It’s no secret that auto insurance rates are on the rise, so you want to get the best price before that happens. In fact, they have been increasing steadily for the past couple of years. So what’s driving this increase in rates? There are several factors at play, and we’re going to take a closer look at some of them in this blog post.
Mike Clark, a financial expert predicts, “I want you to be on the lookout and be aware … that [car insurers] are feeling price pressures, and they may not be willing to absorb those. You could be facing big premium increases when you’ve done nothing — no wreck, no tickets — nothing.”
The Many Factors Driving Auto Insurance Rates Up.
The auto insurance industry is being negatively affected by several factors right now including the following:
- An inflated used vehicle market- Used car prices are up 26.4% -40.5%
- New car market saw a rise in new car prices by 9.8% – 12.2%
- More expensive auto repair costs
- $145 billion + losses from weather disaster in 2021
- There are labor shortages and wage increases are up 9%
- Supply Chain issues trigger shortages of chips and new cars
- Average car insurance claim costs up 20% parts and costs up 6%
- Increase in severity of auto accidents – number of fatal vehicle crashes up 18.4%
Let’s take a closer look at 3 of these factors.
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Higher Priced Used Vehicles
The COVID-19 pandemic has affected our economy, especially the supply of semiconductor chips used to make cars, leading to record high prices for new and used vehicles alike.
The increase in used auto prices directly results in people rushing to buy second-hand cars instead of new ones due to the sticker shock of new car prices increasing by 12.2%. There are far fewer options available, which means buyers have been pushed into paying more for their vehicle than they would typically because there’s less competition on the market.
According to recent data from 2020-2022 cars by Traveler’s, used car prices rose by 26%, while the U.S. Bureau of Labor Statistics estimates a rise by 40.5%.
Higher Repair Costs
Clark observes that the unusual market conditions have resulted in car repairs costing everyone more. Reports say that car parts have increased by 6%. The insurance companies are feeling the strain too, with the average claim cost up 20%.
Severe Weather
Weather-related disasters are becoming more frequent and severe. In 2021 there were 20 separate billion-dollar weather related AND climate change events, including winter storms, wildfires, tornadoes, hurricanes, etc. The National Oceanic and Atmospheric Administration estimated that these storms caused an estimated $145 billion in damages in just one year!
Hurricane Ida made landfall in 2021 as a powerful Category 4 storm, and her devastating effects are still being felt in Louisiana. The hurricane hit the state with high winds that caused extensive damage to homes along its path through coastal areas of south-east USA. Because of this, they saw their auto rates increase 41%.
This chart by The Zebra’s State and Insurance Report shows how auto premiums increased in 2021
What You Can Do To Try and Avoid A Rate Increase
With all this in mind, it is essential to re-evaluate your auto insurance policy. Even if you’ve had a wreck or gotten a ticket recently, you may be able to get a lower car insurance rate by shopping around.
“This year is going to be a very important year for you to re-shop your auto insurance,” Clark says. “If you do get a notice of a massive increase and your record’s clean, other insurers likely have an interest in you, and shopping your coverage with someone else could make a big difference.”
Thankfully, Texan Insurance is a full-service agency that can shop over 40 different carriers, helping you find the best coverage for you. If you’re already a client of ours, you don’t have to worry. At renewal time, your Account Managers automatically review your policy to see if they can find a better rate and coverage.
Call us today to get an auto insurance quote! 281-998-2500
Sources:
Travelers Insurance https://www.travelers.com/
USA Today https://www.usatoday.com/story/money/cars/2022/02/13/used-cars-cost-more/6778705
The Zebra Report https://www.thezebra.com/resources/research/weather-insurance-2021/#hurricanes
Clark.com Why You Need To Re-Shop Your Car Insurance This Year (clark.com)
