Does a Bad Economy Mean Higher Car Insurance Rates?
Posted by Josh Anish on January 25, 2012 in Consumers
The short answer is “yes.” Like almost every segment of the economy, car insurance costs are impacted by a recession. But while that causal relationship is intuitive, it’s interesting to dig deeper and take a closer look at the reasons for the price hikes.
The carriers are losing money. Big insurance carriers are large corporations with nuanced investment strategies. Some even shoot to break even in terms of revenues and payouts, and depend on a yearly 6% gain in the market for their profits. If the stock market drops substantially, these carriers are going to look to make that money back in other ways. Unfortunately, this often means higher rates for the consumer.