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Risk Aversion Problem in Automobile Insurance

by Zubair
Automobile Insurance

The industry can be pretty selective at times which can create serious problems for certain groups of motorists due to their background, zip code, Risk Aversion Problem in Automobile Insurance or driving history. On the other hand, when you are a good driver living in a nice neighborhood with a garage, and having an excellent credit score you can get inexpensive auto insurance quotes from most companies. It can swing from easy to difficult very quickly.

Risk Aversion in Tough Times

Insurance companies are well-known for avoiding risks the moment there is a slight problem in the air. For example, after September 11 it was hard to get any type of insurance in any major city, not only in the USA but in the UK and Europe. They got spooked by possible further attacks when they knew very well that the chances were very slim and they could handle the situation with re-insurance, certain exclusions, and slightly increased premiums.

Now we see a slight increase in inflation they may be at it again as we see huge premium increases in some areas even for policyholders who have never had a claim in the last twenty years. They are scared that costs are going to run away from them and claim numbers will skyrocket because of the economic problems people may have.

Selective Pricing Can Accelerate

Many things that they exaggerate now and demand higher premiums were there already. Risk Aversion Problem in Automobile Insurance Now that they are scare of risk again, they may overplay the issue and try to offload some of the risks. For example, they can rightfully add a flooding surcharge for areas known for flooding or near a large river. But it is unfair to start demanding higher premiums from homes at the bottom of a hill when almost all of their other bills are going up too.

This situation can accelerate pretty quickly. They are likely to be very careful with increasing premiums for good drivers. They will still be able to find cheap car insurance from alternative sources. Risk Aversion Problem in Automobile Insurance That is why they would take a premium hike kindly and switch. But motorists with issues like bad credit, recent claims or traffic tickets or even living in a high-risk zip code will struggle with increased rates and finding alternative quotes.

People are very trusting and believe that by being loyal to a certain insurance company they will be look after well through thick and thin. This is hardly ever the case in so many ways. They can drop you like a hot potato when things get a little shaky. Then, you don’t want to give them any reason to do so. For example, missing a payment could be the reason they would be looking. So, make sure all the installments go through.

And if you are a preferred risk (with no claim or issue) and got a higher-than-expected renewal quote you make sure that you shop around low and high to find the best deal for yourself. There are many auto insurance comparison websites online that can help you locate the cheapest companies in your state in a jiffy. Take advantage of the readily available and free services and push back against high rates.  

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