Explaining What Goes Into Insurance Premiums
Your insurance premium covers two expenses, the cost of crashes and the cost of “everything else”. Everything else includes taxes, fees, rent, and employing people to service your policy and fairly compensate those with valid claims. The cost of “everything else” rises over time along with the prices of most goods and services in the economy.
The cost of crashes varies from year to year depending on many factors, but even if you do not get into a crash during a specific period, many other policyholders will not be as fortunate. The cost of crashes has been soaring nationwide at roughly 3 times the rate of general price increases due to the following key reasons:
- More traffic. As the economy continues to strengthen there are more people on the road commuting to work which increases the vehicle miles driven causing more traffic and more crashes.
- Distracted driving. Smartphones, car infotainment systems, and GPS systems are in the majority of vehicles driven today and they all create dangerous driver distractions.
- Rising Claim Costs. According to Fast Track Monitoring System, for the period 1/1/2015 – 3/31/2017 the average insurance claim cost increased significantly. The figure below shows the detailed increase for each category of expense.
Source: Fast Track Monitoring System
ACIC has worked very hard over the past 25 years to keep its premium stable and consistent for all insureds. Our pricing model rewards the best drivers.
What can you do to keep your premium as low as possible?
Drive safely to avoid adding incidents to your loss record. We have collected various driving tips for your convenience and benefit on our blog for you to consider. Thank you for your continued business!