Much of the news surrounding insurance companies these days is focused on how they’re putting up our car insurance prices. In a recession where many things are getting cheaper, it seems that the opposite is true for car insurance. There are several reasons for this. Firstly, during a recession, petty crime rates will usually increase. For instance, recent figures suggest that car thefts and break ins have gone up since the start of the year. This has a real impact on the insurance companies because the number of claims goes up, in turn forcing them to increase premiums.
Secondly, there is usually an increase in fraudulent activity too. More than ever, insurance companies are having to employ more advanced techniques to detect and prevent fraud. These measures, including voice technology (that works much like a lie detector), accident investigators and expert claim handlers don’t come cheap, further forcing up the cost of insurance premiums.
Finally, over the past few years, insurance companies have been releasing their reserves. Each year insurance companies set aside money to pay for the claims that they expect to be made within that year – which is known as their reserve. In most cases they don’t use the full amount they have reserved and have funds left over. The insurance companies will only release their reserves to make sure they meet their profitability targets but as times get tougher, insurance companies don’t have such large amounts of money left over. This means they need to ensure they only provide cover which is likely to return a profit for them.
Together, all these factors are leading to increases in our car insurance premiums and unfortunately it cannot be avoided. However, you can make sure you are getting the best possible car insurance deal by comparing providers online and getting the cheapest deal.