How To Avoid This Car Insurance Rate Hike

What’s one surefire way to turn a bad day into a worse one? A fender-bender that’s — by all standards — not your fault. Say you’re stopped at a red light and get rear-ended, you’re sideswiped while idling in a parking lot or you come back to your parked car and it’s been hit. Yikes. And chances are that might not be the end of the bad news. According to a recent report from the Consumer Federation of America (CFA), your auto insurance premiums are likely headed up.

The organization studied the five largest auto insurers (State Farm, Allstate, Farmers, GEICO and Progressive) and found many insurance companies were raising rates in cases of clearly not-at-fault accidents. This was happening in eight of the 10 cities they studied (Atlanta, Baltimore, Chicago, Jacksonville, Jersey City, Kansas City, Minneapolis and Queens, NY). And in the only two cities the organization studied where this wasn’t happening — Oklahoma City and Los Angeles — state law prohibited it.

So, which insurers were most likely to raid your wallet for accidents you didn’t cause? Progressive led the way, followed by Geico and then Farmer’s — all of which hiked bills in excess of 10 percent. All State raised rates 5 percent on average. Only State Farm (kudos) left customers’ bills alone.

Another key finding? Where you live matters when it comes to this price hike. “Higher-price cities seemed to have higher [increases],” says Bob Hunter, director of insurance at the CFA. In Queens, NY, the average hike for a not-at-fault accident is over $400, whereas it’s $258 in Baltimore and $213 in both Minneapolis and Jacksonville. The increases were around $100 in Kansas City, Jersey City and Chicago. Atlanta came in lower, at $60.

So, by now you’re probably indignant (and resolving to drive — or park — even more defensively to try to avoid these incidents). But what can you do if the not-at-fault rate hike happens to you? Shop around. It’s precisely because car insurance companies that know you aren’t comparing prices that they take the opportunity to jack up your rate, says Hunter. He explains that they figure out how much to increase your rate specifically using an algorithm that factors in how recently you bought insurance from the company, your shopping habits (which come from a variety of sources), your credit and other information. All of this information can tell the company whether or not you’re a “shopper.” It’s beneficial to be one. Hunter mentions an example where a shopper gets a rate of $250 and someone who doesn’t shop around might be stuck with a $300 bill. So, make sure you do compare rates. Then let your company know about it.

Any time your policy comes up for renewal, research others says Jeanne Salvatore, senior vice president and chief communications officer at the Insurance Information Institute. You can use a site like Compare.com where you can get quotes for a few different providers. Or, head to the National Association of Insurance Commissioners (NAIC) website where you’ll find a U.S. map tab. Click on your state and navigate to its buyer’s guide for auto insurance. (Every state’s site is different, but it may be under something like “Consumer Guides,” “Order Publications” or the like.) Some state’s guides to auto insurance include prices and list a few different hypothetical types of consumers, so if possible, choose the one that’s most like you, then use your zip code to narrow down your area. After that, you should be able to find a list of insurance companies and their prices for a policy for someone like you.

The last step before you pull the trigger: Go back to your state’s consumer services site section and look for its auto insurance complaint ranking. Knock out the insurers with the one or two highest complaint ratios — you want a company that will have your back with a claim — and call the other three to confirm quotes. Finally, let your current company know you’re shopping, and ask if they can make you a better offer.