If you have not yet received notice of your car insurance premium increase, you can expect to receive one.
General has compiled a list of factors that may contribute to higher auto insurance rates, including data from the Insurance Information Institute, the Bureau of Labor Statistics, the National Highway Traffic Safety Administration, and other industry sources and news reports. rice field.
Shortages of parts and new vehicles, waves of retiring mechanics, and treacherous road conditions are changing the auto insurance landscape for insurance companies and drivers. This is due to the fact that the value of new cars has skyrocketed since 2020, and the return of Americans to offices, restaurants and social events has boosted demand for both new and used cars. Recorded maximum profit in 2021.
According to the Kelley Blue Book, new cars have been selling above list price for about a year and a half. New car prices in October 2022 are 18% higher than in October 2020, according to the BLS. Meanwhile, used car prices rose 29% over the same period.
Generally speaking, all forms of insurance are premised on complex financial schemes that balance costs and risks to generate profits and protect consumers from exposure to financial ruin. Most states have laws that require drivers to have a minimum amount of automobile insurance to spread the risk.
If an insurance company has to pay more claims than they receive through premiums, the company can become insolvent and go bankrupt. Insurers are therefore constantly evaluating and adjusting the amount that should be collected in semi-annual or annual premiums to avoid losses, often paid in monthly installments.
Of course, insurers also assess how much they charge their clients based on their assessment of how likely they are to claim damages. And these factors can extend beyond the client’s driving record, to things like education level and occupation.
“Further rate hikes are needed to offset the loss pressure of the catastrophe and economic and social inflation,” Jason B. Kurtz, principal at financial consulting firm Milliman, told a virtual industry conference in November. We expect underwriting losses to continue.”
The Chief Insurance Officer of the Insurance Information Institute expects premium rates to rise by 8.8% in 2022 and a further 8.9% in 2023. The association points to difficult economic conditions and climate disasters as reasons for companies to expect losses. next year. Hurricane Ida has already bankrupted 11 insurance agencies since it made landfall in August 2021, and the aftermath of Hurricane Ian in 2022 could do even more.
Auto shop wage increases
According to the Bureau of Labor Statistics, the average wage for auto technicians and mechanics will exceed the national average of $22 an hour for all occupations in 2021. Their average hourly wage is now $22.55, up 6.4% from 2020, according to the Bureau of Labor Statistics.
Workers who put their cars back together after a wreck get more wages as veteran trade workers retired from the workforce. In recent years, we have partnered with schools and non-profit organizations. Their work is becoming more and more technologically advanced as more and more computer components are installed in automobiles.
A costly dilemma for drivers is expected to continue, at least for the foreseeable future. The Bureau of Labor Statistics expects the number of automotive engineers employed in the United States to remain largely unchanged through the end of the decade.
Supply chain challenges
New vehicles are also in short supply due to production challenges introduced by COVID-19 and various government mitigation plans around the world. keep it longer. Median cars on American roads are older than ever and may require more frequent maintenance.
Demand for auto parts is high this year, but parts makers are still struggling to keep up with demand, according to a report from crash repair technology firm CCC. Coupled with the difficulty of finding workers, vehicle repairs are taking longer and consumers are using rental cars longer. This is another additional cost for insurance companies. According to CCC, in 2021 he took an average of 2.1 days longer to repair than in 2019.
In addition to the cost, car rental agencies have spent the last few years selling inventory to cover the cost of downtime. They too are having trouble buying new cars, pushing up the prices of available cars.
increase in traffic accidents
Traffic accidents and traffic fatalities are unfortunately on the rise. Between 2020 and 2021, car crash deaths jumped by 10%, he said. According to the National Highway Traffic Safety Administration, 2021 saw a greater proportion of these fatalities on urban roads than on rural roads.
In addition, medical costs are rising, resulting in a sharp increase in deaths and accidents. Average medical costs increased by 6.5% from October 2020 to October 2022. This is the latest month for which data is available from the Bureau of Labor Statistics.
Increased claims and costs
The combination of these factors will result in more severe losses for insurers in 2021 than in any other year in the last decade. Not only is the cost per claim rising, but blanket liability claims are being filed more frequently, according to the Insurance Information Institute. Its coverage insures the vehicle against damage unrelated to collisions such as storms.
After lockdowns and other COVID-19-related restrictions were eased, Americans started traveling more. To the dismay of airlines, interstate business travelers were not back in the air soon. In contrast, car travel has rebounded rapidly, including trips to visit family, leisure, and even commuting. The trend was particularly pronounced in retail and recreational travel, which declined 16% from pre-pandemic levels in October 2020, but declined from those levels in October 2022, according to Google’s mobility data. decreased by just 9%.
This story originally appeared in The General, Stacker studio.