Jhe pandemic has triggered a change in the world of car insurance. Despite reimbursing customers about $16.4 billion, auto insurance profits rose as fewer Americans drove and the number of auto claims fell.
But the pandemic continues to shift the industry, and now an increase in insurance costs is expected this year. Supply chain and labor shortages, high demand for new and used cars, an increase in reckless driving behavior and even natural disasters have created the perfect storm for higher prices.
Here’s why rates can go up and how you can find cheap car insurance if they do.
Cars are more expensive to buy and repair
Increased driver demand and a shortage of semiconductors have made new and used cars more expensive, and that should contribute to higher prices this year, according to a study by the Swiss Re Institute, the research-focused division of the Swiss Re group, one of the largest reinsurance companies in the world. The average cost of a new, non-luxury car hit its highest level last year, just over $43,000, and the cost of used cars and trucks rose about 37%, according to US Bureau of Labor Statistics data.
The cost of repairing cars has also increased. Although there is currently a shortage of automotive supplies, the increasing use of advanced driver assistance systems, or ADAS, in new vehicles is also driving up repair costs. These systems assist with driving or parking and use sensors and cameras that can be both difficult and expensive to repair. Even a minor accident can result in a costly repair bill. This increase in costs means more expensive claims for insurers, and claims are already expected to return to pre-pandemic numbers this year.
In addition, there is a shortage of auto mechanics. There has been a sharp drop in the number of working mechanics in 2020, according to a study of automotive technician supply and demand from TechForce Foundation, a nonprofit organization that provides resources for aspiring vehicle technicians. And this shortage is expected to continue.
Driving has become more dangerous
Car accidents caused by distracted driving have been on the rise for years. Although phone use is a common distraction, drivers read, eat, put on makeup or worry about their children while behind the wheel. Distracted driving caused 9% of fatal car crashes in 2019, according to the most recent data available from the National Highway Traffic Safety Administration. It’s gotten so bad that the National Association of Insurance Commissioners has called distracted driving an epidemic in the United States.
Drivers also appear to be speeding more since the start of the pandemic, which means a higher likelihood of car crashes. An Erie Insurance survey of 500 US drivers found that one in 10 drivers said they were driving much faster than normal at the start of the pandemic. In fact, speeding has become such an issue that initiatives have been launched in Maryland and Virginia to develop speed reduction strategies that can be implemented in other states.
Deaths from car accidents are also increasing. While 2020 saw an increase in the number of car crash deaths despite fewer drivers on the road, last year saw the highest number of auto-related fatalities since 2006, data shows. of the US Department of Transportation.
Last year’s rates didn’t go up much
In most states, the average auto insurance rate hasn’t increased much, if at all, according to a recent study by NerdWallet. It analyzed the annual rates for full-coverage auto insurance in all 50 states plus Washington, D.C., for a good driver with a three-year-old car and found that the national annual cost of full-coverage had fallen by an average of 14 $. Ten states, including Texas and Michigan, saw average declines of $112 or more. Among states that saw rate increases, the average annual increase was $83, just over 5% over 2020 rates.
Meanwhile, the national consumer price index for auto insurance was down 3.7% from 2020, according to data from the U.S. Bureau of Labor Statistics.
This trend is not expected to continue. Major auto insurers have filed for rate increases this year in some states as more drivers are back on the road and auto claims are expected to rise.
You can always find cheaper fares
If you notice an increase in the cost of your car insurance, you have several options:
- Ask about any discounts you might be missing. Insurers often offer discounts for things like receiving your bill by email, taking a defensive driving course, or being an always safe driver.
- Increase your deductible. A higher deductible means you’ll pay more out of pocket if you have to file a claim, but if you don’t drive regularly or can’t afford the higher payment, it’s a guaranteed way to lower your premium.
- Consider minimum coverage, which is usually the cheapest car insurance option. While you shouldn’t cut coverage just to save money, you can ditch comprehensive coverage and collision coverage if you’re driving an older car, as they only pay up to the current market value of the car. minus your deductible.
- Get quotes from other insurers. Shopping around for new car insurance quotes is usually the best way to save. Compare auto insurance quotes from at least three insurers and opt for the cheapest rate. NerdWallet recommends shopping around at least once a year to ensure you’re getting the best deal.
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