Why your car insurance premium just rose ... again

If you’ve bought car insurance for the past few years, you’ve almost certainly suffered annual increases that have outpaced inflation. Unfortunately, that trend is likely to continue in the year to come. Just how much premiums will rise will vary by the usual factors--who you are, where you live, what you drive, your driving record––but things completely beyond your control may also cause your rates to skyrocket in 2017.

More driving, more accidents, and higher costs

Americans have steadily increased the number of miles they drive every year in recent years, a trend experts attribute in large part to historically low gas prices. After accounting for population growth, U.S drivers drove 1.8% more miles in 2016 than in 2015––a number that reflects billions of extra miles driven, each with the possibility of an accident. Worse, and in spite of generally safer cars and highways, the number of serious accidents is rising.

The National Highway Traffic and Safety Administration has shown that in the last year the number of fatal traffic accidents have risen nationally by nearly 10%, the greatest year over year increase in 50 years. In some regions, the increase is worse still. According to the NHTSA, in South Carolina, Florida, Georgia, Alabama, and Tennessee combined, fatal accidents in 2016 rose by an overall 15% from 2015. That was not even the highest regional difference, however. That distinction went to New England, where 20% more people died on roads in 2016 compared the year before. Every region in the U.S saw an increase in traffic fatalities. And those serious accidents are proving to be more costly, in at least two respects.

Medical costs are continuing to rise in the U.S., meaning car insurance companies are finding themselves footing heftier hospital bills than ever before. As well, the technology in newer models of cars is generally more expensive to repair and replace, further hiking the cost of claims and making the overall payout from the insurance companies greater.

Bad weather

When we take a look at the earnings report from the first nine months of 2016 from Berkshire Hathaway (company that owns GEICO), we found that the company's car insurance losses have increased since 2015. While the year over year loss was only 0.3% greater than 2015, GEICO was one of the strongest performing auto insurance companies of 2015 meaning losses for other auto insurance companies were likely greater. Interestingly, what GEICO attributes the increase in loss to is severe weather. GEICO paid out $380 million worth of claims due to hail and flooding in the first nine months of 2016 compared to $129 million in the same period of 2015.

Underperforming portfolios

Traditionally, insurance companies rely on investments to bolster their bottom line, especially at times when insurance claims and costs are rising. In particular, car insurance companies have a lot of cash reserves, which they typically invest in bonds, and every year hope to realize a 4 to 6% return on those investments. Ever since the financial crisis in 2008, however, interest rates have remained historically low, which has led to historically low returns from bonds, typically less than 2%. The upshot? Starved for nearly a decade of a robust yearly stream of income with which to balance out their insurance losses, auto insurance companies have turned to rate hikes to make up for anemic investment income.

The bottom line on premiums

How bad might your rate hike be? Already in South Carolina, to cite just one state, State Farm and Allstate plan to increase rates by an average of 12.2% and 18.6% respectively in the new year. From what we have seen so far, such hikes may be typical of many states. It looks likely many drivers around the country will experience a rate increase in 2017. So on a $1,000 per year policy, the 18.6% increase proposed by Allstate in South Carolina would equal an extra $186 per year.

Fortunately, there are steps you can take to reduce your premiums--or at least minimize how much they rise. Those steps begin by shopping around for the cheapest car insurance company in your city. You may want to consider going with a smaller company. Small companies have regional client bases, meaning your rates won't be affected by the actions of drivers from across the country. Storms in the mid-west may be causing GEICO to lose a lot of money, which will affect customers nationwide. If your company is based only in the northeast for example, those storms in the mid-west won't affect your rates. We find often times that small companies end up being the cheapest car insurance company in a given city as well.

You can also reassess how much coverage to carry; this article advises on how best to do that. You could even switch out your wheels, since certain cars cost more to insure, including large SUVs and luxury cars. Lastly, signing up for as many car insurance discounts as you can will be a surefire way of reducing your yearly bill.

This story originally appeared on ValuePenguin.