There is so much uncertainty right now surrounding the COVID-19 pandemic, including financial uncertainty, and people are looking for ways to cut costs to help make ends meet. We asked the experts a question on many people’s minds: Should I try switching carriers to save money on my auto insurance?
There are lots of factors that affect your auto insurance premium that have to do with you, like your claims and driving history, but there are also broader factors at work in the economy as a whole that can impact the price you pay for insurance.
We looked to the past to see how insurance premiums have been affected by both economic and natural disasters and found that while there may not be a big change in your auto insurance cost right away, the economic downturn associated with COVID-19 is likely to be followed by an increase in auto insurance premiums in the future.
Data from the NAIC.
Why the cost of your auto insurance may increase
“Any large-scale disaster of any nature is often a tipoff that consumers might see a spike in their auto premiums although they may have not even been involved in a car accident,” says Chris Johnston, an attorney with Des Moines Injury Law.
It makes sense why a natural disaster would increase premiums because insurers have to pay out tons of money at once for related claims, but the stream of premiums in and payments out aren’t the only factors that impact an insurer.
An insurance company’s business is also affected by the investments it makes with paid premiums. If these investments lose value or if there fewer opportunities to see meaningful returns in the market, this can have a big impact on the bottom line.
Insurers are in the business of calculating and pricing risk based on their best predictions, but sometimes the world can be utterly unpredictable. Johnston explains why that matters for auto insurance prices: “When something unexpected impacts the insurers, this can result in their reserves being depleted. One method for rebuilding those is increased premiums for all.”
How to lower your monthly payments right now
You may be able to get a break on your monthly payments simply by calling your insurer. All of the largest auto insurance companies are responding to COVID-19 with measures to help those affected by the pandemic, and many have announced they will work with customers on payment plans if needed.
“Since the vast majority of the population is currently staying at home during this coronavirus outbreak, it would be an excellent time to take advantage of these programs,” recommends John Espenschied, owner of Insurance Brokers Group.
“With remote work and stay-at-home policies more commonplace, many Americans are overpaying for their car insurance,” says Rick Chen, a spokesperson for Metromile.
When making your decision, look for something that will still be a good fit after you go back to your daily routine because switching insurers too often can increase your premiums in the long run.
Consider locking in your rates with a longer-term policy
While the experts and the data don’t predict a big shift in premiums immediately due to the coronavirus, it doesn’t hurt to compare car insurance quotes right now to see if you can find a better deal.
“We recommend shopping now before rates increase, due to the slow economic time when businesses are losing billions in revenue,” says Espenschied. “Make sure if you switch to take a one-year policy length vs. a 6-month policy to lock-in rates for the full year.”
Johnston, however, cautions that with all of the uncertainty and overwhelming demand for the attention of the insurer’s employees, it’s possible for details to get lost in the shuffle. “If you are currently insured, I see no good reason to switch in the midst of the pandemic.”
While shopping online may help you avoid some potential human error, it’s an important reminder that all of us – insurance companies included – are going through something we’ve never experienced before and we all deserve a little grace as we figure it out.