While your premium is highly individual and depends on a variety of factors including the type of vehicle you drive, your driving record, and the coverage you choose, it is important to keep in mind that even if you don’t file a claim, an increase in the number of claims from other drivers can boost auto insurance rates for everyone.
In fact, a recent report from Insurify stated that the average yearly auto premium increased around 17% in 2022 and predictions for 2023 are that they could climb an additional 12%.
In 2020, there was an unprecedented reduction in driving levels because households stopped commuting daily to work and school. As a result, there were fewer claims filed. We even saw several insurance companies refunding some premiums to policyholders. When we returned to pre-pandemic driving patterns, there was an increase in auto insurance claims. This is one of the factors that cause insurance carriers to increase premiums.
You may be wondering if there are other factors causing car insurance rates. The answer is yes, the increases we are seeing can be attributed to several other factors including inflation, an increase in the cost of repairs, supply chain issues, and a shortage of skilled laborers.
We’ll discuss these along with thoughts on what you can do to potentially keep your insurance premiums low.
Perhaps the biggest factor (outside of an increase in the number of claims being filed) affecting car insurance premium increase is inflation. In the decade prior to the pandemic, new car prices only increased an average of 3% annually, however between 2020 and 2021 prices soared by nearly 17% (according to a report from the Zebra).
Vehicles are also much more complex, which means that when it comes to fixing cars after an accident, even a small incident can cause thousands of dollars worth of damage to delicate electronics. Additionally, if the accident results in injuries, the medical costs to treat the physical damage are likely to be greater than what they were in previous years.
Supply chain issues are another factor contributing to the rising costs of buying or repairing an automobile. The recent demand for vehicles has led to a semiconductor chip shortage. Semiconductors, are used in a wide array of vehicle applications, including driver assistance systems, entertainment systems and electronic mechanisms. A lack of supply has left thousands of vehicles are sitting unusable while they wait for chips to come in and there are predictions that this shortage could continue into 2024.
Although the statistics coming from the Bureau of Labor Statistics reports that unemployment is nearly back to pre-pandemic levels, many companies are still struggling to find skilled workers. When fewer people are available to do any given job, including vehicle repair, pay rates often increase as an incentive to hire skilled laborers.
Educating the clients we serve is important to us. We strive to provide helpful information, so you understand your coverage. Below are a few thoughts for you to keep in mind.
We want to help you understand your current insurance policy. We would be happy to explain your coverage types, limits and all the unique factors that make up your auto insurance policy so if you want more information, give us a call.
Discounts can be one of the easiest ways to lower your premium. We would be happy to review your policy to check that you are taking advantage of any discounts for which you may be eligible.
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This article is for general informational purposes only and is not to be relied upon or used for any particular purpose. Cross Insurance shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, insurance, accounting or other professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article are that of its author and do not necessarily represent the views of Cross Financial Corp. and its subsidiaries and affiliates (“Cross Insurance”) or Cross Insurance’s management or shareholders.