Why Rates Go Up!

 

Throughout your insurance agent journey you will find yourself answering the same set of questions year after year. Its very important to be ready for some of them as the answers don't change. “Why did my premium go up?” or “Why did you raise my rates? I've never had an accident.” are the most prevalent. Consumers are left in the dark and deceived by the marketing departments of insurance companies. They are misled by words like “discount”, “save money” and of course “longevity”.  Somehow even though no other consumer product costs less as time goes on there seems to be a misnomer that the longer you stay with a company the less they will charge you.

Education is part of the business we are in and those who decide to tell their clients the truth and bring down the curtain of discounts and savings will ultimately earn the most trust from their clients and be given the benefit of the doubt when rates go up.  If you really want to do well in this business not only do you need to know the answers to these questions you need to tell your client up front how it works and remind them that its you that will make sure there are no other options that best fit their needs.  Also you are doing your client a disservice if you ever lead them on to believe that insurance rates will ever go down. They may pay less one year than they do the next but overall they will be paying more in 10 years than they are today no matter what they change.

Here are some reasons rates go up that your clients will most identify with.

Something Changed in their rating factors:  Insurance companies use all kinds of metrics to decide how likely an individual or a certain type of person is to have a claim. One is individual statistics like consumer reports (credit), claims history, age, and income or job type. Someone with a lower credit score is deemed a higher risk because they are more likely to need to use insurance after an accident instead of paying for it themselves. Someone who is older usually gets a better rate because they are more settled down and pay better attention of course unless you are very old and may have vision or medical issues.  These factors can fluctuate and just because someone increases their credit factors doesn't mean it will counteract having an at fault claim of over the last year. 

Carrier has too much/too little risk in an area: sometimes the carrier you were with last year has found out that they want to diversify across a county, state or country and would like to remove some of the risk they have in an area and will raise rates just to get some of the risk in that are off the books. Vise versa sometimes a carrier wants to move into an area and will lower rates to get new customers in an area they have never been before but this could change next year. Your longevity with them doesn't matter. 

Carrier Financial Rating: Carriers are rated by Moodys, AM Best and Demotech on their financial strength and if they are at risk of getting a lower rating because they payed out too much in claims vs what they have in reserve they will need to raise rates to 1) get more money in the door and 2) get people unwilling to pay out the door. This raises their capital and lowers their risk. Once again they may charge you less for being with them longer than someone else but your overall rate over time is going up. 

Some Insurance Companies are for Profit: some insurance companies are not just spreading risk around but also have shareholders that need and expect to either get dividends or their stock price to go up.  Straight up they need to make more money this year than they did last year and their shareholders may have decided it's time to raise rates. 

Building materials and labor cost more: One of the main factors in the rising cost of insurance is the cost to make things and the people who put them together is always going up. Inflation is the main reason why insurance costs more today. Just like anything else you client may benefit this year from a discount and their price may go down from the year before but that same discount next year will not counteract the overall cost to rebuild their house going up. I promise you your client does not go to the grocery store and complain to the manager or threaten to shop somewhere else because they keep raising the cost of milk. They may get a .50 cent coupon today but tomorrow the price is going up again. They know that the cost of cows, land, gas, and employee salaries is what drives the cost of consumer products and its what drives the cost of insurance too.

As insurance agents it can be a daunting task trying to navigate these waters with our clients. It can be very personal for them because they feel like you raised rates on them and you personally are keeping the difference. We have to let our clients know that we are not always privy to why a company raised rates or if their premium went up because of their consumer reports but instead were here to check to see if there is a carrier that for them specifically is a better deal. It's always hard to explain this once they get the inflated bill but having this knowledge can help you show them that it's not you pulling these strings. However once again the agent and agencies that tell their clients the truth that insurance will always go up year after year instead of trying to pretend they have special rates will better equip their client with what to expect. This will build trust and brand loyalty. What makes you great is not that you have a special price but that you will actually take the time to find it for them. Lets make a commitment today to be different and always “Get After it”