How high-risk drivers affect insurance companies
Now let's look at things from the other perspective. This is pretty obvious, but the reason you have to pay more if you drive badly or get traffic violations is because you are more likely to get in an accident and file a claim.
This is also why you can get put in this category even if you’re not a bad driver, just based on your claims history. Let’s say you’re an exemplary driver, but your car gets broken into three times and vandalized twice, and you file claims to repair the damages. An insurance company looking at your record, is going to assume you don’t have a safe place to park your car and that there is a high risk that it will be damaged again.
Paying attention to drivers who are more likely to file claims is particularly important now because insurance companies are facing losses to the tune of billions of dollars. Why is this? There are a few factors playing in:
- Major weather events like hurricanes and wildfires have led to a high number of claims all at once.
- Larger economic issues like supply chain lag with auto parts, labor shortages in car repair and general inflation have made cars more expensive to repair and thus claims more expensive to pay out.
- The severity of claims has increased (40% increase in collision severity since 2019).
- Car insurance is regulated at the state level to make sure insurance companies offer fair rates, but the process can be slow and doesn’t necessarily keep up with current economic conditions.