Biden desires to boost auto insurance charges and also you may find yourself paying much less – Yahoo Finance
Biden wants to raise car insurance rates and you might end up paying less
If you've never had a major accident and don't have a pile of parking tickets in your name, you should be paying the lowest possible rate on your car insurance, right?
Not necessarily. Insurance determines a variety of factors, many of which have nothing to do with your behavior behind the wheel.
Sounds strange? This is why the Biden government is researching exactly how auto insurers set their premiums – an investigation that could have a dramatic impact on how much you pay.
This is how premiums are set
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In May, the Federal Insurance Office (FIO), part of the US Treasury Department, announced that it would commission a study of the affordability of car insurance, particularly in low- and middle-income areas, and the effects of “not driving” Have factors on the premiums.
These factors include credit history, home ownership status, marital status, occupation, education, and place of residence.
Insurance companies have long relied on such information. They say these factors are closely related to a driver's risk of claiming damage, thereby ensuring that people who should be paying more will also be paying more. This enables people with lower risks to pay less.
Critics of this system believe that the use of non-driving factors is unfair and discriminates against low-income and minority drivers – one of the main reasons the government is investigating this.
The FIO's investigation follows a February CNN City Hall meeting at which President Joe Biden ridiculed the fact that some people pay higher insurance premiums because of where they live.
Consumer groups jump into the fray
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In a letter to the FIO in July, more than 20 consumer groups emphasized the importance of ensuring that auto insurance – "the only product most Americans are legally required to buy" – is affordable and fair-priced.
"Even drivers with pristine tickets may find that the cost of coverage in their community and for people with their socio-economic characteristics far exceeds their family budget," the letter said.
The story goes on
The groups – which included the Center for Economic Justice, the Consumer Federation of America, and the National Community Reinvestment Coalition – also criticized the industry's handling of the COVID-19 pandemic.
Home stay orders kept drivers off the road, resulting in fewer accidents and fewer insurance claims. While many insurers were offering reimbursements, these givebacks were "pathetically inadequate," the groups say, and many of these companies have already started raising rates again.
The FIO report builds on an earlier 2017 government study that found 18.6 million Americans live in areas where auto insurance costs are disproportionately high.
This study was intended to provide a baseline of affordability that could be used by policy makers, regulators, and consumers. It should be done annually, but has not been updated after 2017.
That's what the insurers say
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In a July 25-page memo to the FIO, the Insurance Information Institute defended the industry, saying U.S. auto insurers accurately price their policies based on a variety of factors that are consistent with state laws and regulations.
"There is no credible evidence that insurers are charging more than they should, either in the broader market or in certain sub-segments such as neighborhood, race, income, education or occupation," the memo reads.
The institute says the rising cost of claims was the main driver behind the rise in rates. The average amount of property damage to motor vehicles increased by almost 6% per year between 1962 and 2013 – “much faster than inflation”.
However, some states have already taken steps to limit the use of certain data in setting insurance premiums. Recently, Washington temporarily banned the use of credit scores in rate setting for some insurance policies. New Jersey and Nevada have taken similar steps.
When you can't afford to wait for lower premiums
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Until the rules change – if they actually do – there are a few things you can do to reduce your insurance burden.
As long as auto insurers are using your credit information to determine your premium, you should be sure that your premium is top notch. If you haven't checked in in a while, there's an easy way to check your creditworthiness for free.
If your score looks less than great, try paying back some of the debt you accumulated during the pandemic with the help of a lower-interest debt consolidation loan. Maybe you can get rid of debt years sooner.
Most importantly, however, make sure that you are not paying too much for your coverage by shopping for a better price. It is recommended that you review your policy every six months. You could save up to $ 1,000 a year.
The same applies to your household and health insurance. Different companies weight risk factors differently, so it pays to see if you can save with a simple switch.
This article is for information only and is not intended as advice. It is provided without any guarantee.