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THE FINE PRINT.

Insight you didn't know you needed.

Why Does my Auto Insurance Keep Going Up?

6/18/2018

0 Comments

 
SUMMER IS HERE, AND FOR A LOT OF PEOPLE....THAT MEANS INSURANCE RENEWAL TIME!

Your standard 12 month automobile policy is over, and if you're paying attention you may have noticed a bump in the costs. 

“Why did it go up!?
I wasn’t even in any accidents.” 

- almost everyone

The fundamental idea of insurance pricing is that it's based on the RESULTS OF EVERYONE...
not just YOU.

We all chip into the pot, and the pot is there for those who need it. 
YES every household's ante is different based on their situation but that's the general plan. 

Each year insurer's rely on last year's information to help them predict what next year should cost.

Spoiler alert. It's not going down.  ​

Insurers are trying to predict what it's going to cost for a whole province to drive around doing whatever they want while they pay for the associated damages. 

Even if they  were  able to magically predict the costs they can't just decide to jack up everyone's rate 20% without a reason like we tend to imagine.

AUTO INSURANCE companies have to 'FILE RATES' with the provinces who review and do their best to avoid forcing Nova Scotia residents to pay any more than they have to.

From what I  understand companies are seldom able to receive the increases they even ask for.
If they NEED 10%, they may only get 5 or 6%.

"I could live with 5%, but I'm up 18%.
​That's more than the province allowed!"

Premium increases are achieved PROVINCE WIDE, but they don't land evenly on every customer. The prices for INDIVIDUALS are so broken up that it's challenging to wrap your head around.  
Here's an Example:
Company A gets an approved 10% premium increase for 2018. 
Perhaps before ANALYTICS showed up to the party that 10% just went right on the top and everyone paid more.
*This was before my time, but I'd be interested to know if it really was that basic.  

TODAY...that 10% gets spread around all over the place.
Companies are focused on figuring out which SUB-SEGMENTS of insureds NEED that 10% the most. Perhaps young drivers are 'under performing' and so are people who drive Volkswagens, and people within 5 blocks of a liquor store.
Of course I'm making these up as I go, but those all seem totally possible to me as examples.

Whether you see an increase this year is related to your policy containing any of those INDIVIDUAL RATING VARIABLES. The more of those characteristics they're targeting that you have...the more of an increase you see. 

Some people will go up 30%, others not at all...EVENTUALLY leveling out at a total 10% across the province.  

OK.  BUT WHY do they need MORE EVERY year?

The FULL answer to this requires serious research and I'd rather not do that right now.
So instead here's some quick points based in fact, but are really more anecdotal. 
#1 - Injury Claim costs. 
​People take a long time to heal/recover from serious accidents. 

People always talk about 'fender benders' but injury is the real cost here. At a conference last year the CEO of a major insurer stated that 'well over half of automobile premiums are earmarked for injury costs.'
This is probably the most obvious and talked about reason for increasing auto rates right now in Canada. 
#2 - Robot Cars. 
It's safe to say the days of a $300 bumper repair are gone.
Things like BACKUP CAMERAS, COMPUTERS and SENSORS have become a nightmare for vehicle repair shops. 
I'm guessing a lot more 'replacement' is happening than 'repairing' on these. 

"According to the U.S. Bureau of Labor Statistics, prices for motor vehicle repairs were 61.07% higher in 2017 than they were in 2000."

#3 - Inflation. 
It's easy to forget since years go by so fast these days, but inflation is happening and insurance is no exception. This factor alone....and by itself would be a justified increase in my opinion. 

​Honestly I struggle to imagine premiums ever decreasing in my lifetime.
Make peace with the fact that the cost will slowly rise over time like all goods and services.

Suck all the value you can out of a good relationship with a broker. 
Let them make sure you're with the ideal company for your circumstances, and that you have access to expertise when you need it. 

You're paying every year, so at least buy something you feel good about.  

​MD
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What are telematics? Should I use them?

6/5/2018

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'Telematics' as they relate to insurance refers to information being collected on drivers and policy holders when they're using their vehicle. Typically you plug in a little device to your cars computer and it tracks the basic operations of the vehicle for a set period of time.
Different companies track slightly different actions but in general the metrics are around:
How fast you drive. 
Frequency of sudden braking events. 

What time of day you're travelling.  

"NOPE. I'm out. I'm not letting them monitor everything I'm doing. They'll just use it against me later." 

I get it. It feels like a bad idea immediately. 
​
But let's hear it out. 

HERE'S THE DEAL.

1) For being a willing participant you get an immediate discount on your auto premium. Often 10-15%.
That's an easy $100 or more for the average driver in Nova Scotia. 
2) The data collection happens only ONCE and lasts for usually a 6 to 9 month period. So we're not talking about monitoring your cars forever...it's not even for one year. 
3) *QUALIFYING* drivers are eligible for up to 30% off their premium the next year.
Note the word QUALIFYING. 
You can't drive like Cal Naughton Jr and expect to cash in the following year.

via GIPHY

4) THEY WON'T USE YOUR DATA AGAINST YOU.
There is a strict code of conduct around what is being tracked, and what that data can be used for.
None of it can be used against a policy holder for underwriting or claims purposes so you can set aside the paranoia. 
5) It may actually improve your driving habits.
Insurer's believe that by being more conscious of how you're driving you'll develop learned behaviors that stick with you.

Once you stop all the speeding for the 6 months to pass this test, you may realize you don't actually need to speed. Whaaaaat?

Intact Insurance is one carrier on the front line of this stuff. They use an app on your phone to do the heavy lifting for tracking the data, and as a teaching tool so you can see how you're doing.

Click on the app after a drive, and you can see the details of the drive on a  map right down to where you had to jam on the brakes.


Yes. We're inching closer to the beginning of a Black Mirror episode. 


But aren't we already kind of there with technology? 

If you're willing to bank online (which I LOVE) then what's the worst thing that can happen to your 'sudden braking history' from your Nissan? 

I'M CONSIDERING IT A 6 MONTH DRIVING CHALLENGE.

HERE'S WHY 

1) It doesn't cost me anything.
In fact...my insurer is offering me 150 bucks off the cost of the policy just to participate this year, and the possibility of doubling that money NEXT year.

2) I have the cheat sheet to this test. 
Don't speed over 120 if possible, avoid hard braking situations, and try not to drive between 11am-4:30am. If my lifestyle makes the above achievable why not try and collect some more discounts?
3) Even if I fail the test horribly because I 'live my life a quarter mile at a time'  the guarantee of not being rated on the data makes it a fair trade for the upfront discounts in a lot of cases. 

4) It's fun anytime you have a chance to try and 'beat the system'.
​ 
5) I may actually develop some better driving habits. I haven't had a driving test in like 20 years and while I THINK I'm the greatest it's fair to say that everyone could benefit from an occasional refresher on best practices. 

FINAL THOUGHT

All I'm saying is that before we all get out the torches and pitchforks against telematics let's make sure we have all the facts.

Talk with your broker about which companies monitor what, and if you're a good candidate for them. They're not going to be EVERYONE'S best option, but if you're at all competitive and enjoy saving money it can be a pretty good offer. 
  
Maybe if insurers connected all the data to a giant leaderboard and put some prizes and hype around it people would actually get into it.
I know a few people who'd be into competing purely for bragging rights.
​Oh and discounts/prizes.

​MD
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    Contrast Insurance logo -
    Matt Davison - Insurance Broker for Nova Scotia

    About the author

    Matt Davison is a
    self -proclaimed 'insurance nerd'
    who lives in Nova Scotia, Canada.

    Reminding people
    about the importance of independent  brokerages, and being informed about what you're buying. 

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