Are Car Insurers Gouging Us Over Speeding Tickets?

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No one enjoys getting stopped by a cop for speeding.

It's embarrassing. It also defeats the purpose of speeding in the first place. You sit by the side of the road, twiddling your thumbs, watching the minutes tick by. This is the opposite of "speeding" to your destination.

Plus the ticket. According to U.S. Highway Patrol data cited by Statistic Brain, Americans pony up $6 billion for speeding tickets every year -- an average of $150 per violation.

And your insurance company wants its cut as well.

Costly Rules of the Road

A recent study by Bankrate (RATE) subsidiary insuranceQuotes.com reveals how much you can expect your insurer to ding you for violating traffic rules.

Crunching insurance data on a hypothetical 45-year-old married, college-educated, employed female with a clean driving record and excellent credit, driving a 2012 sedan when caught for speeding, IQ discovered that a single moving violation can raise a driver's insurance premium by as little as 21 percent (for speeding 15 mph or less over the limit) -- or by as much as 82 percent, for speeding to such an extent as to constitute "reckless driving."

Other violations and the financial hit examined by IQ include:
  • Seat belt violation -- 5 percent hike to insurance premium on average.
  • Driving solo in the HOV lane -- 18 percent.
  • Failure to signal a turn or lane change -- 19 percent.
  • Tailgating -- 19 percent.
  • Driving drunk -- 93 percent.
These higher rates can stick around for as long as three years after you get caught.

Speed Trap!

Surprisingly, these rate hikes aren't even the worst news. The really bad news may be this: The insurance companies appear to be using traffic violations as an excuse to hike rates -- perhaps even more than necessary.

For years, we've been telling you about how insurance companies have been hiking rates in response to a weak stock market and low returns on their bond investments. Insurers depend on the profits from investing their premiums to raise money to pay out insurance claims down the road. When those investment gains don't materialize, though, the insurers must raise money by raising premiums.

From the insurer's perspective, this makes sense. But from a consumer's perspective, it does appear that the insurance companies may be going a bit overboard.

As recently as one year ago, a similar study of insurance costs by IQ found that, for example, exceeding the speed limit by less than five miles per hour usually bumped insurance rates up only 5 to 10 percent. Even a 30 mph violation resulted in no more than a 15 percent hike in insurance premiums.

InsuranceQuotes.com notes that there's no direct, apples-to-apples way to compare these two reports. Last year's survey, for example, was derived partly from polling speeding ticket recipients about their experiences and partly from data provided by the nonprofit Insurance Information Institute. However, they went straight to the source for this year's report, mining data that carriers filed with state insurance commissioners and provided to Quadrant Information Services.

But still, quirks and caveats aside, the magnitude of the difference in fines cited in the two reports suggests there's been a sizable increase in rate hikes imposed for traffic violations over the past year.

How to Dodge the Bullet
  • Go back to driver's ed. insuranceQuotes.com senior analyst Laura Adams has one suggestion: "Drivers who commit moving violations can take safety classes to improve their skills and remove blemishes from their records. Many of these courses are offered online and can be completed in just a few hours." Importantly, these defensive driving classes can also take away an insurance company's excuse for hiking your rates.
  • Shop around. Just because one company thinks your speeding ticket should cost you more money doesn't mean everyone will want to put their hand in your pocket. Indeed, in exchange for winning a new customer, another insurer may be happy to overlook your offense. While you're at it, consider your coverage.
  • Double down. If you love your current insurer, you may not have to switch. Michael Cicero, a veteran municipal prosecutor in Ohio, points out that you can sometimes avoid rate hikes for minor offenses when you have bundled coverage (e.g., homeowner's and auto insurance from the same company). This spreads the risk to the insurer among multiple areas, diminishing the importance of any one. Plus, because the insurer is is getting more business from a bundled policy -- and wants to keep you as a customer -- you may have an easier time getting the company to forgive a ticket and keep your auto premiums the same.
Of course, the easiest way to avoid all of this is to obey the rules of the road. When you're tempted to speed, ask yourself if it's worth the price of a ticket and a hike in your insurance premium.

Motley Fool contributor Rich Smith and the Motley Fool has no position in any of the stocks mentioned.​


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37 Comments

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k4jlp

Wow, what a shame. I'm trying to debate name calling third graders...go back to your X-Box before your mama calls you up for supper.

April 18 2014 at 10:35 PM Report abuse rate up rate down Reply
setanta54s_back

all these bukk bukkkks do is EMBEZZLE OUR MONEY.

and hey champs ? OUR freekin rates GO UP AS WELL.

April 18 2014 at 1:02 PM Report abuse -1 rate up rate down Reply
k4jlp

Of course they are, and they are working with the credit reporting agencies/banks to lower your credit score when you shop around for insurance. When they pull a report, it will cost you about 5 points on your credit score.

April 17 2014 at 5:38 PM Report abuse +2 rate up rate down Reply
1 reply to k4jlp's comment
jpfmtka

Inquiries by insurers are "soft entries" and do not affect a credit score.

April 18 2014 at 9:01 AM Report abuse +1 rate up rate down Reply
Teddy

I think it is whatever

April 17 2014 at 4:50 PM Report abuse +1 rate up rate down Reply
dodie1990

The police should not work for the insurance compaanies. We all know that tickets are revenue raisers, period. It has absolutely nothing to do with safety. Under pressure to bring in more and more money, they resort to quotas for officers. don't write enough and you are punished. I have no problem with that except that they don't tell the truth, It it is not right that they give this information to the insurance companies who use the data to raise your rates. If the insurance company wants more money, they should come out and ask for it not have the police do their dirty work for them. The police are not on the insurance company's payroll.

April 17 2014 at 4:44 PM Report abuse rate up rate down Reply
alfrankenfool

The greed of these Liberal Insurance companies is astounding.

April 17 2014 at 3:23 PM Report abuse -1 rate up rate down Reply
1 reply to alfrankenfool's comment
jpfmtka

Perhaps you can solicit a group of conservatives and start your own non-profit insurance company. With cut-rate pricing, you should be able to corner the market while sticking it to the liberals.

April 17 2014 at 3:37 PM Report abuse rate up rate down Reply
1 reply to jpfmtka's comment
setanta54s_back

LOL and then what happens when the libtards piss and moan about EXCLUSION DISCRIMINATION etc ?

April 18 2014 at 1:04 PM Report abuse rate up rate down
jpfmtka

My spouse and I drive conservatively, no tickets, no accidents, no claims. We also have excellent credit scores. We pay $842 A YEAR for full coverage (including 250/500 bodily injury) on both vehicles, a jeep ($348) and a Volvo ($494.) We pay $1373. a year on our 5000 square foot brick Georgian home and lastly, another $193. for a one million dollar liability umbrella covering any additional headaches. Gouging? (PS... the insurer is a high profile, well respected company that has been around for ever, not some no name obscure company that no one has heard of and can not be depended to pay claims responsibly).

April 17 2014 at 3:22 PM Report abuse -1 rate up rate down Reply
1 reply to jpfmtka's comment
setanta54s_back

so why CAN'T you release THE NAME of your insurer ?

and are you aware that YOUR ZIPCODE is also a part of YOUR FEES ?
lived in the area that was number 1 nationwide for auto theft.- think THEY gave a damn about my clean record ?
then the same thieves started bs when my kids passed age 18 CLAIMING THEY WERE driving and using my vehicle. no way.
now living in that area do you think it was easy to GET COVERAGE ?

April 18 2014 at 1:08 PM Report abuse -1 rate up rate down Reply
1 reply to setanta54s_back's comment
jpfmtka

I am insured with Travelers and live in the Atlanta metro. Georgia's auto insurance rates, although not the most expensive in the nation, are above the average. Plus, you do not have to scream, perhaps that might be one of the reasons your insurer feels less that compelled to accommodate you.

April 19 2014 at 8:27 AM Report abuse rate up rate down
jjolsz

Of course they are gouging us. If there's gouging that can be legally done, it will be. It's the nature of capitalism. It's what we signed up for. Just ask anyone over at FOX news.

April 17 2014 at 3:22 PM Report abuse +5 rate up rate down Reply
jpfmtka

I see no reason for any fuss. Obey the speed limit laws. With absolutely no cost or effort, your problem is solved.

April 17 2014 at 3:05 PM Report abuse -1 rate up rate down Reply
njtautog

HERE IN NEW JERSEY WHEN YOU GET A $ 75.00 speeding ticket or other moving violation you can go to court stop by the proscuters office wait on line. with all the other snaged people in the spider web and plead to a non moving charge and pay any where from $ 350- to $ 500 of course court costs also another $ 35.00 and they tell you your insurance company will never finds out you where speeding..its just like doing business with the mafia..its all about the money. and how much they can shake out of your pockets..they will even tell you when you walk into the municapal court why dont you speek to the proscuator see if he can help you..Then there are the cops that will check off the box on the bottom of the ticket court apperance mandtory so you must lose a day work plus you cannot just mail in the fine all so you will want to wheel and deal and pay the extra court cost.. on top of that ticket with in two days your mail box yea snail mail will be packed with every lawyer in new jersey telling you they can help witht the point that come insurance rate going up- up and away with the ticket you recieved two days ago.. there all retired cops judges, proscuters ect.. they also want $ 250-- $ 500 to stand next to you in court say nothing just stand there and get you the same thing you can get your self.. and big fine court costs..plus there money to just stand next to you.in front of the judge that also uses the system. to make tons of money most work 5 to 10 differnt towns in the state jumping from one day to the next all diffent towns..screwing the joe and mary public..and most are very very nasty.. I look at it like this most cops are like prostutes.. the boss the captain and the judge are pimps he calls them all in to his office tells them go out bring me some money. lots of money we need it for our big fat pentions.. why thats the way pimp work correct..now if you do not live in new jersey and you are just driving though and you do recive a ticket..well so sorry but even if you come from Fla or LA well you will have to come back and go to court..there is no way to just send in the money..no way you must show up in court because they want the extra $ 35.00 court cost.. even if you call a new jersey lawyer he will tell you have to appear in municapal court..so fly in for the day expect to spend the entire day in court so make a late night return flight.. and also expect the police man that gave you the ticket to not show up so you must return again..I hope this is only a New Jersey thing. or does this happen all accross the usa..

April 17 2014 at 2:53 PM Report abuse +1 rate up rate down Reply
1 reply to njtautog's comment
dodie1990

You should be very thankful that you don't get points and a raise in your insurance. PAy the fine and be thankful because the raise in your insurance rates would br far far more costly.

April 17 2014 at 4:46 PM Report abuse rate up rate down Reply