The Cycle of Expenses: Lower Oil Prices vs. Higher Policy Prices

Entrepreneurs and successful business people are by far the busiest people out there. In fact, between running a company, speaking at industry conferences, and moving out and about the city it becomes difficult when we live in a world where cars dominate our lifestyle.

Everyone loves to own a car, and there is no doubt about that, especially in today's generation while not everyone out there is able to afford one because of the high oil price. However, the number of cars on the roads did increase in 2015 due to a significant drop in the oil price, making driving more affordable than ever.

A study by Boston Globe said that approximately 16 million cars crossed Maine Tolls in June and July 2015, which is the greatest number of cars MTA (Maine Turnpike Authority) has ever witnessed crossing the toll booths. Meanwhile, such a large number of cars on the roads resulted in a considerable increase in the number of car accidents, which correspondingly led to a sudden drop in the underwriting income of various insurance companies in the entire nation. This became the one amongst the prime reasons behind increasing insurance prices in the coming months, turning the rest of the year rough for even the nation's biggest insurers.

GEICO, a leading provider of car insurance based out of Maryland, U.S., reported performing poorly in the recent earning report by Allstate and Berkshire Hathaway. Allstate registered an underwriting loss of $13 million in its auto insurance business line, compared to previous year's underwriting income of $539 million. The company also reported a pre-tax net underwriting income of $471 million, compared to last year's $1.01 billion.

Tom Wilson, CEO Allstate, attributed the decrease in company's revenue with respect to a significant increase in the frequency of accidents, driven by a significant increase in the number of people driving on the roads. The company, to increase its margins, took a step forward to increase its insurance pricing, which affected the three major brands of the company - Allstate by 3.4%, Encompass by 7.4%, and Esurance by 4.1%, which most auto insurance companies do to recover from the poor performance at the end of a financial year. Below are the things consumers can do to mitigate the increasing insurance prices:

• It has often seen that consumers accept policies with whatever benefits they offer, including coverage and deductibles, which is because they do not want to spend extra time on customization of plans. They need to figure out and create a list of requirements and coverage needed, and then find the most appropriate plan for them, keeping affordability and primary points of coverage in mind.
• Try not to decrease the coverage offered by the policy unless the insurer does it, as it may turn out costly in the unfortunate event of an accident. Opt for the best coverage, keeping in mind affordability and your level of comfort.
• You can get a significant discount on your insurance price by taking a driving course while the actual discount may vary from one state to another. Thus, the price will be affected accordingly. For instance, you can avail 10% discount on your insurance price if you take a defensive driving course in New Jersey.
• Bundling a plan can save you money. For instance, if you have multiple policies from different insurers, then you can switch from all other insurers to a single one, which might get you an additional discount on your insurance price.
• It is highly recommended to shop around and see how much you can get the most out of the efforts you put in. When you need to renew insurance, make sure you explore available plans thoroughly, and then find out the best possible deal. If your policy price is getting up at the time of renewal with your current insurer, you should consider choosing a plan with another insurer. It is, in fact, not unheard of that some policyholders who have poor driving record pay 300%-400% more in premiums as compared to the lowest rates reserved for the best drivers.

Your driving history has a proportional effect on your car insurance premium. This means that if you have a bad driving history, then you will have to pay a larger price to renew the insurance, whereas a decent driving history requires you to pay the nominal amount. Thus, maintain a decent driving history to save on policy renewal.