Reader Question: Why Do Premiums Go Up?

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Here’s the latest reader question, along with my reply!

Chris asks: I can’t understand why my auto insurance premiums continue to increase year after year yet the blue book value of my vehicle decreases; even with a pristine driving record and the standard options on my policy. I thought that the premium was based on the cost of a total vehicle replacement based on the bluebook value. Am I wrong or have the variables changed over the past 5 years that determine the cost to insure a vehicle?

My reply: The answer is twofold.

First, just because they can. The insurance industry is a mafia; they make us offers we can’t refuse.

While it is true a given insurance company can’t force you to buy coverage from them, they all know you have to buy coverage from one of their number – and this inevitably causes prices to rise generally. If we were able to say: Look, you just raised my premiums again for no legitimate reason (such as a claim filed or a DWI cite) and it’s no longer worth it to me; if you can’t lower the cost, cancel the policy  – That would impose market pressure on the insurance companies to offer competitive rates, which would necessarily be lower cost because (from their point of view) earning some business beats hell out of no business.

Second, because you – a good driver – are subsidizing the bad ones, which is the same problem with mandatory health insurance and explains the cost of that. Note that both are mandatory mafias – they literally practice extortion in order to wealth transfer our money to themselves and their clients.

There is also a third reason, but it applies to newer cars only: The repair costs  have become so prohibitive that vehicles are often just thrown away. For example: If the driver and passenger air bags deploy in a relatively minor and otherwise repairable accident, the cost of replacing the bags and the dashboard and steering wheel and related parts can easily be $2,000 or more before any actual body damage is addressed. If the car has a retail value of say $10,000 it is very easy to reach the threshold (about 50 percent of market value) at which the car will simply be “totaled” and thrown away.

I am still paying $250 to “cover” my 2002 pick-up, which is worth maybe $4,000. I have not so much as scuffed a fender in 30 years and have a “clean” DMV record.

It’s absurd – and vicious. Over the past five years, I’ve paid more than a fourth of the value of my truck to the mafia… the prices continue to increase, never decrease.

I’d cancel the policy tomorrow if it weren’t for Luca…. you know, the enforcer the mafia will sic on you for not paying their extortion.

. . .

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27 COMMENTS

  1. Any feedback/info on “pay as you go” type car insurance? Or “by the mile” type? Wouldn’t that be ideal for vehicles not frequently used? (motorcycles, classics, chore trucks). Am considering that for some of my extra vehicles, or especially if I buy a hobby car. I like the idea of “Farm Use” tags as an end run. Would “Antique” tags work the same way? (Maybe not to the extent of Farm Use tags…)

    • Hi Tom,

      In my state at least, the law requires a minimum liability policy on all registered vehicles – even if they never leave your driveway. The only dodge I know of – legal dodge, that is – is to get the “antique” tags (if you can) which should cut the cost of the “coverage” a bit. However, you run the risk of being hassled by AGWs if you use the antique-tagged vehicle regularly and they become aware of it.

      Now, there are illegal dodges. Don’t register the vehicle, or let the registration (and insurance) expire and just drive very carefully – in order to avoid the Hut! Hut! Hutting! action. However, I don’t advise this, especially if you live in an area where the AGWs have ALPRs…

  2. Some companies think that they can raise premiums every year because you’re too lazy to switch companies.

    For me car insurance oscillates It goes up and down and slowly goes down over all as the car ages.

  3. Switch to Geico and save 15% – hahahahahahah!

    Seriously, it’s not worth carrying anything but liability (required) on anything over about five years old. Pay it off or pay cash to begin with.

      • Yeah, a few years back we got the ins co to list everything but the car as “farm truck” including the Suburban and Jeep which saved us quite a lot. I dunno why it wasn’t that way before – maybe because we didn’t have enough vehicles. We are pretty much at the point where adding or deleting a vehicle from the policy makes no difference in premium. The plates are the same though, and everything including the car is now “permanent” plates. I don’t think MT has a farm tag specifically.

        But also our ins went down a lot just moving from Colorado to Montana. You would like it out here, but I reckon you couldn’t get a car loaned for review?

      • PS: Back in Colorado during the Last Century, I had an old Ma Bell 2 ton with a boom/winch that I used for a yarder. I never did buy plates for it since the guy I traded with brought it up on a flatbed. I just bolted/wired a slow moving triangle on the back and drove it on the FS roads when I needed to move it from one site to another. It was pretty slow anyway with just a 235-6 and 4×2. I’m not sure I ever even found 4th gear and high axle – LOL

        I sure as heck wouldn’t try that again Today in Coloradofornia!

  4. Hey Mark,

    Even if you have a single accident, why should your rate be increased? After all, what other product does one continually pay for and then be punished the first time one uses it? One would think that being accident free for 25 years indicates that you’re not a high risk driver.

    Cheers,
    Jeremy

    • Hi Jeremy,

      Amen!

      And once again – if only we could say no, these abuses could not occur. I did the math once and have paid a truly obnoxious sum of money to “cover” my little pick-up. I would never buy this “coverage” were I free to say no – for the same reason I say “no” to health insurance. Both of them are terrible deals for me – a claims-free driver (and healthy person). It is far smarter for me to eschew these money-wasters and, instead, save the money for just-in-case and then be in a position to use it for something else when just-in-case never happens, which is far more likely to be the case.

      It burns me up that I am forced to pay for “might” and “what if”… and never given a refund when neither comes to pass.

      • Hi Eric,

        “if only we could say no, these abuses could not occur”.

        You are correct, it is only because insurance is mandatory that most people consider it acceptable that rates always be raised in the event of any accident. Now, in some cases it should, but only if it is demonstrated that the initial risk assessment is wrong. Drivers like you are a great deal for insurers and your premiums essentially subsidize less safe drivers. They should be grateful for this (and would be in a free market) but instead use any excuse (minor accident, speeding ticket, etc…) to raise rates.

        Cheers,
        Jeremy

        Cheers,
        Jeremy

  5. Eric,

    How’s this for perverse logic: if you haven’t had an accident in so many years, they’ll INCREASE your rates! Why? Because they say that the odds are sooner or later you will, and the more time passes by, the greater the chance. If you have accidents too often, your premiums go up; if you have too few, your rates go up. You can’t win for losing!

    • Hi Mark,

      Yup. I am seriously considering becoming an insurance outlaw. I just sent in $289 I could have used for things like food (and overdue vet visits for my cats) to the mafia to “cover” my bikes (four of them) which mostly just sit because I rarely have time to ride them and about five months of the year in my area are not bike friendly.

      Now, $289 is pretty “cheap” to “cover” four bikes. But it is still an outrage because there is a gun put to my head. And because it is obscene to be forced to pay to “cover” four bikes when I can only ride one at a time – and none of them almost half the time.

      I grant I “might” wreck. But I don’t live my life according to “might” – and resent being dunned and mulcted on that basis.

      If I injure someone/cause harm, I should pay – and be made to pay. But no one has the moral right to make me pay because I “might” injure someone.

      • Aside from becoming a “scofflaw” about all one can do is shop around every once in a while – although it’s a mafia situation there is some level of competition between companies and you can frequently find a cheaper deal. Then of course they’ll start jacking the rates up again with each renewal, so you have to start shopping again. I just went through this fairly recently. Changing companies yielded a lower rate but now it’s creeping up again. It really is organized crime.

        The trouble with the outlaw situation is increasingly pervasive and automated enforcement. They’ve got us by the short hairs.

      • The insurance mafia must have made the state declare coverage go by the vehicle so that they can charge people a penalty for having multiple vehicles. Otherwise there would be an insurance company that would step up and offer cheap insurance on per person basis.

        And then there was my call to antique auto insurance co last year to find out why my premium jumped only to learn the State of Illinois came down on them for selling insurance to people like me too cheaply.

        • Morning,Mark!

          I had to give Fuzz the “lion cut” – his fur gets matted/tangled and the only way out is a shave. He looks less regal but I think he feels better now!

          • Morning eric, I have to work on the grassburrs Snappy gets into his long coat. It’s a drag when you pet him and get stuck, not that it won’t happen with any cat….or dog.

            No way to get rid of grassburrs I leaned long ago but I probably couldn’t grow them for any price if they were ever discovered to have value.

          • My cat isn’t short hair, but he isn’t long hair like a Persian, either. I just brush the king’s hair now and then, and he’s good to go… 🙂

            • Hi Mark,

              Fuzz has a double coat; very fine hairs underneath a rougher top coat. He gets burrs and tangles and if these are not almost immediately dealt with, he can’t deal with them on his own – and then it just gets worse. It’s my bad for not keeping up with it. But it’s warm outside now and his new look suits! Plus, he’ll have his hair back in a month or so…

                  • Hey Eric,

                    “He’s smarter than me, too!”

                    You mean he doesn’t toil endlessly in the vain hope that what Nock called the remnant may be awakened by our words and stop this looming train wreck?

                    Sorry, feeling extremely cynical today.

                    Jeremy

                  • I feel your pain. I just had to be the “marshal in town” and break up what was about to be a fight. Big was intimidating MTalky cause I dissed Big for his “special food”, of which he’s had plenty already today. I had to speak harshly which sent him packing, reluctantly and sent MTalky to me. I really didn’t need that but he’s a good kitty, even if he does talk a storm.

                    When I got up this morning I looked to see Blue(female)head to head with LT(male) with Ybie against CJ, Noss in bed by the window, CJ head to head with BW and TwoTone and Snappy right against me. Hisser was in TwoTone’s normal spot and TwoPeas was beside my head. There were more cats in the room. Big was on the dresser. When I get up there’s a mass exodus except for BW who simply marches to his own drummer.

    • My best friend’s wife died and he had to transfer her car to himself. Spotless record, no tickets, no accidents….ever. So they triple the insurance “just for him”. I try to get him to shop around. He pays Progressive, a bad move by anyone’s standard.

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