As a result of the sub-prime loan disaster, it is estimated that there will be 6.5 million home loan foreclosures over the next few years. The far-reaching effects of this will touch everyone in a profound way. No industry will be spared mild to severe economic impact. Insurance is perhaps one of the most buoyant segments of commerce in that, in times of uncertainty and instability, people seek the security of obtaining ample insurance coverage for their families and possessions. The exception to the rule is insurer AIG, who will no longer be as buoyant as others, having dipped into the sub-prime cauldron and required a bailout itself recently.
Immersed in the turmoil we now face, car owners and car buyers naturally want to sort out the effects all of this is having on their car insurance rates. People are paying more for car insurance every year and current trends suggest there is no end in sight to the steady increase.
US taxpayers are about to administer a 700 billion dollar IV to Wall Street, banking on it to resuscitate the economy, not just at the level of multi-billion dollar mortgage loan investors, but also on the consumers on Main Street as well. Experts do not believe that the benefits of the bailout will be felt on Main Street anytime soon. So, while each of us will fork over approximately $2,300 each to juice Wall Street, none of us will likely experience a surge of generosity or gratitude from lenders, insurers, or credit card companies until the next President of the United States is ending his first term, if then.
One explanation is that the US recession by now, is fairly well entrenched and will take several years to respond to any effective measures. Car owners who cut back driving billions of miles to save gas this year compared with last, also filed fewer accident claims with their auto insurance. In a responsive economic environment, where insurers set insurance rates according to the number of recent claims, a decrease in auto insurance claims would have meant more profit and consequently lower premiums to the consumer.
Whether auto insurers claim the dividends for themselves from drivers cutting back on claims or pass the earnings on as rate cuts is up to the insurance regulators. For now, most states are raising their premiums 3 to 13 percent. The reason for the increase is blamed on the cost of materials to repair cars, aluminum and petroleum products. Any beneficial reflection in our own bottom line from the “bailout” is years off.
Do not expect insurers or state regulators to do anything to alleviate the increasing cost of car insurance. To lower the cost of car insurance ourselves, continue to drive less; keep your old car instead of buying new; drive defensively; repair your damaged credit rating; install anti-theft devices. All of these measures are tried and true ways to reduce your auto insurance rates.
