Why Does Auto Insurance Increase Every Year? 
Well I have to admit it sure seems like it sometimes but auto insurance does not increase every year . There are many variable factors that come into play into an auto insurance rate . For example , driving record , types of vehicles , marital status , where you live and more . However for the sake of argument lets assume all factors remain stagnant and the rate still increases . The insurance industry flows through what we call hard and soft markets . A soft market is when insurance carriers are showing a profit , loss ratios are good and investments are performing . A hard market is when profits are down , loss ratios are high and investments are performing under expectation . It is more of a constant guessing game for the insurance carriers to operate a business and keep their heads above water . If losses continue and profits are down an insurance carrier will make a necessary adjustment to remain solvent by increasing rates . Rate changes can be local or regional depending on performance in any given area . If the market turns around and profits increase the carriers will then loosen up into what we call a softer marketopeningthe doors to more potential clients by lowering the rates again . Cycles usually run for several years before they shift one way or the other simply due to the time it takes to gather loss information and process it . I will give you an example of some recent trends . During the dot com era insurance companies were performing very well and rates were down . The market crashed and rates began increasing due to poor market performance and increased losses . Carriers got a handle on the situation and things seemed to be going well for the next couple of years and rates actually dipped a little , but now it seems we are back at an upswing . If someone was paying $ 500.00 for a 6 month policy that dropped to $ 450.00 for a year they were happy . But then a year later went to $ 475.00 from the consumers point of view this is a rate increase forgetting just two years back they may have been paying $ 500.00 . Again sometimes this type of movement is difficult to see since variables come into play such as moving to a new location , adding or changing cars , adding drivers and so on . I hope that helped at least explain alittlebit on how the insurance industry operates . 