Why does it seem as if your insurance company is increasing your premiums- – - – - – auto, home, health, disability? Well it stems from a variety of factors; but it starts with the reserve accounts of the insurance company.

An insurance company is required to set aside in a reserve account a certain amount of money to pay for future claims. As an insured you want that; and, you want an insurance company that has a large reserve account so that if you ever have a large claim the insurance company will be able to pay it. It is the insurance state regulators who determine the balance an insurance company must carry in its reserve account. When those reserves fall below that predetermined level, insurance premiums are increased to build up those reserve accounts again.

So what has caused the reserve account balances to dip?

Market Drop reduces investment revenue: The one reason for the dip that we can all appreciate is the drop in market value. When the market dropped the investment revenues of your insurance company may have suffered just like yours did. A portion of the reserve account of your insurance company is investment revenue.

Unemployment reduces business revenue: During a recession unemployment increases. Insured’s cannot pay for their premiums. When insured’s are not paying premiums, the business revenue of the insurance company drops.

Cost of doing business: There are certain operating expenses each insurance company has. The insurance company has medical costs to pay claims, construction costs to rebuild homes, parts and materials to put your auto back together after an auto accident. Because of the economic downturn; all of those costs are increasing. An insurance company is like any other business, to stay in business they pass costs onto the consumer – you. So your insurance premiums are increasing simply due to the cost of doing business.

Fraud: Statistics show fraud increases during economic downturns. Insurance fraud costs insurance company’s billions of dollars annually. An insurance company has to make up for that lost premium – so they pass that cost onto the consumer – you. So insurance premiums are increasing due to fraud.