Car Insurance Rates On The Rise In Colorado

It’s no secret that auto insurance rates have been rising consistently over the past few years. At the end of the day there is only one reason an insurance company will raise rates, their losses are too high and they are unprofitable. Now, there are MANY reasons that a company might be unprofitable. These include but are obviously not limited to:

1. Rising Accident Rates. Companies depend on actuarial tables to predict losses and if those losses outpace their expectation they lose money. Insurance companies can only lose money for so long before they either exit a market, tighten underwriting guidelines or raise rates. There are several reasons for this rise but that might need a separate blog post.
2. Hail Damage!! Here on the Front Range, hail has become an annual if not more often occurrence that has caused such high losses that some carriers will be digging out for years to come. If we can go a few years without a major, and by major I refer to the May 8, 2017 storm that hit Denver costing $2.3 Billion. Yes, that is Billion with a “B”
3. Increased Repair Cost. Vehicles are more and more coming standard with sensors, cameras and technology that both make them safer and more expensive to repair. Where we might have left a scraped bumper alone 10 years ago, today it requires a repair because there is a sensor or computer embedded.

Although our rates have risen substantially across the country and here in Colorado, indications are that the national issue may be mitigated. Here in Colorado, if an insurance carrier still has a combined ration over 100, expect that carrier to raise rates more. 2016 was a bad year and companies tried to raise rates to get ahead of things but, they didn’t go far enough and now in 2017 and first part of 2018, the rate hikes were more extreme.

The good news in all this is that I am seeing indicators that we may be stabilizing. Even though auto has continued to show an underwriting loss, companies that are diversified into home can make the decision to let home profitability balance auto unprofitability as long as they are not too far askew of one another.

Let’s all hope that we can escape 2018 with only minor hail or fire here on the Front Range and perhaps we will not see a continued rise in rates next year. Here are some articles that give more data and insight to this issue:

Colorado is No. 3 for rising premiums

P&C Losses Driven By Auto

Car Insurance rates still going up

2017 Rate Hikes not keeping up with losses

2017 Auto business performed better

Auto underwriting losses worst in 15 years

Combined Loss Ration Data

Hail storm May 8. 2017