How the economy affects car insurance rates
A common situation that many different drivers are facing is an increase in their insurance rates. In the vast majority of cases the increase has nothing to do with you driving poorly or receiving to many tickets. Instead it has everything to do with what is happening with current economic conditions. While this may seem somewhat unfair, there are a variety of reasons how the economy affects car insurance rates such as:

The value of their investment portfolio is down: An insurance company is in the business of limiting their losses to increase their profits. Since the global financial crisis began their investment portfolio has been down dramatically. Under current accounting rules, the insurance company has to do what is known as mark to market, where they will write down the loss in their investment portfolio on their books. For most corporations and individuals they would have to absorb the loss and wait for the investment portfolio to turn around. However, with insurance companies they can increase everyone’s car insurance premiums to make up for this loss, just one way that the economy affects car insurance rates.

Credit history: Another way that can dramatically affect your car insurance rates is your credit rating. With many consumers having trouble keeping up with their bills, this inevitably means that you could be late or have some write offs as a result of tough economic conditions. This means that your credit rating could be lower because you were late or had write offs leading to higher insurance rates, yet another way that the economy can affect car insurance rates.

Everything has become more expensive: Even with commodity prices down, in comparison to just ten years ago the prices of all goods and services has increased dramatically. This increase is passed onto you in the form of higher car insurance rates.

Clearly the economy affects car insurance rates in many different ways. Some of the more common economic reasons for increasing your car insurance rates include: the insurance company is seeing lower values of their investment portfolio, your credit history and the cost of everything has become more expensive. These are the common reasons why many are seeing increases in their car insurance rates during these challenging economic times.

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