What is Driving Auto Insurance Rates?
Like consumers prices across many parts of the economy, auto insurance rates are rising, too.
Rate increases can be difficult for consumers, but as their trusted, an expert adviser can help your clients understand the changes as you work with them to navigate the road ahead.
Returning to “Normal” (Frequency)
Driving behavior changed dramatically due to COVID-19, especially at the onset of the pandemic. Fewer miles driven meant fewer accidents and therefore, lower overall costs for auto insurances. The industry responded quickly by issuing refunds/credits to customers, lowering rates, or both.
In recent months, driving behavior has nearly returned to pre-pandemic levels-and so has the frequency of accidents. As the number of claims returns to (and surpasses)pre-pandemic expectations, insurers’ costs follow. To pay the increasing claims, auto insurance rates must
Then return to (and then surpass)where they were before the pandemic.
Rising Repair and Replacement Costs
When accidents occur, auto insurers pay for the parts, labor,
and other cost associated with repairing or replacing the damaged vehicles. Since the start of the pandemic, supply chains disruptions and labor shortages have driven these costs up substantially.
The Bureau of Labor Statistics reports that average expenditures for vehicle repairs have risen more than 4% over the last year, while used car and truck prices have skyrocketed by more than 40% over the same period.
Initially, the reduction in accidents offset the rising vehicle repair and replacement costs. This is no longer the case. Driving behavior has returned while these costs continue to escalate.
We are an independent insurance agency serving the Dallas-Fort Worth area and beyond.
This material is for informational purposes only. All statements herein are subject to the provisions, exclusions and conditions of the applicable policy, state and federal laws. For an actual description of coverage, terms and conditions, please refer to the applicable insurance policy or check with your insurance professional. The illustrations, instructions and principles contained in the material are general in scope and, to the best of our knowledge, current at the time of publication.