Why is Car insurance going up?
All across the country. Millions of Americans have already received a notice of increased premiums in 2021. For instance, Allstate announced it was hiking rates on nearly all its drivers in Georgia by 40%!
Even outside of Georgia, car insurance premiums are on the rise. Car insurance premiums rose 1.7% just from September to October of 2022 the seventh consecutive month of the premium increase. All in all, over the 12-month period ending with Q3 2022, car insurance premiums increased by nearly three times the rate of inflation – 19.9 percent!
So what’s behind the cost increases?
Well, general inflation is one factor: The Consumer Price Index (CPI) saw an increase of 7.7% for the 12-month period that ended in October 2022. And that affects everybody. Not just car insurance companies.
But inflation is only part of the story.
Car insurance companies have been caught in a sort of “perfect storm” of challenging economic conditions. And so in addition to general inflation, they are passing on their higher costs to the consumer.
And unfortunately, that’s us, consumers.
Here’s what’s causing your car insurance premiums to increase:
People are driving more.
People didn’t have to drive nearly as much when the COVID Pandemic was in full swing. Millions of people were laid off, or started working from home rather than commuting downtown. But now those teeming millions are going back to work, going back to rush hour traffic, and getting in the occasional wreck along the way.
Claims are more severe.
Not only are people driving more and getting into more wrecks – the price tag is much higher now than it used to be. Insurers are finding that medical costs are unexpectedly high. So when someone injured n a car accident goes to the hospital, they are racking up a much bigger bill. Healthcare costs have been rising faster than the rate of inflation, and that works its way into car insurance premiums.
Insurers tragically saw a huge increase in the number of fatalities arising from car accidents recently. According to the National Highway Traffic Safety Administration (NHTSA), there were 9,560 car crash deaths in the first quarter of 2022. That’s the worst Q1 for fatalities we’ve seen in two decades, and an increase of 21% compared to the same period a year prior.
The average cost per collision claim (known as collision claim severity) reached $5,743 in the first quarter of 2022, according to APCIA. That is a new record high and 36.5% higher than the first quarter of 2020. Meanwhile, car insurance companies increased car insurance rates by just 4.6%.
For much of the past three years, there was a major shortage of cars. The number of cars available for sale wasn’t nearly enough to meet demand. And so the cost of new and used cars exploded as consumers competed to buy the few cars available. In some markets, the value of used cars increased by 30 to 40%!
That meant insurance companies had to write much bigger checks every time a customer’s car was totaled out
Supply chain issues continue to plague the auto parts industry. The pandemic disrupted global trade and shipping. Even if we could get parts imported into the United States, it was very tough for a while to get them out of the port stockyards and onto trains and trucks to get them into the hands of consumers. Cars are spending more days in the shop awaiting parts.
Attorneys are aggressively representing the interests of their clients in court against car insurance companies. Which means car insurance companies are forced to spend more in court. Claims are taking longer to resolve. And the trial lawyers are winning enough judgments to force higher settlements.
Which should tell you to get an attorney if you’re involved in an accident!
Labor Costs are Going Up
Labor costs are also increasing. It’s tougher for car insurance companies to recruit and retain quality staff. If you want competent and professional customer service representatives, adjustors, and administrators handling your claim, those great employees cost money. And the labor market is much more competitive now. Some carriers are able to outsource some of those operations to overseas call centers and save costs. But that only goes so far.
So car insurance companies aren’t deliberately going out of their way to gauge prices. For the most part, anyway. These are real and significant components of the cost of doing business in the car insurance industry!
That said, if you do get a car insurance premium increase notice, you shouldn’t just take that lying down. Shop around! Not every car insurance carrier is in the same boat, and different carriers price their policies very differently, emphasizing unique criteria.
You should shop around for your car insurance every year or two regardless!
But it’s especially important to shop around for car insurance after you get a premium increase notice. It’s the only reliable way to keep car insurance companies honest.
Let’s face it: Car insurance companies are already known for less-than-fully-transparent sales practices over the years. Especially carriers who only do business in the “captive” channel, where they know customers are less likely to see any information from competing carriers.
The best way to insulate yourself against car insurance premium hikes is to continue to shop around for the best value.
Not necessarily the lowest premium. Look for the best protection value for your dollar.
What To Do If You Get A Rate Increase Notice
That’s where we come in.
We’re not a captive agency. We’re an independent broker, and represent many different companies in each state – all competing for your business.
Many other agents at Big Name companies couldn’t show you a better offer from a competing insurance company if they wanted to.
But at Select Insurance Group, we’re BUILT to do just that. ”
Did you get a premium increase notice? Just want to make sure you’re not getting taken for a ride by your current insurance carrier.
Call us today, or click on this link to get quotes from many different competing carriers.
A recent survey from JD Power found that more than 90% of car insurance customers who shopped and switched carriers saved money, improved their coverage, or both.
Chances are good we can help you and your family too!
Don’t wait! Click here and get your free, no-obligation quote and consultation today!
Looking forward to serving you!
See you on the road!
Steve “Mr. Insurance” Ludwig