An insurance company can have many reasons for raising the rates on certain types of policies. This can be because of on insurer’s loss history, violations on a driver history record and the number of claims that have been made on the policy. A rate increase on an insurance policy will not take effect until the policy renews.
An insurer may raise the rates for certain types of policies based on their loss history in a particular area. This is true for areas that are prone to storms or areas in which an insurer has had a lot of claim activity. An insurer will occasionally raise rates on policies because they are not collecting enough premium to cover their claims costs. Normally an insurer looks to break even on the premium they collect and the claims they pay. This can not always be done if there is a storm or some other form of natural disaster which results in many claims being submitted to an insurer. When this happens the only recourse they have is to raise their insurance rates.
An insured that has an automobile policy can see their rates increase because of violations on their driving history. When an insurer looks at an insured’s driving history they are basically looking at the Motor Vehicle Record or MVR. The MVR will list all tickets and violations that were received by the insured. When an insured has received a ticket it will be applied to their insurance premium when the policy renews. Once a ticket or violation appears on an MVR an insurance company will use it to base the premium for three to five years. As a result a speeding ticket an individual received three or four years ago will be used as a factor to calculate the rate that is applied to their policy.
An insurer can also raise the rates on an insurance policy based on the number of claims that have been submitted on the policy. Usually when an insured files their first claim on their policy an insurer will not raise their rate. However, once there are multiple claims within a specific time period an insured can assess higher rates because the insured is seen as a greater risk. Again, any rate increase that is applied to a policy will not take effect until the policy renews. One thing an insured can do to reduce the amount of claims is to try and pay for damage that is at or near the deductible on the policy. Even though insurance is provided to pay claims having too many usually results in a rate increase.
Any time an insured decides to raise the insurance rate for one of their insured’s they cannot do so until the policy renews. This is because an insurance policy is a contract and it cannot be charge more for a policy mid way through the policy term. They can however decide to non-renew a policy but need to notify the policyholder at least sixty days in advance.