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Auto - 2022-2023 Auto Insurance Market Predictions

August, 2022


Unfortunately, we’re about to see some pretty significant auto rate increases. Some carriers have already taken a little bit of a rate increase, and the rest are about to. 

Auto Insurance is pretty simple. Like most insurance, all they have to do is bring in more premium than they pay out in claims and expenses. The amount being paid in auto claims has gone up dramatically since 2021. In 2020 insurance companies gave back some of their premiums they collected and didn’t take rate increases because people were driving so much less for a short period of time. At this point 2+ years later, most people are back to work driving to and from work going to lunch and doing all the things they used to be doing. At the same time, people are still distracted while driving and playing on their phones and doing all the normal stupid human tricks that cause auto accidents. Not to mention just plain old bad luck.

With the slight increase in car accidents there has been a major increase in repair costs and replacement vehicle costs. 

The amount of technology in vehicles has gone up and has caused the cost of repair to increase because now you’re using professionals who need to be able to make repairs but also be able to work on the computers and the cameras and do the calibrations necessary to keep all of your vehicles technology operating. 

Not to mention the cost of the technology manufacturing itself. 

For example what used to be about a $350 expense for a windshield replacement is now, more often than not, over $1200. There is now an additional 800 or so dollar expense needed just to re-calibrate the camera in the front of the vehicle that shines through the windshield. That’s just one example; there are many more. 

Additionally, the cost of labor is going up which means the cost to repair cars is going up. The supply chain problems have caused the price of parts and equipment to go up because the supply of them is down. On top of that, because of the supply issues, repair times have gone from 2 to 4 weeks, 1 to 2 months. When you damage someone else’s vehicle and it’s not drivable, you (or your insurance), are responsible to pay for a replacement vehicle during the entire time while their vehicle is not drivable. Even if that’s simply because parts are not available to repair the vehicle. So when you damage someone else’s car and it’s not drivable, what used to cost the insurance company $40 per day in a rental car for 21 days, is now costing $44 per day (general inflation price increase) over 45+ days, because of the issues with getting vehicles repaired timely.

And that increase cost in rental car is just another increased expense on top of all of the others. 

These are the main factors causing the major increase that is about to come in car insurance. If you’ve been with an insurance company for several years and your rates go up, just because you find somewhere else that happens to be 5-8% cheaper at the time you shop for it, doesn’t mean you should switch. That insurance company may be taking a 25% rate increase at your next renewal. 

When you look to switch, make sure you ask the agent or whoever you’re speaking with when their last rate increase was and how much it was. If they haven’t taken a rate increase in the last nine months or it wasn’t more than 10%, I can say with almost complete certainty that the insurance company will need a 12%-20% rate increase over the next six months. That doesn’t mean you should not switch, that just means you need to be aware of the landscape and ask the right questions to try to figure out what may happen over the next six months, so that you don’t save $100 today and cost yourself $300 at renewal.

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