The Boston Globe recently ran an article about automobile insurance rates in Massachusetts increasing between 6% and 9% on average this year. The article outlined some of the reasons behind these increases including:
Lower gas prices mean people drive more.
More drivers on the road mean more accidents.
Even though newer cars are getting safer, even small accidents now cost a lot more to fix.
Investment income, traditionally part of an insurance company’s economic calculus, is so low today that it no longer contributes much to an insurance company's bottom line numbers. That difference is made up for with additional costs for consumers.
Additionally, according to the Globe, traffic fatalities nationally were up nearly 7.7% last year. This affects costs for bodily injury, the coverage used when someone gets hurt. Thus, it isn’t just that new cars cost more to fix, medical costs for injury caused by auto accidents are also on the rise. In the settlement of an auto claim, adjusters use values assigned to the damaged vehicle, but the cost to treat the injured can exceed the policy limit.
Ultimately auto insurance rates are derived from four primary factors:
the kind of car you drive,
the amount of insurance or how much insurance you buy,
where you live, and
your driving record.
Massachusetts prohibits the use of credit scores in pricing auto insurance, but these are used in most other states because credit scores are predictive. To address this, Massachusetts carriers use proxies for credit such as home ownership or group / association memberships. This is why package credits – insuring the home and car with the same company - are so meaningful today.
Naturally more expensive cars cost more to insure for collision and comprehensive coverages. On the other hand, liability costs are less affected by the kind of car you drive. It doesn’t matter whether you’re driving an expensive car or an old beater: if you hit someone else, it’s the cost to fix their car or make them well again is the same.
The next factor, where you live or more accurately where your car spends the night, is another rating factor. Cities have higher congestion, meaning higher accident frequency; this affects insurance rates for everyone in your city or town. The Globe article mentioned that the average annual premium in Massachusetts was $1080 in 2013. Most suburban drivers pay less than this, and urban drivers a little more.
Finally the biggest factor in auto insurance costs is your driving history. Good defensive driving will lead to lower auto insurance costs for everyone, but mostly for you.
Gordon Insurance represents most of the top companies in Massachusetts so we always try to find the right company for you. For more on automobile insurance in general, visit our website at www.agordon.com/auto, or call us at 800-649-3252.