Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Jan 14, 2016

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Here's what you need to know...

  • When a policy is up for renewal, the carrier has the right to reassess risk and change the policyholder’s rates based on their findings
  • As the policy is being assessed, underwriters will run Motor Vehicle Reports, Claims History reports and other types of verification to see if the household is riskier than they were the prior term
  • Since carriers can’t legally change a household’s rates for tickets or accidents mid-term, the rates at the following term will be surcharged
  • If the insurer has discovered that you drive more than you’ve estimated the previous term, the usage will be updated and rates may go up because of the higher mileage band
  • It’s possible that your vehicle’s classification code has changed because of safety ratings or claims statistics, which can increase liability or damage premiums
  • If nothing on the policy has changed, it’s possible that the rate increase was due to a new company-wide filing through the state

There’s nothing more frustrating than maintaining a good driving record just to find that your insurance rates have still gone up. While a large percentage of auto insurance policies do go up when the renewal is processed, only a small percentage of consumers actually check their documents and look into the reasoning for their increase. This is often because the policyholder has taken advantage of auto-renewal features offered by their carrier and they don’t want to be inconvenienced with doing yet another thing in their busy life.

What you might not know is that failing to check your renewals could cost you a pretty penny. Rates can go up because errors in ratings, lost discounts, changes in risk and newly added operators. You’ll need to know exactly what changed and whether or not you can lower the rate before you start to shop for coverage. Compare car insurance rates now by using our FREE tool above! Read this guide and pinpoint why your rates keep going up.

What is a renewal and why does it have an impact on your rates?

Car insurance policies are sold in terms. The standard length of time that a policy lasts will be either 6 months or 12 months. During this period of time, the rates the policy was issued at will remain the same.

It’s not until the policy is set for renewal that the company can change the rates for a multitude of different reasons.

The car insurance renewal happens at the end of the current policy term and this is when you’ll pay a new rate and receive new documents. A new rate is charged either because of new rating factors or a new rate filing through the Department of Insurance.

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Are insurance rates on the rise?

While some states have overall decreases in auto insurance expenditures over the long term, studies have shown that carriers are charging more than ever to certain customer demographics. It’s no surprise since carriers are businesses that are looking to be profitable, but studies show that 2014 was one of the most profitable years in history for standard carriers. Since the only way to be profitable is to squeeze the profits out of rate increases, it’s important that you as a consumer take the time to educate yourself on how rates are made.

Different Reasons That Your Rates Can Go Up

Your rates might not go up during your term, but when you receive your renewal notice and the rates have gone up significantly it can be a shock to your system. Some of the reasons for a rate increase might be because of your decisions behind the wheel and others might have nothing to do with you. Here are some of the many reasons why renewal rates can go up:

  • You’re Convicted of a Moving Violation

Being cited for a moving violation and being convicted are two different things. Many drivers are shocked to learn that their rates haven’t immediately gone up after they’ve been issued a ticket. What these drivers might not know is that they won’t see any effect on their rates until the renewal after they’ve gone to court and been convicted of the charge. At this time, the rates can go up significantly depending on the nature of the infraction. Percentage increases range but may be anywhere between 9% to 22%.

  • You Have an At-fault Accident

Rates don’t automatically go up after a car accident claim is paid. It’s not until the renewal that the underwriters will review the terms of the accident and the allocation of fault to see if the risk class has changed and if surcharges are necessary. In most states, an accident can’t affect your rates unless you’ve been found to be at least 51% responsible for the occurrence. If you are at fault, statistics show that the average rate increase for one single claim is 41% when you stay with your carrier.

  • Loss of Good Driver or Safe Driver Discounts

Just one ticket or accident won’t affect your eligibility for a Good Driver Discount, but a combination of the two will. If you’ve already had a loss and you throw in a violation within the same 3 year period, you could lose the Good Driver or Safe Driver discount that saves you about 20%.

  • Change in Vehicle Classification Code

Insurance companies charge rates based on a vehicle’s safety rating, how much it costs to repair, and also what the claims statistics say about the car. The classification code can change over time when there’s new safety data or claims data through the Insurance Institute for Highway Safety.

  • Your Credit Rating Has Changed

Almost all states allow carriers to use credit ratings to calculate rates and about 95% of auto insurance companies use credit-based insurance scoring. When you apply for coverage, an insurer will run an insurance score through FICO or through LexiNexis to see how financially responsible you are. The rating will be used to determine rates for the term but the score can be run again at renewal. If you’ve had some defaults or changes to your credit file, this could raise your rates.

  • Your Usage and Mileage Change

Auto insurance rates are dependent on how the vehicle is used. If you drive for pleasure, you’ll pay less than a commuter or a business user. When you’re up for renewal, most companies will ask for your updated odometer reading. If the calculations show that you’re driving more than you disclosed, the higher mileage band could lead to higher rates for vehicle usage and mileage.

  • Rating Territory Changes

Rates are strongly tied to the territory you live in. By using your zip, a company can determine if there’s a high incidence of claims in the area that put you more at risk for having a loss. If you’ve moved but just updated your garaging address, rates can change. It’s also possible for rates in a territory to change because of claims data at renewal even when you don’t physically move.

What if rates have gone up but nothing has changed?

If you haven’t had a loss, you haven’t had an accident, and none of your other rating factors have changed, you might be still scratching your head wondering why your rates are higher. You’re not alone. Many people have fallen victim to the hideous company-wide rate increase and it’s something you need to look out for.

While insurance rates are highly regulated, if a company can justify a rate increase with the state they’ll be approved to raise their base rate.

When this happens, you’ll see a sudden increase at renewal even though everything on the policy is the same. It’s more than just frustrating.

As you can see, it’s possible that being loyal to your insurance can cost you money. If you’re tired of your rate increase offsetting your loyalty discount, it’s time to start shopping for coverage. You can start by gathering your documents and reviewing them for accuracy. After you do this, use an online rate comparison tool and price the cost of coverage with several companies all at once. This is the best way to find the best industry premiums. Enter your zip code in our FREE tool below to compare car insurance rates now!