Why it's time to push for lower insurance rates
If you haven’t been lobbying your insurance company for lower rates on home and auto coverage, there may be a $25 billion reason why you should.
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In a Jan. 23 letter to state insurance commissioners, the consumer advocacy group asserted that insurers would garner a $25 billion “windfall” from tax savings and this should result in lower premiums for customers. (The insurance business is regulated by the individual states and companies must apply for rate changes.)
“If you raise the tax rates, the investment income drops and insurers file rate increases,” said J. Robert Hunter, director of insurance at the Consumer Federation of America and co-author of the letter to regulators.
“When their taxes go down, they need less premium, so their rates must come down,” he said.
Insurance trade associations disputed the consumer group’s findings in a Jan. 30 letter to regulators, saying that the consumer group’s claim “oversimplifies and overstates the impact of federal tax changes in a number of ways.”
“The calculations fail to consider the effect of other factors in rate filings — such as upward loss trends and the resulting increase in reinsurance costs — some of which will offset the impact of a tax reduction,” the American Insurance Association and the Property Casualty Insurers Association of America wrote in a joint letter to state insurance commissioners.
Here’s how you can push for lower premiums.
The new tax law is prompting insurance regulators to take a second look at what the new code will mean for insurers’ finances.
Aside from premiums, the National Association of Insurance Commissioners or NAIC will be looking at whether it needs to adjust its regulatory guidance for insurers’ risk-based capital — the minimum amount of capital an insurance company needs to hold, according to a spokeswoman for the association.
A review of accounting standards for insurance companies is also on the table.
The NAIC can draft regulatory guidelines for insurance companies, but how those rules are interpreted and applied will vary from one jurisdiction to the next.
Regardless of how your state insurance regulator responds to the new tax law, you can still push for a reduction in your homeowners and auto coverage.
“If nothing else, the letter is a timely reminder that it’s the beginning of the year and time to revisit your policy,” said Tim Manni, an editor specializing in mortgages at NerdWallet.
Here are a few things you can do.
Review your coverage: Reach out to your agent and see if you’re paying for insurance you don’t need, including comprehensive and collision coverage on an old car. You can also save on premiums costs by raising deductibles on your homeowners’ policy, but be sure you can afford the expense in the event of a disaster.
Shop around: Gather quotes from other insurers and get ready to negotiate with your current provider. “The great thing is that if you are a homeowner, you already have a policy in place,” said Manni. “You have the security to shop the market and talk to different firms.”
Bundle where possible: If you bundle your homeowners and auto coverage at the same insurer, you can save up to $322 per year, according to InsuranceQuotes.com.
Shore up your home: Certain home improvements can protect your property from loss — which can also help you make the case for a discount. “If you’ve had your roof redone, that will help with your insurance,” said Manni. “Maybe you have a home security system that you didn’t have when you first bought your policy.”
“Think about what’s changed and what would make you cheaper to insure,” he said.