As our economic recession churns onward it seems like each day a new round of layoffs and job cuts are announced by small and large business alike here in Ohio, Kentucky and Indiana. Gas prices, at least temporarily, have plunged to levels not witnessed for a few years helping to alleviate tight budget. However the inevitable job losses, rising foreclosure rates, and the stock market plunge from past levels will also have one perhaps unseen result for insurance buyers:
Higher insurance rates.
If you get a large rate increase on your insurance click here for a new rate quote and up to seven of our top insurance companies we do business with will provide you an instant rate quote on your car insurance for Ohio and Kentucky drivers. (quotes also available in all 50 states)
There are 4 specific reasons why insurance rates are increasing for car, home and business insurance in Ohio, Kentucky, and Indiana. (This also applies to other states as well)
Let’s discuss the first reason:
Investment Portfolio Losses for Insurance Companies.
Some of the largest insurance companies have announced billion dollar plus investment write downs.
Progressive Insurance reported a $1.4 Billion loss on their securities portfolio. Allstate Insurance, the largest publically traded Property & Casualty insurer also announced a pre-tax capital loss of more than $5.1 billion for 2008.
Why do investment losses for insurance companies mean higher insurance rates for me?
Insurance companies invest premiums not immediately used to pay claims in a variety of financial instruments including stocks and bonds to offset claims expenses.
For example Allstate Insurance reported that it earned $8.6 Billion dollars in interest payments from its bond portfolio. Those billions of dollars that Allstate earned offset potential premium rates for their policyholders.
Without earning this additional money Allstate would have needed to charge an extra $8.6 billion dollars on the insurance policies that it sells to make the same amount of money, does that made sense?
With considerable portfolio losses dragging down earnings for the industry, raising insurance premium rates is the likely short term solution to generate additional revenue for insurance companies.
While it’s true that some insurance companies are aggressively raising their rates, keep in mind that not all insurance companies are doing this. If you are an existing client of our agency or you want to find better rates on your insurance in Cincinnati click here for an updated online rate quote.
Next we will discuss why credit scores are dropping for families nationally and why this means your insurance rates may be increasing.