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Who Taught You to Drive?

What accounts for rising car insurance rates?

Reader E. Jackson Jarmon of Belmont has maintained a perfect driving record for more than a decade. So why, he wants to know, does his insurance rate still go up every year?

What a great question.

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“I’m getting older; I’m less of a risk,” he says. “I made a call to my insurance agent, and finally the response I had to settle for was that rates have gone up across the board.”

That’s true. According to the state Division of Insurance, the average driver paid $860 for personal auto insurance per car in 2009, $891 in 2010, $915 in 2011, and $942 in 2012. Chart those numbers, and it sure looks like an upward trend.

But wait — weren’t our insurance premiums supposed to go down after the state stopped setting rates in 2008? Is our new “managed competition” system working or not?

‘One of the things that’s happeningis that automobiles are becomingmore expensive. The cost of repairs,as anybody who has ever had a fender-bender knows, it’s no longer a few hundred dollars. You get a dent andyou pay a lot of money to have yourcar fixed.’

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You could, with a little imagination, view the rate hikes as nothing more than a market correction.

When insurance providers were finally free to set their own rates, many dropped their price to attract new customers.

“In April 2008, that’s when everyone’s rate bottomed out,” says Donna McKenna, vice president of communications for the Massachusetts Association of Insurance Agents, which has tracked rates. “But they set their rates so low that they couldn’t possibly sustain them over time.”

Joseph Murphy, commissioner of the Division of Insurance, offers a much different view, however. Insurance rates have been rising, he says, primarily because more claims, for more money, are being filed each year. Not just in Massachusetts, but nationally as well.

“Both injury and and property damage claims have increased between 2.5 percent and 3.5 percent each year” since 2008, he says. “At a very basic level, claims drive rates, so the more frequent and the more severe claims activity we see, the more rates will increase.”

According to the state, insurers currently pay about $8,400 per injury claim, up from $7,400 per claim in 2008.

  Property damage and collision claims have also increased by more than $300 on average over that span.

In Massachusetts, bad weather in particular has spiked claims, Murphy says.

“We’ve had significant hail events in Central Massachusetts, tornado damage in 2011. Last winter was pretty severe,” Murphy says. “All of that factors into it.”

Barbara Anthony, the state’s undersecretary of consumer affairs and business regulation, says that inflation and spiraling car repair bills have also played roles.

“One of the things that’s happening is that automobiles are becoming more expensive,” she says. “The cost of repairs, as anybody who has ever had a fender-bender knows, it’s no longer a few hundred dollars. You get a dent and you pay a lot of money to have your car fixed.”

Obviously, no one wants to pay more for insurance. But that doesn’t mean deregulation has failed to help consumers, Anthony says.

When Massachusetts regulated car insurance, the law demanded that rates be set high enough to allow every insurance company — even poorly run ones — to make a profit. Competition didn’t drive down rates, so not surprisingly, we had some of the highest insurance rates in the country.

All of the factors that have caused rates to increase since 2008, Anthony says, likewise would have caused regulated rates to have increased, too. You just don’t see that on the chart. “Without a doubt, they’d be higher than now,” she says.

Second, rates are still lower today — albeit by just $41 — for the average driver than before deregulation.

Lastly, with so many companies now offering insurance — 34 in all, compared with 19 when the market was regulated — consumers who shop around have a good chance of finding rates that are either below the market average, or much less then they’re currently paying, she says.

When McKenna was helping her son shop for insurance, she discovered that most companies set their rates according to a customer’s six-year driving record.

That meant they’d flag the car accident her son had five years ago and penalize him for it.

“I just happened to know that Hanover Insurance uses a 3-year experience period rather than six years, which cut his rate in half,” she says.

Murphy said some insurers offer package discounts if you buy both your car and home (or renter’s) insurance from them. Some “forgive” your first accident, or reward you with a discount if your car’s data recorder (which tracks braking, acceleration, and the like) shows that you don’t drive aggressively.

How can you make sure you’re getting the best rate when shopping for insurance? Alas, it’s not always easy. A company that offers or advertises a below-market rate on a particular component of your quote (say, the number of drivers who use your car) might charge an above-market rate on another component (say, annual miles driven). And insurers are not required to make public their internal formulas for rate determination.

McKenna has also seen insurance companies offer first-time customers attractive discounts that eventually disappear.

“I had an agent who said they had a customer who went to another company and got their rate cut in half . . . but they gave him a lot of discounts that he didn’t quality for,” she said. “Sure enough, when the policy came up for renewal, it doubled. But he still got that savings for the first year. And he just switched companies again.”

The Division of Insurance offers numerous insurance-buying tips on its website.

You could also hire an insurance agent to wade through various quotes and choose what’s best. With luck, you’ll make back their fee on the savings they find for you. Just be aware, Murphy says, that agents tend to work with no more than five or six insurance companies, and never all 34.

Some insurers, such as Liberty Mutual, Amica, Geico, and Progressive, don’t work at all with independent agents. To find out what they’re offering, you need to call them directly or read their websites.

Just be sure to compare “apples to apples,” McKenna says, wherever you shop.

“The best advice you can give anyone is to make sure that whatever quote you get mirrors your current policy,” she says. “You should say, ‘I want you to give me a rate for this set of coverages’ — the ones you currently have. Then you’ve got a real comparison.”

Peter DeMarco can be reached at demarco@globe.com. His Facebook page is “Who Taught You to Drive?”and on Twitter @whotaughtU2driv.

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