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Rising Costs of Auto Insurance Affect Consumer Coverage Decisions

The rising costs of auto insurance are affecting policyholders around the country. As their agent, you may struggle to explain why costs are increasing, even when your customer hasn’t had an at-fault accident or citation recently. Auto insurance costs will likely continue rising by 7% this year, so you need to plan for difficult conversations with policyholders.

Read on to learn more about how rising costs impact consumer decisions about policy limits and optional coverages and how you can help as their agent.

How Rising Costs of Auto Insurance Affect Consumer Decisions

When costs increase, people often need to cut their expenses to continue making their budget work. But when it comes to auto insurance, cutting costs can sometimes mean losing valuable coverage. Before your policyholders take this risk, make sure they understand these critical considerations: 

Reducing limits to state minimums could be too risky for many policyholders.

Policyholders who reduce their coverage limits to state minimums or other low limits are at risk of an accident that exceeds policy limits. Make sure your customers understand their personal assets could be at risk if they purchase a very low-limit policy. The savings aren’t always as substantial as consumers believe they will be, so try running quotes using various policy limits to show your customers the price difference between lower limits and ones more in line with industry standards.

Keep deductibles within affordable limits.

Policyholders are sometimes tempted to increase their deductibles to lower premium costs. And with continued rate increases, agents may field this request from their policyholders more often. But raising their deductible isn’t the best option for every policyholder. Explain to your clients they should never increase their deductible above what they can afford and are comfortable paying. A deductible is the portion of the loss your policyholder retains — so it needs to remain affordable.

Look for other discounts to save money on rising auto insurance costs.

Most major auto insurance carriers offer valuable discounts. Policyholders can find savings based on bundling their auto and home insurance policies together, making electronic payments, or paying their policy in full in advance instead of by monthly installment. Student drivers can earn a discount by being good students and sharing their report cards with their insurers. Members of various professional groups, trade organizations, the military, and other affinity groups can be eligible for discounts from many insurance companies. Safety features on vehicles, like anti-theft systems and daytime running lights, can warrant additional discounts. Be sure to help your policyholders find all the discounts they are eligible for to save the most on their premiums.

Enroll in a telematics program and share data to earn a discount.

Policyholders who agree to share driving data with their insurance company can earn a discount between 5-40% when their data supports good driving habits. Most carriers have a telematics program where drivers download a mobile app or plug a device into their vehicle to track driving metrics. Behaviors considered risky, like hard braking or fast acceleration, may lower discounts over time. But when drivers exchange data with their carriers and prove they are safe drivers, they can enjoy a discount on their auto insurance costs. Talk with your policyholders about the benefits and potential privacy concerns with telematics programs before they enroll. Some people worry about the risks of how safe their data will be with carriers and how much data is reasonable to share with an insurance company.

Focus on factors within the policyholder’s control.

While it can seem to policyholders like the insurance company controls their rates unilaterally, consumers can take many proactive steps to keep their costs as low as possible. Maintaining a clean driving record, avoiding payment and policy lapses, and staying current on defensive driving classes can make a significant difference in premium costs. Some insurance companies use credit scores as a rating factor, so keeping a high credit score can help offset some of the rising costs of auto insurance. Help your policyholders understand how their actions can affect their insurance costs. 

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