Study: Major Insurers Raise Rates After Accidents, Even If Policyholder Isn’t at Fault

You get rear-ended by another driver and at the scene of the accident, you exchange your insurance information to later file a claim with your carrier. Your insurer will compensate you for the damage of the fender-bender and in the meantime, you wait to get your vehicle fixed.
However, when it comes time for auto insurance renewal, your carrier significantly increases your rates without explanation. As a recent study by the Consumer Federation of America shows, you’re not alone. Data gathered from the top five insurance companies in 10 metropolitan areas indicates raising rates for not-at-fault drivers after an accident is extremely common.
To gather its data, the CFA created an identical driver profile with one exception: One of the drivers had a not-at-fault accident on his record. Researchers then submitted quote requests for these two drivers across a range of income and education levels. After receiving quotes and analyzing the data, CFA found that, across locations, carriers and demographics, the driver with a not-at-fault accident on his record was nearly always quoted a higher rate. However, how much higher wasn’t uniform.

• Low-income drivers are penalized more, quoted 9.6 percent more. Those in the highest income bracket were penalized, but to a lower degree (a six-percent increase).
• Some carriers penalize more than others. Progressive raised rates 16.6 percent on average, Geico 14 percent, Farmers 11 percent and Allstate 4.8 percent. Out of all major carrier quoted, only State Farm did not raise the driver’s rates.
• Drivers residing in certain cities may also see more of a rate spike. The biggest jumps, up as much as $400 per pay period, occurred in Queens, N.Y., Kansas City, M.O., Chicago and Baltimore. Los Angeles and Oklahoma City had the least-sharp increases.

Since the CFA released its findings, the Insurance Information Institute explained the reasoning for these patterns. Carriers consider any driver who has been in an accident, even if he or she isn’t at fault, to have a greater risk for at-fault accidents in the future.
However, the CFA believes that this trend ultimately harms drivers. “Penalizing safe drivers hit by another car is not only very unfair; it also discourages them from filing legitimate claims,” said CFA’S director of insurance J. Robert Hunter in a statement. “Lawmakers and regulators need to protect consumers from being punished when they’ve done nothing more than use the policy they have already paid for.”
If your auto insurance rates have been raised drastically, you may want to start shopping around for new coverage during the renewal period. To get a free quote and learn about your options in detail, work with Ion Insurance. To find out more, give us a call at 203.439.2815.