If it seems like your insurance rates are getting higher and higher each year, you’re probably right. Insurance rates climb each year, and for the past 5 years, insurance premium rates have risen by more than an average of 9% each year for consumers. This is seen with all forms of health insurance – health maintenance organizations (HMOs), preferred provider organizations, and point-of-service plans have all experienced this increase. And it’s not just health insurance that’s getting higher. In addition, those with homeowner’s insurance face annual rate hikes as well, averaging about 8% each time. Auto insurance premiums also rose about 8% last year. In addition, workers’ comp premiums rose an average of 20%.
The Big Question – Why?
Insurance rates increase for a variety of reasons, depending on the type of insurance. Health insurance increases can often be attributed to the rising cost of prescriptions and an increased amount of people visiting hospitals and having medical procedures done. In addition, rising costs for hospitals and doctors also contribute to health care inflation.
As a person ages, they can expect their rates to hike as well. Insurance companies determine how much to charge for insurance policies based on statistical averages, and the older a person is, the more likely they are to get sick as their bodies age.
Auto rates can increase based on a number of factors. The age of the driver, the type of car, and whether or not the insured has ever been in an accident all play a factor in the cost of rates. Also, rates can increase if the insured gets in an accident, regardless of fault, or gets a traffic or speeding ticket.
Increased homeowner’s insurance rates depend on a variety of factors as well, including the area and the environment and climate. For example, after Hurricane Katrina, insurance rates along the Gulf Coast increased dramatically and have continued to increase since then as they try and recoup their losses from having to pay such large amounts of money after the storms that hit.
Major catastrophes can also cause some insurance companies not to cover anyone. After September 11, for example, no insurance company would sell terrorism insurance to large buildings, regardless of how high the price – the payout would have been astronomical had another attack occurred.
Rates also tend to fluctuate with the market and increases may have nothing to do with major catastrophes or health problems. For instance, sometimes a “slow” period causes insurance companies to lower their policies to attract more business. Then when a major event happens or the number of claims increases, so do their rates.
How Can I Save Money?
While you can’t really prevent the rate hikes, there are some things you can do to save money on your insurance. First of all, make your voice heard; write to your insurance regulators and encourage your neighbors to do so as well.
Shopping around for a good medical benefits program is one way to cut costs. Take into account the cost of premiums and deductibles when finding a health insurance plan. Insurance agents work on commission, so many of them will be more than willing to help you find a plan that works for you and your family or company. This applies to all aspects of insurance as well, including auto and homeowners. Be sure you purchase your plan from a reputable, well-established company.