Why Car Insurance Rates Are Rising | NJM

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Why Car Insurance Rates Are Rising

NJM is committed to providing cost-effective and reliable insurance to our customers. As the cost of claims increases, we need to ensure that we are financially able to fulfill our promise to be there when you need us most. Sometimes, that means we may raise rates to maintain our financial strength.

What causes premiums to go up?

Insurance rates are unique to each policyholder, so you may see changes in your premium based on factors like your driving history and the type of vehicle you drive.

However, external factors have increasingly impacted car insurance premiums across the industry. These external factors can be summed up in two broad categories: claim frequency and claim severity.

  • Claim frequency
    Claim frequency means the number of accidents people are involved in. More people on the road, distracted driving, and severe weather events have contributed to a significant increase in the number of car accidents over the past decade.

  • Claim severity
    Claim severity means the costs that result from accidents. Since 2005, repair costs and medical expenses have both risen faster than inflation. As vehicle technology advances, the cost to repair or replace damaged parts increases.

Even if you haven't had any accidents or tickets, your premium might increase based on these external factors.

Insurance operates based on a principle of shared risk, which means that the risk of each driver is shared amongst all policyholders. In exchange for the peace of mind you gain from your NJM policy, you share your risk with every other NJM policyholder, just as they share theirs with you.

What is NJM doing to help?

NJM remains committed to the responsible management of your premium dollars. We have several initiatives to counteract the impact of industry-wide trends.

  • We promote traffic safety.
    The risk of motor vehicle crashes is higher among 16- to 19-year-olds than any other age group. Through our Teen Driver Safety Program, we promote safety in the communities we serve by working with teens and parents to reduce the number and severity of accidents.

  • We reduce operating costs.
    We focus on administrative improvements to maximize efficiency and minimize costs, without impacting customer service.

  • We're continuously improving the customer experience.
    We've implemented new tools to settle claims more efficiently and improve customer service.

How can you lower your premium?

Consider some of these solutions that may help to reduce your premium while maintaining the coverage you need:

  • Contact us to conduct a policy review and ensure you're getting all applicable discounts.

  • Bundle your auto and homeowners policies for discounts on both.

  • Raise your deductible to reduce your monthly premium. Just note that this could mean higher out-of-pocket costs if you have to file a claim.

  • Consider whether you still need physical damage coverage if your car is more than five years old.

Frequently Asked Questions

Why are auto insurance rates increasing?

Recently, the entire auto insurance industry has seen an increase in claim costs, relating to both the number of accidents and the higher cost of repairs and medical treatment.

NJM may increase rates to ensure we can pay future losses and remain financially stable for our policyholders. However, we remain committed to finding ways to lower costs by promoting traffic safety, reducing operating costs, and continuously improving the customer experience.

Could my rate increase if I haven't had an at-fault accident, received a ticket, or changed my policy?

Insurance operates based on the principle of shared risk. Risk is spread across all NJM policyholders, which helps to reduce your premium rate and minimize your exposure to a major financial loss. Although policyholders with adverse driving records pay higher rates than those with clean driving records, external factors such as escalating vehicle repair and medical costs can increase your insurance even if you have a clean driving record.

Shouldn't my car's safety features result in a lower rate?

Improvements in car safety features help to prevent accidents and reduce injuries and fatalities. However, it can take more than ten years for these safety features to become widespread in vehicles, which means that many new safety features are not yet common.

In addition, as vehicle technology becomes more advanced, the cost of repairs also increases. Insurance premiums are calculated in part based on the projected cost to settle a claim.

Is NJM still financially secure?

NJM continues to be very financially secure, just as we've been for more than a century. Our financial strength rating by AM Best, the country's oldest and most widely regarded insurance credit analyst, is A+ (superior).

Will my rate change because NJM expanded membership?

Our expansion enables us to become a trusted insurance partner to even more drivers, homeowners, and business owners in the Mid-Atlantic region. Opening eligibility allows NJM to build upon the personal and commercial relationships we have established over the past century. It also allows us to have a wider array of prospective policyholders, who will join the shared risk pool. A greater geographic reach can also help NJM reduce the impact of severe weather events on rates.

How can I save money on my premium?

There are a few ways you can save money on your premium. NJM offers several discounts that may apply to you. You can also choose to bundle your home and auto policies, raise your deductible, or remove physical damage coverage from older cars. Our representatives will be happy to assist you if you contact us.

References:

  1. Rising Costs, Not Insurer Profits, Drive Auto Rates Higher (2020). The Insurance Information Institute.
  2. Facts + Statistics: Highway Safety. The Insurance Information Institute.

The information contained on this page should not be construed as legal, financial or insurance advice. The coverage afforded for a particular loss depends on the specific facts and the terms, exclusions, and limits of the actual policy. Nothing on this site alters the terms or conditions of any policy; the policy controls coverage. Coverage options, limits, discounts, deductibles, and other features are subject to underwriting criteria, state availability, and effective dates. Coverage provided and underwritten by NJM Insurance Company and its subsidiaries, 301 Sullivan Way, W. Trenton, NJ 08628.