The Outlook for Car Insurance Buyers in Today's Market 

When driving has decreased significantly during the pandemic, so has the risk of accidents and claims. Drivers are back on the road, and resulting accidents can be costly in auto insurance claims due to higher medical bills and labor and other component costs.

Increasing auto insurance costs is one of the most prominent trends and key drivers that auto insurance consumers expect to see through 2023.

Auto insurance premiums pushed up by inflation

The Consumer Price Index (CPI) rose 7.7% in the 12 months to October 2022. The CPI recorded its largest 12-month gain in the past 40 years in June 2022, when the IPC rose 9.1%.

The prices of housing, food, energy, and other necessities such as vehicle insurance are assessed in the CPI, which measures the rate of inflation and monitors the rate of change over time.

Auto insurance costs rose 1.7% from September 2022 to October 2022, the seventh straight month of increases. Auto insurance costs rose 12.9% year over year, according to CPI data. Car insurance premiums see surprising increases compared to September 2020 19.9%?

A new report from the American Property and Casualty Insurance Association (APCIA), an organization representing property and casualty insurers, analyzes auto insurers' struggles with rising costs. APCIA Says Insurance Claims Costs Are Growing Faster That's higher than the CPI, and faster than auto insurers are raising interest rates. As auto insurers feel out of season, expect them to hike rates in 2023 while they try to catch up.

“A big concern for consumers going into 2023 is the continued increase in auto insurance rates,” said Douglas Heller, insurance director for the Consumer Federation of America.

Auto insurance rate hikes by insurers have already been approved or submitted to state regulators, but they're only just getting started. Heller believes that when customers' policies are renewed, their rates will increase significantly Or they buy new insurance for their vehicle within the next six to nine months.

Serious car crash leads to costly medical claims

People are starting to get back on the road, driving longer than ever. Data obtained from the Federal Highway Administration shows that vehicles drove 43.2 billion miles in the first half of 2022. This represents an increase of 2.8% over the same period in 2021.

Driving more miles increases a driver's chances of being involved in a crash. National Highway Traffic Safety Administration (NHTSA) estimates for the first quarter (January-March) of 2022 show 9,560 fatalities in crashes, the most in a first quarter Quarters since 2002. From 2021, the number of deaths has increased by 7%.

APCIA reports that over the past few years, the number of injury claims has dropped 25 percent, but the severity of injuries has increased by nearly 40 percent. This results in higher injury insurance premiums, which are then passed on to all drivers due to higher auto insurance rates.

According to APCIA, the cost of collision claims (known as the severity of the collision claim) for the first quarter of 2022 is $5,743. This is an all-time high and represents a 36.5% increase from the first quarter of 2020. In contrast, auto insurers have raised their rates Automobiles accounted for only 4.6%.

Glimpses of optimism can be seen that the patterns of car crash deaths are shifting. NHTSA's estimates for the second quarter of 2022 (April-June) show a 4.9 percent reduction in fatal crashes compared to 2021. if the number of serious cars Accidents are starting to drop and there is an opportunity to reduce future increases in auto insurance rates, but they are still in the process of getting there.

Auto repair costs continue to rise

Auto accidents can also trigger property damage claims against the vehicle that was hit. The rising cost of living has impacted parts and labor costs in the region. Supply chain issues continue to make it difficult to locate OEM and aftermarket (original manufacturer of equipment) parts And lead to a large backlog in repair shops, thereby increasing the cost of claims. car insurance.

A study by Enterprise Rent-a-Car tracked the amount of time drivers spent using rental vehicles while waiting to have their vehicles repaired after an accident. Enterprise determined that in the second quarter of 2022, the median time vehicle owners will wait for collision repairs is 18.2 days. This is 4.5 days more than last year.

Repair times have been increasing rapidly, putting increasing pressure on insurers to raise auto insurance rates, said Rich Attanasio, senior director of AM Best, a credit rating agency and data analytics service specializing in the insurance industry.

"Many private auto insurers continue to seek to increase rates due to rising claims costs. This is driven by a combination of factors, including higher death rates, and rising repair costs for newer and lower-cost vehicles. The high cost of used cars and supply chain and market problems and rising medical costs,” Atanasio said.

Insurance Information Institute spokesman Mark Friedlander said: "Personal auto insurance premium growth has been roughly flat over the past year, despite significant increases in the cost of living index (CPI) and vehicle and auto parts prices."

Other factors driving auto insurers to raise rates include higher valuation costs for used cars, higher auto repair costs and more insurance claims for catalytic converter theft, Friedlander said.

Litigation can lead to huge settlements and then higher rates.

One of the major challenges facing auto insurers in 2023 is excessive claims due to litigation. A study conducted by the Insurance Research Council found that the presence of lawyers in auto insurance claims was associated with higher claim costs and Billing time delay.

The APCIA report shows that the number of litigation-related claims is growing like never before. This includes an increase in the number of verdicts and some very high jury award cases, such as multi-million dollar personal injury verdicts. most concerned about Large claims by insurers set a new precedent, which will lead to "claims inflation".

Insurance Information Institute The Insurance Information Institute summarizes social inflation and its impact on auto insurance companies. It explains how social inflation is linked to the impact of increased litigation costs on insurer claims payments As their loss ratio (the amount of claims the insurer is able to pay compared to the rate amount paid) and ultimately how much we as policyholders will pay for auto insurance.

A study by the Insurance Information Institute and the Accident Actuarial Society found that social inflation increased the number of commercial auto insurance claims by more than $20 billion between 2010 and 2019. Clearly, similar trends are emerging in other areas Insurance companies, they fear they will infiltrate private auto insurance.

The auto trial and judgment costs that plague insurers will be passed on to drivers through higher auto insurance costs.

Often, bills come due for multiple charges that auto insurance companies are constantly trying to pass on to their customers.