A man in Glendale, only identified by his last name Kim, found himself in confusion after reading a letter that came in the mail recently. He has driven without a single accident in 2016 and had a clean bill of driving record.
Yet, the notice from his auto insurance company alerted him that his insurance cost will rise by 7 percent this year.
When Choi called his insurance company and made an inquiry about just why the cost had to rise, he was told that the higher fee was imposed on every customer.
More than a few drivers have experienced similar rise of costs this year as Choi. Auto insurance costs nationwide is expected to rise by approximately 10 percent this year. All drivers, including the ones whose driving records are clean, are subject to the raise.
“Insurance companies have been raising the cost by nearly 10 percent over the last three to four years,” said Chun-ha Insurance executive director Steve Yoon. “A raise of 5 to 10 percent is common, but some have even imposed a 20 percent raise. I’d say about 80 percent of the drivers are paying higher costs now. More elderly drivers who live outside of the city probably have experienced smaller or no raise at all.”
The insurance cost also soared by 7.5 percent last year. In California, the figure was at 7 percent. The primary reason behind the rising cost is due to the financial loss of many insurance companies. SNL Financial recently reported that seven of the nation’s 10 major auto insurance firms suffered losses by 100 percent.
In other words, their expenses have outweighed the revenue exponentially. As the losses pile on, the companies are trying to compensate by driving up insurance costs.
A multitude of reasons have sprung up to add to the insurance firms’ struggles. As the U.S. now has more drivers than ever before, the number of accidents are rising. Repairing cars also costs more than it did in the past and decreasing amounts of return on investments are some of the reasons behind the rising insurance costs.
In fact, the number of car accidents in 2015 rose by 9.5 percent compared to the year before.
“Virtually every insurance holder has been experiencing rising costs,” said an insurance company president. “So more customers are now shopping for cheaper insurance companies, but that is no longer easy in this day and age.”
how much would an accident or DUI increase the insurance cost by?
Drivers who have caused accidents are the ones who are the most likely to be imposed higher insurance costs in 2017. In that case, how much would an accident or DUI increase the insurance cost by?
Finance analytics firm NerdWallet reported that while insurance cost this year will rise by 14 percent on average across the country, those who have been found guilty of DUI will be hit with a 62 percent increase.
However, the percentages vary depending on the state. In California, the margin of the rise is considerably higher at 128 percent. That essentially means that a driver who was arrested for DUI will pay anywhere between an addition of $1,248 and $2,849.
Also, drivers who violate the speeding law is likely to be imposed of a 20 percent increase, which equates to an addition of about $1,503. That is the second highest average increase in the country following North Carolina where a DUI drives up insurance cost by 368 percent while a speeding ticket will trigger a 62 percent increase on average. In Louisiana, on the other hand, even a DUI only raises insurance costs by just 17 percent.
The rise of insurance costs when involved in an accident is a bit more complicated as it largely depends on the type of the crash. If the compensation is worth less than $2,000, the increase would be around $300 per year.
If the compensation surpasses $2,000, the raise would be somewhere around $300 to $600. An injury to someone involved in the accident will shoot up the cost by an additional $400 to $800.
By Hyun Woo Kim