Why insurance has become so expensive, and what you can do about it.
By Dave Hamby
Most of the people residing in Williamson County have noticed a sharp, up-ward trend in the past few years in the cost of their automobile insurance. Anyone visiting an auto body collision repair shop for any type of collision repair can understand why insurance is getting so darn expensive.
Claims costs for automobile insurance have really escalated since 1985. This trend started with the 5 mph bumpers that were mandated in 1973, and really took off with the advent of passive restraint systems, aka air bags. These restraint systems required a whole new paradigm for auto collision repair. In days past an auto body shop could perform any kind of collision repair it wanted to, and when the customer complained about poor workmanship they were told, “You should have thought of that before you wrecked it.” Now that cars are equipped with air bags a poor repair could possibly be fatal. An air bag that deploys too soon can be more dangerous than not having an air bag at all, and an air bag that deploys too late can inflict a second and possibly fatal injury to some one who has just been injured micro-seconds before. Strict and expensive collision repair procedures were developed so that automobiles could be repaired correctly, and have their designed-in safety features fully restored. Oddly enough the cost of developing these procedures was borne by the very insurance companies that would have to pay for the more expensive repairs.
Automobiles have also become disproportionately more expensive (in a good part because of these new safety features) and the cost of replacement parts have matched this high level of inflation. Consider that in 1972 a brand new Toyota Corolla could be purchased for around $1,400. Today that car costs over $16,000. If we were to extrapolate that inflation rate to other things, a four dollar shirt in 1972 would now cost $45.80, and a 99 cent hamburger then will now set you back $11.33. (Gasoline oddly enough comes in at under $2.60 a gallon, a good price now days.) Because consumers have had to pay so much more at the showroom, the average life span of an automobile has increased.
Combine the extra cost of transportation and the extra expected service life of these automobiles and you can understand why consumers have become more demanding of quality in automobile collision repair. Gone are the days of body men and bondo wipers. They’ve been replaced by certified collision repair technicians. A $400 dent has evolved into a $2,500 collision damage restoration. While this may sound like price gouging by the collision repair shops, this increase is less than two thirds the increase in the cost of automobiles.
Insurance Companies did all they could do to check spiraling costs, but the actual repairs were less than 28% of the claims costs they had to pay. The vast bulk of the money paid went out for medical bills and legal costs. (Again we blame the lawyers.)
High claims costs are only a part of the reason why Williamson County motorists are going to have to dig deeper and deeper into their pockets for automobile insurance. Another reason is because Round Rock, Georgetown, Leander and Cedar Park are no longer little towns. Anyone lucky enough to commute down IH 35 or US183 in the past half dozen years knows full well there is no difference in traffic risk between Austin and Williamson County. It’s only because Williamson County is so large and so much of it is still rural that we have been able to enjoy a lower insurance rate than our neighbors to the south in the past. All of that has become history.
So what can you as a consumer do to lower your cost of insurance? The first thing I recommend is to call your agent. If you don’t have one you may consider switching to a company that has good agents. Your agent can make certain you’re getting all of the discounts you’re eligible for, and can also tell you what other discounts are offered. Often full line companies offer substantial discounts to households that insure everything through their company. Compare theses discounted rates to the great deals you think you’re getting from that “low cost” dot-com company, and you may be in for a surprise. A defensive driving course can net you a quick 5 to 10% in savings, and perhaps keep you from filing a claim in next year or so. Look at your deductibles. Many believe insurance companies are now of the opinion that a low deductible is an indicator of a possible future claim. Raising your deductibles can save you enough in premiums in just a few short years to cover any extra deductible cost you may incur in the event of a claim.
You might also consider the price of insurance before you buy your next car. Large expensive cars and SUV’s cost a lot to fix and also cost a lot to insure. Your agent can do the research for you and help you with your selection.
Many folks will jump up and buy insurance from the cheapest company they can find on the internet. A problem with dot-com companies is the fact that many of them offer a low rate to get you signed on, and quickly up those rates come renewal time. Unless a person is willing to shop insurance every time their policy is renewed, it’s unlikely they’re getting the best rate for insurance. A good agent will keep an eye on your rates for you, and will help you keep your rates down. There’s also a good chance you’ll regret buying cheap insurance if you ever have to file a claim. Just call any reputable body shop and ask them which insurance company is the best one to have if you have the misfortune to wreck your vehicle.
When you visit with your agent tell him about this article. Ask him to review your coverages and make certain that you’re not buying insurance that you don’t really need. Is that car you bought six years ago still worth carrying full coverage on? Is there something like an investment in a life insurance policy that can reduce your auto insurance rates? Another big issue, do you have enough liability to cover you in the event you are at fault in a major accident? Your agent has the answers to these questions and would welcome the opportunity to discuss them with you. Remember that while you may be able to find a special today on the internet that may save you a few hundred dollars over a couple of years, a good agent will save you thousands and thousands of dollars over a lifetime.
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