No matter how much you study it, insurance is a tough product to figure out. With so many factors affecting car insurance rates, it can even seem a bit random at times (though we can assure you it’s not).

One question we hear on occasion is, “Why did my rates go up if I haven’t had any claims?” So we reached out to our customer service pros to fill us in.

The nature of car insurance: an agreement based on unknown risk

When you think about most contracts, the businesses involved know what they’re exchanging for your money. Hire a lawyer, he or she is giving you hours. Lease a vehicle, the dealership is handing over a set of wheels. But when you buy car insurance, the insurer gives you … a promise?

Yes, strange as it is, there’s nothing to hold in your hand or track on a spreadsheet after you sign a policy. Instead, what you get is an agreement: in exchange for your premium, you get to transfer driving risk to the insurer. And if anything ever does happen on the road, they promise to help pay for the incident.

But here’s the really cool part: the insurance company agrees to this promise without ever knowing what your incident will cost. So, if you cause an accident, or live in a no-fault state, your insurer will have your back and be there to pay your claim (up to your coverage limits, of course). On the other hand, if you didn’t cause the incident and don’t live in a no-fault state, it would likely be the at-fault person’s insurer that does the paying.

If nothing changed, why did my car insurance go up in price?

Because insurers never know what they’ll have to pay, or how often, they can’t offer you one flat car insurance rate forever. They’re always trying to forecast the average claim. And — for good or bad — your rate can change accordingly.

If your insurer studies your neighborhood, for instance, and finds that collision claims are being filed twice as often than the previous year, or for higher settlements, you might see a small spike in your premium even if you, yourself, didn’t file any claims. Same goes if you move from an area with fewer claims to one with more.

The good news? Well, insurers serve large groups of people, so when you do have a rate increase, it’s usually small (hooray for safety in numbers!). What’s more, claim trends in your area can also go the other way. If your insurer discovers an improved claims history in your area, they could give you a rate reduction at your next renewal as a result.

Shop around to lower your auto insurance rates

Since the cost of car insurance isn’t fixed, most policy terms only run for 6 months. This can be great for customers because it gives you frequent opportunities to reexamine your policy. Before you renew, shop around for the best rate and coverage.

At Esurance, we want you to have the right protection for your needs. Try our Coverage Counselor® for help selecting the right auto insurance coverage for you based on your input.


Car insurance 101


about Alex

As copywriter for Esurance, Alex had professional experience in everything from film to literature to (thanklessly!) correcting the grammar in friends' emails. As a fervent Minnesota sports fan, he spends most of his non-writing time gently weeping into cereal bowls.