Auto Insurance Rates and Inflation

Every day I read new articles about the impact of inflation on what we buy.

Let me explain what is happening in the auto insurance market. When the COVID lockdowns hit, auto insurers quickly realized people were driving less and claim costs were going down. Most of the big insurance companies either cut interest rates or returned premiums in the form of dividends.

When COVID restrictions were lifted, people who were confined to their homes started driving more. They went to work, they went on vacation, they got more bills. The auto insurance industry responded to increased driving by raising rates.

At the same time, inflation soared to a 40-year high, supply chain problems delayed vehicle repairs, and used car prices soared.

Auto insurance has been impacted across all sections of the insurance they offer. Insurance companies responsible for repairs now pay more for rental reimbursement if there is a delay in repairs. Parts costs go up and labor costs go up. Vehicles that have been totaled (deemed unrepairable) now receive a higher payout. More vehicles are being totaled due to higher repair costs. The simple cost of towing a car is increasing due to gas and labor costs.

An article was recently published wall street journal Catalytic converters used to reduce automobile pollution contain precious metals and sophisticated rings are formed to steal them.

Health care costs have increased as hospitals and nursing homes have become more expensive.

Weather-related events are also increasing the number of claims. I recently read that 50,000 to 70,000 cars were destroyed by Hurricane Ian.

Finally, litigation costs have increased. If the policyholder is involved in an accident, it costs more to protect the policyholder from lawsuits.

When insurance people meet, they always discuss two things. frequency and severity. It’s like a perfect storm. More claims, higher costs, rising rates.

Here are some tips on how to deal with rate increases.

Call your insurance agent to check current policies. Make sure you have the correct driver and are using the vehicle correctly. If you only drive 5,000 miles a year, let your insurance company know.

If you have an older vehicle, make sure you aren’t paying for comprehensive coverage or collision coverage. You may be paying more than the car is worth.

Ask about discounts such as loyalty discounts and multi-contract discounts. Most companies offer discounts if you have a home or renter’s insurance policy linked to your auto insurance policy.

As I wrote before, telematics is the future of auto insurance. All you need is a smartphone and an email address to apply. Save 10-30% on insurance premiums by downloading the app and installing a beacon on your vehicle. This program can only lower fees.

Finally, research the major companies to see what they offer, but be careful. It will disappear with the next update. I recently had a customer buy a condo and was convinced I could save on condo insurance premiums by going to another company. The condo contract saved him $80, but the car insurance cost him $1,200 more.

His new company has been in business since 2019 and did not offer auto insurance.

When the paperwork was obtained, the address the new company was using as the location of the property was a shopping mall.

WARNING emptor is Latin for “please warn the buyer”.

Bob Holrick is a Washington-based state farm insurance agent. His column appears every other Friday in his Observer-Reporter.

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