Why do my premiums keep increasing?!?

I receive many calls from folks wondering why the insurance rates are constantly increasing. They wonder where if any can they find relief from the high premiums. I have put together an article that you may find helpful in understanding the insurance industry.

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The prices you’re offered depend on several factors. Since your home and family’s location and characteristics likely differ from the sample profiles used for its comparisons, do some shopping on your own. And if you’re considering an insurance switcheroo, know that you don’t have to wait until your policy term ends to sign on with a lower-priced company. Even if you select a low-priced company, don’t waste hundreds of dollars a year buying the wrong coverage. Here are some tips on reducing premiums:

• Take a high deductible: You’ll get a big discount, and it will make you less likely to file small claims that may generate future premium hikes. Keep in mind that the purpose of insurance is to protect you from losses that you can’t afford to cover yourself. If you buy insurance for small losses, you pay insurance company overhead — sales, administrative and claims handling costs — to deal with losses you could cover out of your own pocket. You need to determine how big a loss you can incur without unacceptably disrupting your life, and then set your insurance deductible levels accordingly.

• Obtain an accurate estimate of what it will take to rebuild your home. Many homeowners do not maintain adequate insurance coverage, leaving themselves financially vulnerable in the event of a total loss. Don’t count on your insurer to keep your homeowners policy up to date. Every few years have your insurer re-estimate your home’s replacement cost and then adjust your coverage as needed. But keep in mind that insurance agents may try to sell excessive coverage by providing inflated estimates of replacement costs. If you buy too much coverage, you’re paying for insurance you can’t use.

• Limit the number of claims you make. Filing a claim will result in higher premiums from most insurers and may cause an insurer to drop you — which will make it difficult and more expensive to get insurance elsewhere.

[Low credit scores may mean higher homeowners insurance rates]

Many consumer groups — including Checkbook — oppose this use of credit scores, arguing that the scores are not a direct measure of insurance risk and that using the scores in insurance pricing hurts low-income consumers, whose scores tend to be lower on average. Companies, unfortunately, are increasingly using secretive and opaque methods to calculate their rates.

• Consider declining optional higher coverage limits and other add-ons. Raising limits for some types of coverage — such as liability coverage — won’t increase your premium much, and most consumers find the extra protection worth it. But be wary of agents and companies that try to tack on extras without discussing them with you first.

• Consider buying your homeowners and auto policies from the same company. Many companies offer dual-policy discounts to customers who insure both their homes and cars with them. But such discounts are usually small and won’t make a high-priced company a good deal. (Checkbook also evaluates auto insurance companies for quality and price.)

Keep in mind that what companies sell as their standard insurance policies varies, which makes direct cost comparisons more difficult. For example, some insurers estimate the amount of dwelling coverage needed and then automatically include an extra 25 percent or more of protection to make sure you’re covered in the event of a total loss.

Similarly, while coverage for increased living expenses is usually set at an amount equal to 30 percent of the dwelling coverage, with some companies there is no limit. They instead reimburse for actual living expenses for up to one year. And some companies automatically cover personal property using a replacement-cost provision rather than charging an extra premium for it. If you are interested in these types of enhancements, make sure you’re comparing prices for the same coverage.

Take into account that what you get with basic coverage is particularly important if you own an older home, where you might want to make sure expensive-to-replace features like woodwork are properly covered.

Standard policies promise to repair or replace what is damaged, but not to pay for an exact replica of what was lost. Also, with older homes make sure you’re covered in case there are additional costs to bring old systems up to code during a rebuilding process. Some insurers include this type of coverage for no additional charge, while others impose additional hefty premiums.

[Real Estate Matters | Lack of homeowner’s insurance sparks dispute with lender]

No matter which company you choose or which coverage you select, you’ll want a company or agent that offers unbiased information and quotes accurate prices. Unfortunately, Checkbook’s undercover shoppers often found many agents more interested in selling them too much insurance and unwanted options than dispensing solid advice and reliable price quotes.

Often their information was incorrect, even dishonest. When shopping for insurance, speak with several companies and agents — and question price quotes that seem excessive or include unrequested coverage.

Document features of your home and keep the list up to date. If you make improvements, promptly report them to your insurer. Take pictures or videos of your belongings, and keep this information in a safe place away from your home. Being able to prove the value of your home and belongings will ensure that you’ll be fairly compensated in the event of a loss.

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Atlanta scores 179th out of the 200 major cities for safe driving….again.

Let’s make a list, shall we?

• Road rage

• Distracted Drivers. Texting, Facebook, Cell phones, etc.

• Speeders

• Aggressive and rude drivers

An average of 200 serious injury/death auto accidents in Georgia per week.

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Reported in Reuters

Allstate's second-quarter earnings came in at $326 million, or $0.79 per diluted common share. That represents a decline of 43.2% on a per-share basis compared to the same period a year ago.

In the earnings release, the company's CEO, Thomas Wilson, noted that auto losses were not limited to any particular risk pool or customer type. He pointed out that "the increase in auto accidents is broad-based by state, risk class, rating plans and the maturity of the business, and consequently appears to be driven by external factors." Furthermore, increasing losses were the result of both increasing severity (losses per event) and frequency (more events in which the company would have to pay claims).

For GEICO, which is owned by Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), and Allstate (NYSE:ALL), the first quarter of 2015 was a surprisingly poor quarter for their auto insurance businesses. Claims-related losses reduced GEICO's first quarter pre-tax operating income by more than half, falling from $353 million in first quarter 2014 to $160 million this year. Meanwhile Allstate's underwriting income fell from $183 million to $76 million.

Both companies saw their auto loss ratios (the percentage of premiums paid out toward claims) rise above their historical norms. GEICO has typically operated with loss ratios in the 75%-77% range but reported a loss ratio of 80.1% this past quarter. In the case of Allstate, its main brand saw auto loss ratios increase from 67.9% to 71.7%.

With the largest auto insurers operating at pre-tax underwriting margins of 7%-8% of premiums earned, small percentage changes to the loss ratio have a dramatic effect on operating income. The main concern for investors is whether such shifts are a result of underwriting family’s broader shifts in consumer behavior. Auto insurance loss data is typically broken into two component parts: severity and frequency. Loss severity looks at the average dollar value of claims made, while loss frequency measures the quantity of claims as a percentage of policyholders.

During the two recent quarters both GEICO and Allstate experienced significant increases in loss frequency. Allstate saw increases in claims frequency across all its brands and lines of auto insurance business. The company's Allstate brand saw bodily injury claims frequency rise by 6.8% over the previous year. GEICO reported increases in claims frequency in every part of its business.

Catch Up Plan

The insurers announced in May that it would charge customers more after auto claims were made.

We are broadly increasing rates to catch up, and then keep pace with increase loss costs. All State President Matt Winters said Tuesday during press conference, “Those rate actions and underwriting changes are taken in conjunction with our ongoing correct-classification programs to ensure we are adequately matching price and risk.”

The economy is continuing to recover with lower fuel costs and increased auto sales. What does this mean to the insurance companies? More Autos on the road to insure. More autos equate to more accidents which results in higher premiums for us all.