Premiums go up because information is revealed to the insurance company that you are the type of person who gets into accidents. You were always this kind of person, but the insurance company didn't know until it happened.
From this point on, you might become less accident-prone than your previous self, but you established that you're more likely to get into accidents than the average 0-accident driver.
That doesn't mean that people don't become safer drivers after an accident! It just means that the variance between drivers is more significant than how much a single driver improves.
Insurance companies raise premiums after accidents because there is an excuse to do so. It has nothing do with your likelihood to have another accident, and everything to do with charging you more so that they can attract new customers with a lower price. Premiums go up even if the driver is found to be not at fault.
It is no more in an insurance company's interest to raise rates arbitrarily than it is for any other company. If one company's premiums are significantly more expensive than other insurers, they'll lose customers – and if what you say was true, any insurance company that realized this could cease the practice and gain many new customers.
The whole point is that in the post-accident customer's mind it is NOT an arbitrary price increase--the customer feels that they "earned it" by getting into an accident.
But all the insurance company cares about is revenue vs. expenses across the entire pool. If they can charge one customer more, it allows them to charge another customer less--like, by advertising a low fee for new signups.
Yes, this is my point: rate increases after accidents are done by choice of the insurance company, not because their risk management requires them to do so, as the grandparent post implied:
> Premiums go up after an accident because it is more likely that you are a poor driver and likely to have another accident.
No, premiums go up in that situation when the insurance company thinks they can do so and not lose too many customers. As you point out, not every insurance company operates this way.
An insurance company only cares about managing risk and revenue across the entire pool. They plan to pay out a certain number of claims, so any given accident might simply be fulfilling the actuarial expectations and not altering their risk calculations at all.
Same. I've also had one at-fault accident and my premium went up in the sense that my "accident free discount" was removed for about 24 months. But I eventually got that back too.
Anecdote not evidence, but still interesting - I know someone who was no-fault in an accident, and her premiums still increased because the insurance company claimed that statistically anyone who has an accident is more likely to have another, even if it's not their fault.
