Why are insurance rates going up?
Sometimes, you have a good idea of why your rates increased. That speeding ticket you got caught up with you, or you’ve had lots of claims.
Other times it may not be so cut and dry. Nothing has changed with your situation yet your rates are still going up.
It’s important to understand that many factors go into insurance rates, so it could be a number of issues. In some cases, there are multiple factors going into the rate increase.
If you’ve experienced a rate increase, contact us to get a quote. Florida’s Best Quote can help!
Keep reading to better understand what causes your insurance rates to go up.
Why Are Insurance Rates Going Up?
The problem with insurance rates is there are so many factors that go into them. It’s not just one thing that makes your rates go up and down.
Some of the factors have to do with the company as a whole. These are out of your hands since they relate to the larger pool of insured people.
Revision of Rates Overall
Sometimes an insurance rate hike has nothing to do with you or your circumstances.
Insurance companies routinely adjust their rates. It’s more common for those new rates to go up instead of down. If the company sees losses in a particular population, they may bump up the rates to compensate.
Maybe the company has seen increases in claims or a general increase in the cost of doing business.
Whatever the reason, the insurance company is doing what it takes to protect its profits.
Change in Your Insurance Score
Companies use your insurance report to help determine your rates. It uses data about you to predict the likelihood of you filing claims.
Your credit report plays a big role in your insurance score. If you have good credit with a solid history of paying bills on time, your insurance score will be higher, which means you’ll pay lower rates.
If you have lots of debt, late payments, and an overall low credit score, you’ll likely have a lower insurance score. That means you’ll pay higher insurance rates.
Your claims history also goes into your insurance score. If you have lots of past claims, it can reduce your insurance score and increase your rates.
If you’ve had financial difficulty recently, your insurance score may have dropped. That could contribute to your increase in rates.
With any type of insurance, having a lot of past claims can increase your rates. If you’ve had a long history of claims in the past, you’ll likely have more in the future.
Every time you file a claim, you cost your insurance company money. They want to cover themselves, so they charge higher rates.
Even if you don’t personally file any claims, rates can increase if other people insured by your company file claims. This is especially true if there’s an increase in fraudulent claims.
The more money the company pays out in claims, whether it’s yours or other customers’ claims, the less they make in profits. Charging higher rates helps offset those losses and keeps them working with a profit. That could be an individual increase to people who file lots of claims or an increase across the board when overall claims are up.
The weather can impact your insurance rates, especially in a state like Florida where natural disasters often cause extensive damage.
Hurricanes, in particular, can cause billions of dollars in damage in Florida. In recent years, Florida has experienced an increase in intense hurricanes.
Several factors led to more costly storm damage. Recent hurricanes moved more slowly and produced wetter conditions than in the past, creating more damage. Hurricane forward speed decreased by 10% from 1949 to 2016.
More people now live in coastal areas, which puts more homes and businesses in the line of storms.
Insurance companies pay out a lot of money in damages when a hurricane strikes. To offset those potential expenses, the company charges higher rates.
But it’s not just Florida weather that can increase rates. Wildfires, winter storms, and hurricanes in other states result in expensive losses for the insurance company. That can cause increases in rates for all customers across the country.
Increased Construction Costs
Are you dealing with an increase in your homeowner’s insurance? That could be due to an increase in construction costs in your area.
Your insurance covers the cost to rebuild your home if it were to be destroyed or damaged. If it costs more to build a home in your area, your insurance company will have to pay more if you have a loss.
That can result in increased rates. Your insurance company is trying to cover itself and the higher amount it’ll have to pay should you have a claim.
Assignment of Benefits Abuse
With all types of insurance, fraud leads to higher rates. Insurance companies take a loss when fraud happens. This costs everyone more money to make up for the financial loss.
One type of fraud with Florida homeowner’s insurance happens through the Assignment of Benefits process. AOB abuse in Florida increased by 70% over 15 years.
AOB is a normal part of the insurance process. It’s an agreement that allows a third party to bill the insurance carrier for the services performed. If you have insurance-covered repairs done on your home, you might use AOB with your contractor so that the company can bill your insurance company.
The problem arises when the third party abuses that power by bumping up the cost beyond what it should be. This type of fraud may include claims of damage without any actual proof or doing additional unnecessary repairs.
If the insurance company denies the payment or only pays part of it, the dishonest contractor takes them to court. They have that right since you signed the AOB and essentially made them the policyholder for this claim.
Florida law requires the insurance company to pay the contractor’s attorney fees if the court rules in favor of the contractor. But it’s a one-way situation, meaning the contractor doesn’t have to pay the insurance company’s fees if the ruling goes the other way.
Whether your carrier fights the charges or pays the higher amount these issues cost insurance companies a lot of money. They pass those costs onto you.
New legislation designed to fight AOB fraud has gone into effect. This may help control increases based on this issue in the future.
Dealing With Insurance Rates
If you’ve experienced a rate increase, get a quote from us today. We have access to over 40 home insurance carriers, so we can shop your coverage and see if we can find an option that offsets the increase.
We also offer full insurance reviews to see if there are additional savings or discount options to get you the best rates possible.