Why is car insurance so expensive right now?

The latest news reports may lead people to believe that automobile insurance rates are on the rise. As we enter 2022, they have begun to return to their pre-pandemic levels.

Auto insurers – anticipating fewer accidents as a result of the economic lockdown – repaid policyholders approximately $14 billion in cash refunds and account credits at the start of the epidemic. While it may seem that auto insurance rates are increasing, because of the refunds, they are just back to normal.

Something interesting happened, though. While miles traveled fell and accidents began to decrease during the epidemic, frequency and severity quickly accelerated as we returned back to normal.

Insurance companies personal auto loss ratios (how much they paid out in claims vs how much premium they collected) fell briefly and steeply early in 2020, but they subsequently rose steadily to meet or exceed pre-pandemic levels as the country opened back up. With more drivers on the road and replacement parts prices continuing to rise, this pattern is expected to continue.

The pandemic brought many challenges, and the car manufacturing industry is still suffering from it. Brand new cars are sitting in storage lots waiting for parts, car dealership lots are mostly empty because the supply of new cars trickling in isn’t keeping up with demand. Used car prices are skyrocketing because of the shortage. And we haven’t even mentioned the parts shortage for damaged cars from the increase in accidents. People are running out of rental car insurance coverage because it takes so long to get the parts to repair their damaged cars.

2021 statistics from Tripple-I analysis:

  • Collision accidents increased 42% year over year in 2021
  • Collision severity increased 43% year over year in 2021
  • The fatality rate increased 26% per one hundred million miles over the last 2 years
  • Replacement parts cost increased 13% year over year in 2021

All of this is to say that, while car insurance rates may seem high right now, they are likely to continue increasing as we move further into 2022.

To continue to operate, any company must turn a profit. Personal auto insurance is now one of the most unprofitable lines in the business, and the reasons listed above will continue to put pressure on insurers to boost premiums to ensure that coverage is adequately priced.

What can I do to help control my car insurance rates?

  • The simplest method is to reduce your risk, find ways to drive fewer miles if you can. Consolidate trips to the store with an efficient route.
  • If you have an extra vehicle or a vehicle that isn’t being used, sell it.
  • Controlling the times that you drive, early morning and late at night, sees a spike in accidents due to the volume of traffic on the road, avoiding heavy times if possible.
  • Adjust your deductibles, ask to move to the next deductible option up. Insurance companies know those with lower deductibles have more claims, so they charge you more.
  • Take advantage of your amazing driving habits, prove it to the insurance company in return for a discount. This one simple method can save you up to 50% on your insurance costs, ask us how!

The best way to combat this is to contact your friends at Beacon Point Insurance for a friendly review and make sure you are taking advantage of the tips from above.

Call us today 816-254-6100!

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