Why are insurance rates going up?
A number of pandemic-related trends are driving up auto insurance rates throughout the industry. Inflation has possibly had the biggest impact — as the cost of goods and services goes up, so too does the cost of protecting our customers on the road. Here's a more in-depth look at these trends and how they impact car insurance rates.
Why auto insurance rates are increasing
Repairing & replacing vehicles costs more
The auto industry has seen its share of labor shortages and supply chain disruptions over the past year. As the TechForce Foundation reports, the demand for transportation technicians outpaces supply by an estimated 5 to 1, leading to higher labor costs. Strained supply chains have also caused prices for auto parts and vehicles to spike dramatically. Altogether, these factors led to a 6.3% increase in the cost of vehicle repairs and maintenance between February 2021 and February 2022, as well as a 41.2% spike in used vehicle prices.
As repair costs go up, the amount insurers pay to fix their customers' vehicles also goes up. Likewise, as vehicle values rise, insurers pay more to help replace their customers' totaled cars and trucks, all of which increases the cost of auto insurance.
Accidents are increasing, leading to more claims
Changes in driving behavior are also impacting insurance rates. The number of car accidents has gone up, leading to more insurance claims. This higher claims volume, coupled with higher vehicle repair and replacement costs, is ultimately what's driving insurance rates up throughout the industry.
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