance companies determine rates for everyone. All companies subscribe to the statistical axiom of the “Law of Large Numbers” which says the larger the number of exposure units independently exposed to loss (you and me and our cars), the greater the probability that actual loss experience will equal expected loss experience.
 
  
Simply put, the more people and cars on the road, the higher probability that the insurance companies will have to pay out for more claims. The actions of large groups of people affect everyone else. While you may be an excellent driver, that doesn’t mean most people in your zip code are. There are risks that the insurance company sees that make it statistically more likely to have something happen over time, than to have nothing happen ever. As a direct result to you, and others, insurance companies will raise Oklahoma car insurance rates across the board.
 
Distracted Drivers

·         In 2014, 3,179 people were killed, and 431,000 were injured in motor vehicle crashes involving distracted drivers.
·         Ten percent of all drivers 15 to 19 years old involved in fatal crashes were reported as distracted at the time of the crashes. This age group has the largest proportion of drivers who were distracted at the time of the crashes. (NHTSA)
·         Drivers in their 20s are 23% of drivers in all fatal crashes, but are 27 % of the distracted drivers and 38 % of the distracted drivers who were using cell phones in fatal crashes. (NHTSA)
·       Up to   660,000 drivers are using cell phones or manipulating electronic devices while driving - a number that has held steady since 2010. (NOPUS)
·         A 2015 Erie Insurance distracted driving survey reported that drivers do all sorts of dangerous things behind the wheel including brushing teeth and changing clothes. (ERIE INSURANCE)
·         Five seconds is the average time your eyes are off the road while texting. When traveling at 55 MPH, that’s enough time to cover the length of a football field blindfolded. (2009, VTTI)
 
 
 The correlation between distracted driving and fatal accidents is one that cannot be ignored, and a major reason why insurance carriers across the state are increasing car insurance rates.
 
More Expensive Cars

Right off the bat, I am glad that the first mention on the accessories list for this 1997 Toyota Camry above is a “clock”.  It does come with an AM/FM radio as well, which is certainly a nice feature.
Compare that to a 2017 Toyota Camry, with its wireless charging abilities, an “App Suite” where you can stream your favorite music and radio channels, navigational system with live traffic alerts, voice activated features, and an engine monitoring LCD screen.

Look, no one is claiming that in 1997 these features weren’t important. We simply want to point out the stark differences and the exponential growth in automobile technology in a relatively short amount of time.
This means if or when these cars are involved in collision accidents, there is so much more that must be accounted for, and the cost to fix, replace, or repair them is much higher.

Nowadays, your local body shop doesn’t just have to be well adept in fixing a bumper; they now need a computer science degree to figure out all the moving parts. As a result, the cost of labor and materials has skyrocketed.

This can cause insurance companies to increase rates. If their cost to fix a car - or tens of thousands of cars - goes up, then insurance companies have no choice but to raise the rates of everyone to maintain profitability.
 
 
Car Insurance Companies are For Profit Businesses

Insurance companies are in the business to make money.: A handful of consumers operate under the belief that insurance companies should pay for any and all claims regardless of profit, but insurance companies are in the business to make money. I know this sounds a little harsh, but it’s the reality that we live in.

Think about this for a moment in case you just furrowed your brow at this idea.  Warren Buffett owns Berkshire Hathaway and Berkshire Hathaway owns GEICO Insurance.  Do you think Warren Buffett doesn’t want to make money from owning GEICO Insurance?!?

Of course, he does and so does every person that owns Berkshire Hathaway stock.


Insurance Score

This is one of the most complicated subjects to discuss, and often a topic that people want to avoid.  When we use the phrase Insurance Score, it is referring to a credit-based statistical analysis of an individual's potential to file an insurance claim.  Insurance companies believe that this gives them a better assessment of risk exposure and to predict future losses.
Here are some of factors that an insurance company will include in the insurance score, which are derived from a credit report:
·         Outstanding debt
·         Length of credit history
·         Late payments
·         Public records of bankruptcies, judgments, or liens
·         New applications for credit
·         Types of credit used
·         Available credit and payment patterns
 
Here are some factors that an insurance won’t include in the insurance score:
·         Income
·         Race
·         Gender
·         Religion
·         Marital status
·         National origin
·         Geographic location
 
An insurance company is looking at long-term patterns and overall responsible use of credit when determining an individual’s insurance score.  What may be the most frustrating aspect of this is that some insurance companies do not disclose insurance scores to the customer or the agent?
 
MARKETING

According to 2013 SNL Financial report, GEICO spends about $6 of every $100 it collects in premiums on advertising, totaling $1.2 billion annually. Allstate increased its budget last year by 5.7% to reach $900 million, and State Farm pushed its spending up 5.1% to $800 million.
In general, insurance companies spend so much, they outstrip every other American industry by nearly 8%. Carriers say keeping their name in the minds of American consumers is worth the cost, but critics are beginning to voice disapproval. According to J. Robert Hunter of the Consumer Federation of America, the massive ad budgets of auto insurers are a big part of the reason GEICO and Allstate have had to raise rates this year.
  
He states, “It drives rates up since every penny of the ads is built into the rates.” While we all laugh at the funny commercials put out by big companies, there is an accountant and a company actuarial off somewhere making the determination that they need more money as a company. Since insurance companies don’t depend on the kindness of strangers for their income, it’s safe to say they plan on getting it from you, the policyholder.


What does the future hold, and is there hope?

It’s uncertain what the next 20 years looks like. With self-driving cars on the way, who knows how and when insurance rates will drop, or if they ever will?

The beauty of working with an independent insurance agency like Centennial Insurance Group is that when Oklahoma car insurance rates increase, we can always look at the current insurance marketplace and find a company that offers the best coverage for your situation and one that also works within your budget.
 
If you found this blog helpful and would like our agency to review your current coverage insurance needs, contact us at 405.286.5025 or info@centennialins.com
 
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