One of biggest factors affecting premium is Liability Claim Lawsuits. According to the Insurance Information Institute, claims for bodily injury liability from 1985 - 1988 rose more than 13 percent a year. Fourteen of the 15 states with the highest auto insurance premiums were also among the 15 states with the highest bodily injury paid claim costs.
The number of suits being filed is increasing. Since 1981, auto lawsuit filings in California have increased by more than 50 percent. Because insurers are obligated to pay defense costs even in minor or frivolous lawsuits, increases in filing lawsuits mean increases in their cost of doing business.
Medical Costs
Rising medical costs are contributing to the increases in bodily injury liability claim costs. In general, medical costs have been rising at a 6% rate. On the other hand, advances in medical technology and improved rescue and life saving techniques result in fewer deaths, but this also drives up the cost of medical care.
Car Repair Costs
It costs more to fix cars nowadays, and that means higher claim costs. As cars have become more sophisticated through advancements like air bags, fuel injection, unibody construction and on-board computers, they also have become more expensive to repair in the event of an accident.
Theft & Fraud
Motor vehicle theft is the fastest growing crime in the nation. Fraud, a more sophisticated form of theft, is a major problem for insurers. According to the National Insurance Crime Bureau, fraud costs property and casualty insurance companies more than $20 billion a year, that's equal to 10 percent of all property and casualty claims paid industry wide.
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