The N.C. Rate Bureau, which represents all insurance companies doing business in the state, filed a request in December with the state Department of Insurance seeking an average increase of 13.8 percent in automobile insurance rates. State regulators have 60 days to approve or challenge the rate hike request. If approved, the higher rates start Oct.1.
Here are four more reasons why car insurance will likely rise this year:
1. Smartphone-addicted drivers are facing more scrutiny.
More than one in three motorists text while driving, and 29 percent access the internet while driving, according to a 2015 survey by State Farm Insurance. Drivers are also using their devices more for GPS, reading and responding to email, and using social media, according to the survey.
State Farm and other insurers and researchers say there are many reasons behind a rise in distracted driving – from drivers grooming behind the wheel, to reading, to fiddling with radios. But mobile devices especially are drawing attention.
“It’s interesting to observe how the number and types of distractions available on cell phones have grown over the years we have conducted this annual survey,” Chris Mullen, director of technology research at State Farm, said about the study.
An estimated 33,000 people were injured in 2014 in crashes involving cell phone use or other cell phone-related activities. That’s 8 percent of all people injured in distraction-related crashes, according to the National Highway Traffic Safety Administration.
And for the record: It’s against the law in North Carolina to type a text message or read a text or email while driving.
2. The economy is good...which is leading to more crashes.
This is the N.C. Rate Bureau’s first rate hike request since 2009, toward the end of the recession.
Fear of losing jobs combined with high gas prices kept people off the roads, according to Bob Hunter, director of insurance for the Consumer Federation of America.
Drivers are logging more miles these days, according to the rate bureau. In North Carolina, miles driven rose 13 percent in 2015, compared to the average of the preceding five years.
And that means more crashes. Citing N.C Department of Motor Vehicles statistics, the rate bureau said driving-related fatalities increased 8.1 percent in 2015 from the year before. Injuries increased 11.8 percent, and reported crashes rose 11.1 percent.
3. Cars are more complicated. So repairs are more expensive.
Insurers say their costs are rising, as more high-tech vehicles with safety features hit the road.
It “used to be just fixing a bumper,” said Allstate spokesperson Adam Polack. “Now it has a backup camera in it. So cars are more expensive to fix.”
Other costs come into play, according to Loretta Worters of the Insurance Information Institute, a nonprofit trade group.
“In recent years, medical and auto body repair costs have increased at a rate much faster than inflation,” Worters said by email. “Legal costs have gone up, too.”
Insurers’ loss ratios--the amount they pay toward claims out of each dollar of premiums--spiked in 2015, according to Worters.
State Farm Mutual Automobile Insurance Co., the largest U.S. property-casualty insurer, said its 2016 annual profit plunged 94 percent on car insurance claims costs, according to a Bloomberg report.
Travelers Cos. said earlier this year it had begun to increase auto premiums because of higher expenses, following Allstate Corp. and Berkshire Hathaway Inc.’s Geico, according to Bloomberg.
4. 'Hands-free' does not mean 'brain-free.'
Even if your car thinks for you by following voice-activated commands, you’re still distracted, according to a 2015 study by AAA Foundation for Traffic Safety.
Using voice-based systems for voice dialing, music selection, GPS destinations and controlling heat and air is “cognitively demanding and ought not to be used indiscriminately while operating a motor vehicle,” the study found. “Hands-free does not mean brain-free.”
Mental distractions could last up to 27 seconds after using these systems. Older drivers in the study were especially taxed.
A separate AAA study from 2015 also showed challenges to drivers using voice-based features of smartphones.
Hunter, a former commissioner of insurance for Texas, said while it’s expected of rate bureaus to ask for increases, they don’t always get them. And even though the N.C. Rate Bureau hasn’t made a request in several years, a 13.8 percent request is still eye-catching.
“Maybe they should have filed one last year for 3 or 4 percent, and this year for 3 or 4 percent,” Hunter said.
“The big factor is miles driven,” Hunter said, although smartphones are “driving up the cost of insurance because of more accidents.”
Auto insurers last sought a 1.4 percent rate hike in 2009, on top of a 9.4 percent increase requested in 2008. But in the end it reached an agreement with the Insurance Commissioner at the time, Wayne Goodwin, that produced a slight reduction in rates – a one-half percent decrease.
It remains to be seen whether things will be any different under new Commissioner Mike Causey, a Republican who defeated Goodwin’s bid for a third term in November.
Insurance Department spokesman Colin Day said both the department and the commissioner are withholding comment on the Rate Bureau’s approximately 1,300-page filing for now.
The Insurance Department noted in its announcement of the Rate Bureau’s filing that auto rates haven’t risen in North Carolina in more than a decade. The last increases went into effect in 2001 and 2002, but were erased by a rate decrease in 2003, the department said.
We would like to thank The Charlotte Observer for reprint permission.