Most states require all drivers to carry some form of auto insurance. As a result, drivers are aware of the issues that can make insurance premiums more costly. For example, an accident or filing frequent claims can lead to higher insurance rates. However, auto insurance rates have been rising among all drivers. In fact, car insurance rates are increasing by an average of 4.9% nationally.
If you’re among the many drivers frustrated by rising rates, you’re likely wondering about the cause of these increases. Unfortunately, there are many reasons auto insurance rates are increasing that are out of the control of drivers. These are some of the major factors affecting auto insurance rates.
The cost of nearly every purchase made by consumers is increasing. Unfortunately, this means insurance costs are likely to go up as well. Inflation peaked at 9.1% in June 2022. Exactly what does that mean? It means that we’re spending up to 9.1% more than we were a year ago for the same goods and services. As a result, the cost of doing business is rising.
Does this mean insurance companies are raising rates to avoid feeling the impact of rising costs? Not exactly. While insurance companies may raise rates incrementally, the impact of inflation on the vehicle market, supply chain, and healthcare all affect insurance prices. However, some insurance companies are likely to raise rates more than others, which makes shopping around crucial during periods of economic uncertainty.
Rising Vehicle Prices
Inflation driving soaring costs has had a significant effect on the vehicle market. The price for new vehicles rose by 11.4% between June 2021 and June 2022. The used car market saw a 7.1% increase during the same time period. While prices are stabilizing, they saw major increases in recent years, which still contribute to overall higher costs. Vehicles are more complex than they used to be.
As a result, the overall cost of car ownership, including parts replacement, has risen. Because car insurance is designed to pay for the costs after an accident, these costs lead to steeper insurance rates to effectively cover damages. Simply put: As vehicle prices rise, so does the cost to insure them.
Increased Medical Costs
Not surprisingly, factors like inflation and supply chain disruptions have also affected the costs of healthcare. What many drivers don’t realize is that these increases can have a bigger impact on auto insurance rates than the cost of vehicles. Studies show that as the costs of medical care have exploded over the last 40 years, inflation in car insurance costs has closely followed the same trajectory.
In Massachusetts (and most other states), drivers are required to carry liability insurance that protects other drivers and passengers in the event of an accident. This coverage is required by all drivers, including those that don’t have collision coverage. The increase in healthcare costs means that when someone is injured in a car accident, the resulting medical costs are greater than what they were in the past. As a result, insurance rates rise to meet these increased costs.
Supply Chain Disruptions
Pain points in the supply chain don’t directly affect insurance premiums. Unfortunately, they do affect other factors that increase premiums. The price of new cars and replacement parts have been significantly affected by supply chain issues. The last few years have created a perfect storm to disrupt supply chains. From pandemic shutdowns to driver shortages and semiconductor chip shortages, these impacts are still having a major effect on the ability of the auto industry to keep up with demand.
Parts are more expensive, labor is more expensive, and repair costs are more expensive. As a result, insurance premiums rise to keep up with these costs and keep drivers from paying out of pocket.
A Rise in Severe Car Crashes
The second quarter of 2022 was the fourth consecutive quarter of increasing traffic accidents, injuries, and fatalities. These increasing and more expensive claims result in rising costs for insurance companies. Often, major car accidents involve attorney services which raise overall claims costs even more. When accidents increase in frequency and severity, higher claims lead to increased auto insurance premiums.
Increased Comprehensive Claims
Comprehensive auto insurance covers losses related to natural disasters, vandalism, theft, hitting a large animal, etc. When natural disasters and crimes rise, so do comprehensive claims. Unfortunately, both crimes and natural disasters have increased in frequency. Catalytic converter thefts have increased more than 7 times since 2019. Replacing the stolen converter and repairing all the damage caused by the theft can add up to a claim of $3,000 or more.
On the other end of the comprehensive claims spectrum, costly natural disasters have risen in frequency as well. In 2022, there were 18 climate disasters with losses exceeding $1 billion in the U.S. Events like floods, storms, and tropical cyclone events can result in significant damage to vehicles. Increased claims for these events also lead to higher insurance premiums.
As you can see, there are many reasons auto insurance rates increase that are unrelated to filed claims. This can be frustrating for drivers when they have no control over rising rates. Auto insurance is required for all drivers in Massachusetts. Adequate coverage is essential for ensuring you can avoid financial strain in the event of an accident.
Luckily, there are many ways you can decrease your auto insurance rates during difficult economic times. While insurance rates are increasing across the board, not all insurance agencies have the same rates. Shopping around can help you find lower rates for the coverage you need. When you work with an independent insurance agent, you can compare costs without the effort of shopping around. Other ways to lower auto insurance rates include discounts, higher deductibles, and practicing safe driving habits.
If you’re concerned about your ability to maintain your Massachusetts auto insurance coverage while rates are rising, the independent agents at LoPriore can help. Contact LoPriore Insurance to learn more about changing auto insurance rates and how you can get the coverage you need within your budget.
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