Wonder why insurance premiums are going up instead of down during recession?

Foreclosure Rate in AmericaThe rising price of oil and gas, the unemployment rates and the uncertainty of the economy; what do these things have in common? They can all affect the insurance industry and the rates you pay for your auto and homeowners coverage.

Actuarial science is a field that uses math and statistics to assess risk in the financial and insurance industries. There is a professional group of people called actuaries that use actuarial science and apply it to property and casualty insurance risks.

This group of experts has noticed a connection between sudden surges in oil prices and recessions. Over the past seventy years there have been twelve sudden hikes in oil prices; eleven of those were instantly followed by a recession.

When a recession takes place people tend to drive less because of higher gas prices. In turn, this decreases auto insurance claims. This may sound like a good thing, but there is usually a trade off. The amount of fraudulent auto claims may rise, or theft claims may increase because crime rates rise in a poor economy.

Recessions have unfavorable effects on employment. When people lose their jobs, they can’t pay their mortgage, and they have difficulty keeping up maintenance on their home. When banks foreclose, houses may sit empty for months, or years, without any upkeep. This causes an increase in homeowner claims.

This comes around full circle to affect everything in our lives. The price to repair our cars and homes, the price of food and yes, the price of our insurance; everything is effected by a recession. People are also shaving coverages as well as letting insurance policies cancel altogher, which as lead to an increase of uninsured motorist claims. Agents make less money in a recession and insurers that make less money have less investment income.

Our natural resources are being depleted, and we still haven’t figured out a way to replace them. On the positive side of this; investments in green products usually increase. People buy solar panels, wind turbines and hybrid cars. This could lead to new lines of coverage for homes equipped with natural energy resources and for hybrid vehicles.

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