2011 Forecast: Rates on Insurance

Caught up in the holiday spirit, it’s easy to spend hundreds of dollars on gifts. But amid the spending frenzy is easy to overlook future costs, including those unassociated with shopping, such as insurance costs. Predictions for next year’s insurance costs forecast what insurance rates are likely to do. Consumers can use these forecasts to get an idea of what they’ll be spending next year on insurance.

Car Insurance
With the advent of pay-as-you go plans in California coming next February, intermittent car drivers will save tons. So far, AAA and State Farm introduced the plans for customers who seldom get behind the wheel.

The concept is simple. Drivers report their mileage to the insurance company and agents check how far drivers actually drove. AAA plans to implement a device that will report the mileage, thus speeding up the process.

Calculations for car insurance aren’t simple. Consumers that shop hard online at aggregators touting a free insurance quote or similar comparison offerings can find differences in ultimate costs due to things as specific as ZIP code.

The rates are also based on driver age, history and region. Frequency of use (mileage) does not have an affect, as some consumers have questioned recently. Drivers who don’t often use their cars pay the same rate as somebody who commutes daily. The pay-as-you-go plan will lower rates for some drivers, and if the plans go nationwide rates will fall even more.

Homeowner’s Insurance
Chances are these rates will rise in 2011. In fact, property insurance rates in general are expected to spike. A report from Moody’s last month indicated that little demand caused insurance providers to increase rates. Some states already saw rates increase from different insurers. All State and State Farm announced rate increases.

Life Insurance
Moody’s report drew similar conclusions about all casualty insurance. Back in April, Conning Research and Consulting completed a Property-Casualty Industry Forecast, which anticipated a spike in property and casualty insurance rates in 2011. Moody and Conning noted that a number of catastrophes contributed to expected rate hikes next year.

Overall, 2011 could be a revolutionary year for the car insurance industry, but a pricier year for homeowners and customers with life insurance plans.